New findings reveal confusion around basic financial concepts and retirement rules
Vanguard’s new How Australia Retires 2025 report reveals that financial literacy gaps persist among Australians, with many still struggling to understand key concepts like interest, inflation and the importance of diversification in managing risk.
The findings are drawn from a nationally representative survey of 1,800 Australians aged 18 and over, conducted in February 2025.
To assess financial literacy, participants answered the internationally recognised “Big Three” questions, which test understanding of core financial principles.
Want to see how you’d fare? The questions are below — and you’ll find the answers at the end of the article.
- Suppose you put $100 into a no-fee savings account with a guaranteed interest rate of 2% per year. You don’t make any further payments into this account and you don’t withdraw any money. How much would be in the account at the end of the first year, once the interest payment is made?
- Imagine now that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, would you be able to buy more than today, exactly the same as today, or less than today with the money in this account?
- Is the following statement true or false. Buying shares in a single company usually provides a safer return than buying shares in a number of different companies.
So, how did Australians perform?
While these questions may appear straightforward, the results show that many Australians found them challenging.
- Young adults (18-24) answered just over half correctly, averaging 52%.
- Australians aged 75 and over performed best, with an average score of 75%.
- Women scored lower than men across all age groups, with the largest gap in the 75+ bracket (men: 84%, women: 62%).
- Older men consistently demonstrated higher financial literacy than the general population, a trend that continued into retirement.
- Women’s financial literacy peaked between ages 45 and 54.
These findings suggest more needs to be done to support Australians to better understand and effectively navigate financial decisions.
Figure 1: Financial literacy by age and gender
Source: Vanguard How Australia Retires 2025 report
Many Australians don’t know when they can access their superannuation
The survey also included four true-or-false questions to measure Australians’ knowledge of the retirement system, including superannuation rules and pension eligibility.
- Everyone in Australia over the age 67 is eligible to get Age Pension if they pass the resident rules, income test, and assets test.
- Super fund members can access their superannuation after reaching the age of 50.
- Employees cannot contribute into their own superannuation funds – only an employer can make contributions.
- Superannuation is taxed at a lower rate than other investments (except for owner-occupied housing).
If you’d like to check your answers, you’ll find them at the end of the article.
Similarly to financial literacy, we scored respondents based on the proportion of questions they answered correctly.
We found that even Australians at retirement age have gaps in their knowledge: the average retirement literacy score for men aged 65 and older was 67%, while women in the same age group scored only 57%.
Concerningly, the biggest gap was for the question about the preservation age for superannuation. Just 40% of Australians were able to answer that question correctly this year, compared to 43% last year.
Figure 2: Australians’ understanding of the retirement system
Source: Vanguard How Australia Retires 2024 and 2025 reports
So, what can you do about it?
We found that financial literacy and retirement literacy were among the factors associated with retirement confidence and feeling optimistic about retirement.
That means improving your financial knowledge isn’t just a nice-to-have; it can impact how secure and hopeful you feel about your future.
Whether you’re beginning your financial journey or seeking to improve your knowledge, free resources such as ASIC’s MoneySmart website can help you build confidence and make informed decisions about your financial future.
The more you learn, the more empowered you’ll feel to make decisions that support your financial wellbeing. Book a time to chat here, and we’ll discuss what’s best for you.
Source: Vanguard
