From scams and super to tax and ETFs - we put Aussies' investing skills to the test

Sydney, Australia 11/09/2024 - A lack of basic investment knowledge is likely holding many Australians back from wealth creation. Research from InvestSMART, a leading online investment adviser and wealth platform, has found the majority of Australians lack the knowledge to make important investment decisions and do more with their money. 

InvestSMART's new investing knowledge quiz, Test Your Invest Smarts, has already challenged more than 1,000 Australians nationwide and the majority (74%) failed. 

Just one in four people passed the test (26%) and no one received a perfect score (15 out of 15). The five questions Australians performed worst on were: 

• What are concessional super contributions? (Just 3% got it right) 

• How is capital gains tax calculated? (Just 13% got it right) 

• What does the S&P/ASX 200 Index track? (Just 20% got it right) 

• What are franked dividends? (Just 21% got it right) 

• What is dollar cost averaging? (Just 25% got it right) 

Effie Zahos, InvestSMART's money expert said: 

"Many Aussies are feeling the pinch of the cost-of-living crisis, forcing them to focus on day-to-day expenses over wealth creation. But now, more than ever, understanding the basics of investing - inside and outside of super - is crucial, as it remains one of the few accessible paths to building wealth. 

"While Australians have traditionally been obsessed with property, skyrocketing prices are making this dream increasingly unattainable for younger generations. To embrace a new Aussie dream - one that doesn't require a picket fence - an understanding of investing across all asset classes will become essential. 

"For example, for younger generations super is set to become the biggest asset class they have, yet overall, only 3% of people could accurately identify all types of contributions that qualify as concessional. Understanding how to contribute to and make the most of your superannuation is crucial to ensuring financial stability."  

Battle of the generations 

Baby Boomers were more likely than Gen X to pass the test (30% compared to 22%). Interestingly, Millennials and Gen Z outperformed Gen X with a pass rate of 29% and 24% respectively. 

Gender and income divide 

Significantly, the survey found that Aussie women dramatically underperformed compared with men, who were twice as likely to pass the test (35% men v 18% women). Men were also more than twice as likely to score 10 or higher on the test compared with women (19% compared to 7%). 

Aussie households with an annual income of $150k or more were more likely to have passed the test (48%) compared with those from lower-income households. Commenting on the disparity, Zahos said: 

"Understanding investing concepts shouldn't be the sole domain of the well-paid. I think there's a tendency to think investing is too intimidating. Certainly, there's a lot of industry jargon associated with investing, but there are a lot of resources available that can help people build up their investing knowledge." 

Aussie's improving at spotting a scam 

It's not all bad, though, as there were several areas where Aussies performed quite well. These include: 

• When you can access your super (72% correct) 

• Identifying a Google search result scam (64% correct) 

• Identifying a scam message (63% correct) 

• The impact of inflation on returns (62% correct) 

• Identifying different asset classes (54% correct) 

"The silver lining is that Australians are more aware of the insidious nature of scams. However, I would like to see the pass score on this closer to 100%. Money scams have become incredibly sophisticated and, unfortunately, it's on consumers to police their money. 

"The team at InvestSMART created the Test Your Invest Smarts quiz to help Aussies boost their financial literacy and spark investing thinking. 

"My recommendation for those who put investing in the too-hard basket but know they should do something about it is: 1) Do the quiz to see where you sit. 2) Put an action plan together to improve your knowledge. 3) Set a small achievable goal to get you started." 

Take the Test Your Invest Smarts quiz: testyourinvestsmarts.com.au