Does financial education influence retirement savings? An examination of Australian employees

In order to ensure a financially secure retirement, Australians will need to plan and save for their retirement many decades before they retire.

The age pension, paid for out of Commonwealth government taxes is currently the backbone of the retirement system, but will not replace as much pre-retirement income in the future as it does today. Given the shift from the defined benefit style to the accumulation style, superannuation funds involve considerably more uncertainty, and as such, one might have thought that individuals would be saving more on their own. But personal saving outside of superannuation plans is virtually non-existent. Combine the retirement income crunch with the dramatic increase in life expectancy, and the need for careful retirement planning and sacrificing current consumption for later consumption becomes imperative for ensuring the financial security of older Australians. The hard question is whether individuals will be prepared to make the necessary sacrifices today to ensure a more secure financial future in retirement? This paper explores the willingness of individuals to make these sacrifices, and whether financial education can influence individuals in this difficult decision.

Evaluating the impact of financial literacy programs on the retirement savings of superannuation fund members

Currently, in Australia, the age pension, paid for out of Commonwealth government taxes, forms the basis of Australia’s retirement income system, however, given the reality of an ageing population has compelled the government to undertake a number of measures to shift the responsibility for saving to the individual, forcing them to accept an increasing level of responsibility for their financial decision-making. In the light of the changing retirement environment, it would be expected that Australians’ would ensure that they became financially literate, however, despite the amount of information and advice available in the market place, this is not the case, and they do not appear to be appropriately prepared for their retirement. Recognising the importance of financial literacy, an increasing number of government agencies, employers, superannuation funds and schools are implementing financial literacy programs in Australia. This article provides an overview of the impact that attending a financial education seminar has on the retirement decisions and settings of participants. Evidence is provided from this research that in the short term, providing financial education programs make a difference to an individual’s intended retirement settings. However, the impact of these education programs in changing investment behaviour is less conclusive.

Conceptual framework of the precautionary principle approach in the decision-making process

This article reviews the precautionary principle as an approach in addressing decisions with far reaching environmental consequences under scientific uncertainty. The precautionary principle is intended to assist with structuring environmentally risky decisions toward sustainable development. It responds to the lack of scientific evidence of a potential environmental problem. There is currently no framework to assist with the process indicating the areas of importance and stages of decisionmaking. This paper suggests a framework to assist with the process of decision-making for complex environmental problems. The main areas of concern are the issues relating to the costs, risks, and benefits assessments. The main stages of the framework includes; definition of the problem, analysis of the potential environmental risks, assessments of specific anticipated legal, social, economic, political, and technological impacts, review of the key players (social, organisation and government) obligations, comparison of alternatives available, determination of accountability, implementation, decision making, monitoring and control processes.

Savings behaviour in Fiji : an empirical assessment using the ARDL approach to cointegration

Purpose – This paper aims to delineate the short- and long-run relationships between savings, real interest rate, income, current account deficits (CADs) and age dependency ratio in Fiji using cointegration and error correction models over the period 1968-2000.

Design/methodology/approach – The recently developed bounds testing approach to cointegration is used, which is applicable irrespective of whether the underlying variables are integrated of order one or order zero. Given the small sample size in this study, appropriate critical values were extracted from Narayan. To estimate the short- and long-run elasticities, the autoregressive distributed-lag model is used.

Findings – In the short- and long-run: a 1 per cent increase in growth rate increases savings by over 0.07 and 0.5 per cent, respectively; a 1 per cent increase in the CAD reduces savings rate by 0.01 and 0.02 per cent, respectively; and the negative coefficient on the real interest rate implies that the income effect dominates the substitution effect, while in the short-run the total effect of the real interest rate is positive, implying that the substitution effect dominates the income effect.

Originality/value – This paper makes the first attempt at estimating the savings function for the Fiji Islands. Given that Fiji's capital market is poorly developed, the empirical findings here have direct policy relevance.

