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Financial confidence builds as festive season approaches

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Confidence in financial wellbeing increased during the third quarter and 28 per cent of households say the festive season will encourage them to resume spending, according to a new survey.

The ING Direct Financial Wellbeing Index rose to 105.9 in the third quarter from 105.8 in the second quarter and from its lowest level of 104.8 in the first quarter.

The survey showed the proportion of mortgage-free households was unchanged at 23 per cent this quarter. Of the households that have a mortgage, 43 per cent are paying down ahead of time, which is up from 40 per cent in the previous quarter. The median outstanding balance is $224,853.

Also among the data, 59 per cent of respondents said they are “very comfortable” with their mortgage debt, while 54 per cent said they are “very comfortable” with their card debt.

“Despite a volatile quarter in financial markets, Australian households are proving their resilience as they get debt under control and build a strong savings base,” says Don Koch, CEO of ING Direct.

Over the holiday period, 37 per cent say they would like to increase savings before they resume personal spending. Among Gen Y, 43 per cent will most likely prioritise saving over spending.

Twenty-eight per cent of all respondents want to get debt under control before they increase spending and 27 per cent won’t spend again for at least a year.

The major barriers to spending are job security, interest rates outlook and uncertainty over the political environment. Thirty-three per cent of respondents said they would spend more if interest rates dropped and the number increased to 60 per cent among households with a mortgage of $100,000. The survey also revealed 36 per cent restrict spending because of job security fears, 30 per cent are waiting for signs of economic growth/stability before they start spending again and 28 per cent say the “volatile political environment” is the reason for restricted spending.

“Australians have worked hard to improve their financial position over the past two years,” says Koch. “We now have a very clear perspective of what’s happening in terms of financial confidence, and households clearly feel better about reduced credit card debt and increased personal savings. Overall, many households are well-placed financially.

“It’s possible that as we get closer to the festive season, households will relax their purse string a little more but right now it seems the focus is very much on protecting the gains made in financial wellbeing over the last two years."

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Friday, October 21, 2011

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