Home ownership most important factor for financial wellness, report says

author-avatar By on July 26, 2021
Home ownership most important factor for financial wellness, report says

A new survey shows those earning $125,000 per year or more recorded significantly higher levels of 'financial wellness'.

The report, commissioned by Your Financial Wellness (YFW), with support from Teachers Mutual Bank, used the YFW Index to identify and explore factors impacting financial wellness in Australia, using a survey sample size of 3,000.

Financial wellness was associated with income, but average index scores only improved moderately when incomes increased below $125,000 a year. 

Once the $125,000 threshold was breached, average scores increased substantially. 

For example, the average wellness score on household incomes below $50,000 per year was 5.3; $50,000-$80,000 was 5.8; $80,000-$125,000 was 6.2; and for $125,000+ it jumped to 7.2.

Self-employed people had better financial wellness than their full and part-time counterparts, with the report suggesting being in control on one's destiny improved scores. 

Women on average also reported lower financial wellness levels than men, at 6.1 compared to 6.9. 

Home ownership the 'key' to unlocking financial wellness

According to the report, a YFW index of 6.4 (out of 10) represented average financial wellness, with the average score of those who owned their home outright sitting at 7.9, the highest average score of any variable analysed. 

Scores below five indicated 'significant' levels of financial stress, and people renting a home scored an average financial wellness of 5.1. 

The proportion of people who felt financially stressed and owned their home outright was just 6%, while the proportion of renters who were stressed was 48%. 

People looking to buy their first home had an average index of 6.7, with the report noting this likely reflected the optimism of looking to buy with the safety net of a deposit. 

The index dropped marginally after purchasing a home, most likely reflecting the pressure that mortgage repayments brought. 

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Source: YFW, Teachers Mutual Bank.

Steve James, chief executive of Teachers Mutual Bank, said first home buyers looking to enter the market needed to prepare accordingly. 

"While support such as the First Home Loan Deposit Scheme (FHLDS) can provide a great help in removing the cost of Lenders Mortgage Insurance, it is important to remember the other additional costs that come with purchasing a property and moving, such as stamp duty, removalist fees, electricity, gas and internet connection, home and contents insurance," Mr James said.

"Further, your first home won’t be your home forever. It may be helpful to think about the potential re-sale value it has in the future.

"Consider things like travel distances, proximity to transport, retail, and schools that may be of value when looking to sell the property down the track."

Want to feel financially 'well'? Pay off debt

The report noted the ability to pay off debt is also one of the most important factors underpinning financial wellness. 

Around 88% of the 3,000 survey respondents reported having some form of debt and 30% expressed concern at meeting repayments. 

Of those struggling to repay debt, 78% were financially stressed and recorded a YFW score of just 3.6, while of those just managing to repay debt, 47% were stressed and had an index of 4.1. 

Forty per cent of respondents also reported having less than a month's salary in savings, with financial wellness substantially improving when more money was saved.


Photo by Sidekix Media on Unsplash

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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