Ten eye-openers from Money Week

Pawn shops still exist. Retirement Commissioner Diane Maxwell.
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Pawn shops still exist. Retirement Commissioner Diane Maxwell.

Money Week is over for another year, and what have we learned?

Many families lacked financial "resilience", and were struggling to cope with modern challenges like variable incomes, survey data released this week by the Commission for Financial Capability (CFFC) showed.

Coping mechanisms included begging family for help, and hocking valuable through pawn shops, but ageism and living in a cycle of borrowing for necessities were also making life hard for many people.

Retirement Commission Diane Maxwell, who heads the CFFC, wants families to focus on insurance, savings and reducing debt to become better able to weather the ups and downs of life.

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The CFFC survey data showed what some people are up against in turning their money lives around.

UNSTABLE INCOMES

Overall 42 per cent of people said their income varied a bit, or a lot, each month.

And 20 per cent of households said it was likely their income would decrease in the coming year.

Maxwell said: "Income variability is a problem because outgoings like rent or mortgages, insurances, utilities are usually fixed. You need to be able to plan things like childcare in advance which is very difficult if work doesn't get confirmed until the last minute, and hours vary. It can create a level of daily uncertainty and stress that is bad for our ability to think clearly and think long term."

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YOUNG BEAR BRUNT OF "GIG" ECONOMY

Younger workers are less likely to have stable incomes.

Maxwell said: "We have a skills shortage in many sectors so if you are renting with no dependents and have skills that are in demand you can work the gig economy to your advantage. Even more so if you're still living at home and not responsible for the monthly bills.

"However, it can make it harder to get credit from mainstream lenders who struggle to assess your income and risk. You may pay a risk premium or it might impact your ability to get a home loan. You might also be losing out on some extras that add up like employer contributions to KiwiSaver and paid sick leave."

AGEISM CONTINUES

Pessimism about job prospects rises as people age.

Just shy of a third of those aged 55-64 thought it would be hard for them to find a new job, if they lost their current one. That was significantly higher than for younger workers.

Maxwell said: "Ageism is alive and well in the job market, sometimes cloaked in vague comments like 'not the right fit'. We need this issue to be addressed at the board table level so that organisations develop a clear plan to attract and retain older workers."

ASIAN JOBSEEKERS IN DEMAND

There are plenty of stories about migrants finding it hard to crack the job market in New Zealand, but Asian people responding to the CFFC's survey were the more confident about their ability to find a job than people from other ethnic groups.

Maxwell said: "Broadly other stats tell us that Asian New Zealanders have higher education levels and particularly in areas that have rising demand, that may translate into greater confidence in a tight job market with skills shortages."

STRONG FAMILIES MATTER

Family help is vital resource for many families, but higher-income families have higher levels of family support in a crisis.

While 34 per cent of people in households bringing in over $100,000 a year could access a family "helping hand" anytime they needed it, the corresponding figure for people in lower earning households was 28 per cent.

Maxwell said: "Money Week has been focusing on building resilience via buffer savings, insurance and wills. We know that lower income families are less likely to have insurance and yet will be the most impacted by the loss of a car, or house contents.

"Sometimes the car has been written off but there is still a loan outstanding on it which has to be paid. Our message this week has been that we want insurance companies to dig deep in times of crisis, not families. Make the insurers do the heavy lifting financially." 

HELPING HANDS

One in five people (20 per cent) had asked for financial help from family in the past 12 months.

Maxwell said: "The upside is that a gift or loan from family is much cheaper than a payday lender. The downside is that we know that family member sometimes went to a payday lender to be able to help.

"In the worst situations we see the remaining family member with a good credit rating doing a lot of providing because they are the one that can still access money."

FOOD RATIONING

It's been a long time since there was food rationing imposed by government, but 13 per cent said they had gone without meals in the past year because of a lack of money.

Maxwell said: "Our work through our face to face programmes tells us this is a complicated area and it is inevitably a mix of different situations. It's not always related to how much income is coming in, it can be about debt payments that are sucking the household dry.

"Families also tell us that sometimes friends and family arrive and deplete the weeks groceries on day one and they don't feel able to say no. The inevitable response is, 'Why bother shopping and planning, do takeaways when you've got the money and then rice until next payday'. It's a feast or famine approach."

TRUST IN ACC

A lot of people seem not to expect to be able to rely on the government, if they suffered a serious injury. 

Maxwell said: "Everyone has a story about someone they know who was turned down for an ACC claim. There's some confusion about what ACC covers and when. Overall though it probably contributes to our low rates of income protection insurance."

PAWN SHOPS THRIVING

In the past year, 13 per cent of people had pawned or sold something. Surprise?

Maxwell said: "Yes and no. The thing about pawn shops is that they deliver quick access to cash with no questions asked. No hard conversations with a lender, or applications to fill out detailing outgoings and income. They position themselves in areas with high rates of poverty so they are just a few steps away."

BORROWING TO PAY THE BILLS

Again, 13 per cent of people in households earning more than $100,000 had borrowed to meet everyday expenses, compared to 26 per cent of households with incomes of $100,000 of less.

Maxwell said: "Work is underway to understand more about what's going on here. An element of it is that we live beyond our means, we buy too much stuff driven by a sense of relative poverty, simply meaning we look around and everyone else seems to have more.

"We are driven by FOMO, status anxiety, short term thinking and the easy availability of credit. We buy before we've even worked out how badly we need it, because there was a deal on.

"We do 'spaving', spending and saving, ie, they'll come home with a $200 pair of shoes and say they 'saved' $100, or a $1000 bike and say they 'saved' $300. We cook less and eat out more.

"Inflation has been relatively low so it's not necessarily driven by the cost of living, with the exception of course of the cost of housing. While interest rates are so low that is workable, but will become more of an issue if they were to rise."

 - Stuff

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