According to the Financial Services Council's (FSC's) latest research report, "Financial resilience trends in New Zealand: Overconfidence and a Perfect (Savings) Storm", 86% of New Zealanders are moderately to extremely confident about their financial situation, an increase of 8 percentage points from 2020 to 2022.
According to the research, this optimism is likely unwarranted in light of the economic volatility, rising living costs, and rising interest rates observed in the months after the release of the most recent data. It emphasizes that:
Concern persists about the fact that around half of all New Zealanders are afflicted by financial concerns that negatively impact their well-being, claim a lack of financial literacy, and are unprepared financially for retirement and emergency money.
2. Despite an overall increase in confidence in making financial decisions, 40% of respondents did not know if they could raise NZ$5,000 ($2,922) in a week in an emergency, and 45% said they would rely on family or friends or were unsure how they would manage if they were suddenly unemployed or unable to work for more than three months. Thus, there appears to be an overestimation of financial resilience.
Since March 2020, only 44% of respondents declare financial literacy, a decrease of 6 percentage points.
Worrisomely, in January 2022, less than 30% of respondents stated they could survive for a month or less without a source of income.
In light of the fact that financial readiness is a concern for some, job stability is an essential component of financial resilience for those in the labor force.
What the findings of the study show
Richard Klipin, chief executive officer of the FSC, stated, "The purpose of this study was to examine some of the most significant financial confidence and well-being trends and behaviors over the past three years to gauge our progress."
Mr. Klipin stated, "According to the research, there are clear warning indications that a perfect storm is building owing to financial overconfidence, insufficient emergency reserves or retirement investments, and economic risks such as rising interest rates and inflation."
"Given that the economic climate has altered dramatically since January of this year, the current situation is likely to be even more alarming. It is crucial that increasing financial confidence be reflected in the other measures, including financial literacy, financial readiness, job stability, and wellbeing.
In March of 2020, just as the COVID-19 pandemic became a reality in New Zealand, the FSC began monitoring financial resilience. The subsequent data collected illustrate how New Zealanders reacted to the pandemic and how they continue to react to economic uncertainty.
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