Solar energy use for energy savings in dairy processing plants

New Zealand is one of the world’s largest producers of dairy products and has a climate with high levels of solar radiation; however, the use of solar energy in the dairy processing industry has received limited attention. An examination of historical records found that the annual peak in New Zealand milk production and processing occurs at a time when solar radiation levels are increasing markedly. An F-Chart analysis was used to simulate the performance of large-area arrays of solar collectors and to determine their suitability for heating and cooling in a dairy processing environment. For the study four types of solar collectors were analysed: glazed flat plates, evacuated tubes, evacuated tubes with CPC reflectors and a building-integrated solar collector under development at the University of Waikato (UoW). It was found that of these echnologies, both flat plate and evacuated tubes with CPC reflectors could make useful heating and cooling contributions. Furthermore, the solar fraction was determined mainly by the collector area to storage volume ratio. Finally, it was found that the UoW building-integrated solar collector could make a significant contribution to energy use in dairies and may be an attractive future technology for the industry.

An empirical investigation of the determinants of Oman's national savings

In this note we examine the determinants of Oman's national savings for the period 1977-2003 using the bounds testing approach to cointegration. We use the ARDL model to estimate the long run and short run determinants of national savings. Our main finding is that the current account, the urbanisation rate and the money supply exert statistically significant impacts on Oman''s national savings in the long run.

Behavioural finance theory : implications for retirement savings

This paper contains an overview of the life-cycle model and the behavioural finance theories that assist in explaining why individual savings behaviour deviates from what is predicted by this model. According to Bernstein (1996), the behavioural research evidence suggests irrationality, inconsistency and incompetence in the way individuals approach and arrive at decisions and choices when faced with uncertainty. The review of literature undertaken in this paper confirms that numerous individuals are not adequately equipped to handle the complex decisions required to properly plan and save for their retirement. While the targeting of educational resources to those individuals who are prepared to actively engage in the management of their retirement funds is likely to be beneficial, there is a need for behavioural factors to underpin future retirement savings policies.

The relevance of financial education for retirement savings behaviour

This paper was motivated by the growing literature that suggests that individuals fail to conform to rational economic behaviour when it comes to saving for retirement. A review of the relevant literature confirmed that many individuals fail to save for retirement in a rational way as prescribed by the Modigliani and Brumberg (1954) economic life-cycle model. Numerous studies show that many individuals exhibit irrational behaviour when it comes to planning and saving for retirement. The literature review identified that exposure to financial education programs can positively influence the planning and savings behaviour of retirement fund members.

Water savings or water efficiency? Water-use attitudes and behaviour in rural and regional areas

Drought conditions in southwest Victoria, as in other regions of Australia and around the world, have caused the need to reduce water consumption to ensure security of supply into the future. To develop effective water-saving behaviour change strategies, an understanding of people's attitudes to the behaviour, including barriers stopping them from adopting the behaviour, is required. Thus, this paper explores the water-use behaviours and attitudes of rural and regional urban water users in southwest Victoria. A conceptual model of the factors impacting on water use of these users, including drivers and barriers to water saving, is developed. The factors that appear to impact on water-use behaviour not previously identified included the source of water supply (groundwater versus surface water), previous experience with water shortages and trust in the water authority and government. Also, a difference in the drivers for water saving was found, with farmers wanting to be 'water efficient' to keep their business viable and productive, while hobby farmers and residential users were 'saving water' for more altruistic reasons. These findings have implications for development of demand management strategies in this, and other, rural and regional areas. However, the conceptual model has to be tested to determine if it truly reflects factors influencing water-saving behaviour in rural and regional areas.

The Australian superannuation framework : implications for retirement savings

The provision of retirement income has become a challenge for governments across the world. The population is ageing as a result of lower mortality and fertility rates: this places financial stress on government budgets as welfare spending increases, further compounded by a proportional reduction in working-age taxpayers. The Australian government has introduced a compulsory superannuation charge on employers to assist retirement savings. Even though savings in superannuation have increased significantly over the years, many will still have insufficient savings to fund their retirement. Recent changes to the superannuation framework have emphasised the importance the government places on supporting future generations of Australians in retirement.