What is financial resilience?

Life is full of events that can affect your clients’ finances: job loss and changes to physical or mental health are some common examples. How they bounce back from a financial shock determines their level of financial resilience.

‘Resilience’ is an increasingly common term used by professionals in the areas of health, natural disasters, education and community infrastructure. It’s a dynamic process that lets individuals bounce back after difficult events and experiences. It allows them to adapt to changing circumstances, and to deal with environmental stress. Therefore, it’s more about adaptability than stability.

Financial resilience is measured by someone’s ability to draw on the skills and know-how they already possess. It’s also about their ability to access appropriate support in times of financial difficulty.

What does the research measure?

This research identified four factors that produce financial resilience when they work together:

  • economic resources
  • suitable financial products and services
  • financial knowledge
  • behaviour and social capital

Economic Resources

Financial Products and Services

  • income
  • savings
  • debt management
  • ability to meet cost of living expenses and raise funds in an emergency.
  • access to and demand for financial products and services.
  • bank account
  • credit
  • insurance.

Financial Knowledge and Behaviour

Social Capital

  • budget management
  • knowledge and understanding of financial products and services
  • use of or willingness to use financial advice.
  • social networks
  • social support in times of crisis
  • need for and access to community or government support.[RFC1]

Register for a webinar to learn more.

How is this different to financial exclusion?

These findings build on the previous research into financial exclusion we did in partnership with the Centre for Social Impact.

Financial exclusion measures the level of access to financial products and services only. However, financial resilience looks at the four factors above to measure someone’s ability to cope with financial difficulty and ability to reach financial security.

This new approach provides us with a much more in-depth understanding of people’s financial situations. It means we can identify:

  • the resources they have to protect themselves in times of difficulty
  • if and when they need additional support
  • which resources are needed and for who.

To find out more download the research report Promoting Financial Resilience in Australia 2015 or register to participate in a webinar with the research team.

How financially resilient is the Australian population?

Overall, around 2 million people experience severe or high financial stress or vulnerability. This means that over 1 in 10 adults in Australia are likely to be facing financial issues such as:

  • problems paying debts and/or meeting cost of living expenses because of limited economic resources
  • limited access to or unmet demand for credit or insurance
  • limited financial knowledge and confidence
  • low levels of social capital such as social support in times of crisis.

A further 1 in 2 people (53.2%) face a low level of financial stress with the remainder of the population (35.7%) identified as financially secure.

Tools and reports

We’re committed to working with the government and community sectors to help you measure the impact of social programs so resources are allocated effectively and have the most impact.

We’re developing a tool that you can use to measure the effectiveness of programs in improving your clients’ financial resilience. This tool will be launched later in 2016. If you’d like to be one of the first to use our evaluation tool you can register your interest by sending an email to corporate.responsibility@nab.com.au.

Here is the summary and full version of our reports for further reading:

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