Allan Hanson | Brisbane Financial Advisor

What the HILDA survey reveals about Australian financial literacy

The Household, Income and Labour Dynamics in Australia (HILDA) Survey is Australia’s first national representative household-based longitudinal survey. Started in 2001 by the University of Melbourne, the HILDA Survey provides an ongoing picture of changing lives and social attitudes, as opposed to a cross-sectional snapshot or single point picture that most surveys give.

The survey tells the stories of the same group of Australians over the course of their lives. The survey now tracks more than 17,500 people in 9,500 households, asking about their household and family relationships, income and employment, and health and education.

In 2018, for the first time, the survey has reported on financial literacy. The survey included a series of questions assessing basic competencies in financial concepts such as inflation, portfolio diversification, risk versus return, and money illusion. Here are some interesting findings from the questions:

  1. Whilst a good majority of participants got each question correct (between 70-85%), less than half (42.5%) got all five questions correct.
  2. About 50% of men correctly answered all questions, compared with only about 35% of women.
  3. The young – aged under 25 – are the least financially literate, with about 25% correctly answering all questions. Those approaching retirement – aged 55 to 64 – are the most financially literate, with about 55% getting all questions correct.
  4. Low financial literacy is associated with poor financial well-being. The poverty rate among people with low financial literacy is over twice that of people with high financial literacy.
  5. University education is strongly associated with financial literacy, while those not completing high school have the lowest levels of financial literacy.
  6. People with low financial literacy are less likely to get involved in decisions about household finances.
  7. Low financial literacy is associated with a lower propensity to save regularly, and a greater likelihood of experiencing financial stress.

Different surveys conducted over the years have shown that financial literacy in Australia is generally poor. Financial literacy is important, and work needs to be done to improve Australian financial literacy across genders, generations and income groups.

It is wonderful that financial products have improved over the years, and you now have more choice and options available in relation to borrowing, superannuation, pensions, and investments. However, with more choice comes more risk and having many choices can make it all become too hard, and so people do nothing. This itself comes with its own risk – you need to be able to make thoughtful and informed decisions about your finances and how they will impact your future.

If you are in need of any advice regarding your financial wellbeing, please contact arcinvest at

Below are the Questions HILDA asked. How many can you get right?

  1. Suppose you put $100 into a no-fee savings account with a guaranteed interest rate of 2% per year. You don’t make any further payments into this account and you don’t withdraw any money. How much would be in the account at the end of the first year, once the interest payment is made?
  2. Imagine now that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, would you be able to buy more than today, exactly the same as today, or less than today with the money in this account?
  3. “Buying shares in a single company usually provides a safer return than buying shares in a number of different companies.” (True or false?)
  4. “An investment with a high return is likely to be high risk.” (True or false?)
  5. Suppose that by the year 2020 your income has doubled, but the prices of all of the things you buy have also doubled. In 2020, will you be able to buy more than today, exactly the same as today, or less than today with your income?


  1. $102
  2. Less
  3. False
  4. True
  5. Exactly the same
Posted in Behaviour, Informative.