Nadine Tereora: Why financial literacy is the key to better wellbeing

COMMENT:

We've recently seen the release of the 'wellbeing' budget, which aims to lift Kiwi families out of poverty and boost mental health through targeted funding. This is a great start, but if we really want to safeguard Kiwis' long-term physical and mental wellbeing we also need to invest more in raising financial literacy, from budgeting to retirement planning to protecting what's most important to us.

For a caring nation, New Zealanders are behind the rest of the world when it comes to taking care of ourselves and our loved ones through insurance. Even Kiwis with insurance don't fully understand what they're buying.

As recent Consumer research discovered, just 18 per cent of Kiwis understand what their insurance policy covers. While this shows insurers need to work harder on making their policies clearer, it also points to a worrying degree of disengagement from customers.

Wouldn't it be great to see the government partner with the financial services industry to boost understanding, creating a holistic approach to wellbeing that allows us all to maintain a great quality of life?

"She'll be right" – if there's a single catchphrase that defines our national culture, it's this. It's true we live in a country with a lot to be thankful for. We have social welfare, a public health system with subsidised treatment and medicine and a world-class national insurance scheme, the Accident Compensation Corporation (ACC), which keeps us covered when the unexpected happens. Except that it often doesn't. ACC only covers accidents rather than illness, and it's rarely at the same level as a regular income.

Worryingly, the likes of GoFundMe and Givealittle are increasingly becoming our backstop when things go wrong.

This is where the "she'll be right" mindset is letting us down. According to just-released Financial Services Council research, only 20 per cent of Kiwis have considered what it would mean to not earn an income for a period of time due to illness or injury, and two-thirds of us don't have sufficient savings to cover our rent or mortgage repayments (let alone other expenses) for three months.

Some are choosing to self-insure, which can work if you've been saving hard for 30 years, but if you're only in year two, that's not nearly long enough to have built up a decent safety net.

This isn't mere self-interest from the insurance industry, but an acknowledgement that we can't keep relying on the kindness of strangers and straining the public purse to plug the gaps.

As Sam Stubbs, founder of Simplicity, said recently, money problems can be a significant contributor to poor mental health. Our industry is undergoing significant changes, which is a great opportunity to focus even more on what will really improve outcomes for New Zealanders. For us, that means helping more Kiwis take control of their own futures.

When you think about it, it seems crazy that in the past two years, many more of us have considered the risk to our cars, worth a few thousand dollars (34 per cent), than the most valuable asset we will ever have – our ability to earn an income (23 per cent).

Some may argue it's human nature to avoid thinking about the worst, but New Zealand is particularly far behind when it comes to insurance.

We rank 29th in the OECD for life insurance spending, compared with Australia's 15th. Many European countries that also have national insurance and social welfare place much higher on the list.

It's time to bust that "she'll be right" culture. Over the last decade the government and its agencies have focused on promoting KiwiSaver, which has been a huge success. We should make a similar effort with insurance, which is equally vital to ensuring our financial wellbeing. This needs to be a multi-pronged approach to reach young people in schools as well as a campaign to reach workers and families at home.

It could include the insurance industry supporting other financial experts and educators in delivering the successful Sorted in Schools programme, to help students understand risk and forward planning (which are also useful in any business career).

It would also be great to see the industry collaborate with the Commission for Financial Capability, which was granted $15 million in the recent budget.

Why not put some of this towards a campaign that raises awareness about insurance as well as other elements of financial literacy?

To adapt the old Chinese proverb, give a person fifty dollars and feed them for a day, teach them to manage fifty dollars and they're sorted for life.

Yes, insurance costs money, and some may never need to make a claim. But if every Kiwi had it, think how much healthier our national wellbeing would be.

We shouldn't have to rely on charities when accidents or illnesses happen, prioritising our cars over our families.

If we're serious about ensuring New Zealand's wellbeing, now and in the future, let's get together and change the attitudes to risk that are holding us back.

- Nadine Tereora is the chief executive of Fidelity Life.