Financial wellbeing - how is it faring as cost of living rises?

New Zealanders’ financial wellbeing hit a new low in the 2023 September quarter as the cost-of-living crisis continued to bite.

The ANZ Financial Wellbeing Indicator (FWI) score fell to 56.9 in the three months to the end of September, from 58.3 in the June quarter.

It is the lowest it has been since ANZ started regularly tracking New Zealanders’ financial wellbeing in June 2019.

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The ANZ FWI provides an overview of the personal financial wellbeing of New Zealanders and is intended to act as a ‘pulse check’ on how Kiwis are feeling about their financial wellbeing.

It is made up of three key indicators – feeling comfortable, ability to meet commitments and resilience.

Meeting Commitments

This measures people’s views about how easily they can pay their bills and other expenses like their mortgage or rent.

As interest rates and rents have risen the stress has become evident.

The latest quarter saw a sharp dip, from 71.0 in the June quarter to 68.7.

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Feeling comfortable

The second element is Feeling Comfortable – it measures how people feel about their financial position now and looking forward.

Not surprisingly, after a period of house prices declines (for many people their house their largest asset) and choppy markets (impacting KiwiSaver funds) people are feeling, overall, less comfortable.

The measure dropped to 46.6 from 49.3, a record low.

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Resilience

The third element is resilience – our ability to handle any future economic surprises or shocks.

This has continued to hold up, rising to 55.3 from 54.7 in the previous quarter.

While unemployment has lifted, it remains low, and savings rates have (surprisingly) remained solid. These are preventing the overall FWB Indicator Score falling even more sharply.

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The combined impact of these changes has altered the size of the four segments we use for financial wellbeing, with the proportion of people in the ‘struggling’ camp pretty much doubling over the past two years.

19.8 per cent of people were considered to have no worries (financial wellbeing score >80-100). This compared to 25.8 per cent two years earlier in the September 2021 quarter.

41.9 per cent were doing OK (financial wellbeing score >50-80), down from 45.9 two years earlier.

21.0 per cent were getting by (financial wellbeing score >30-50), compared to 17.9 per cent in the September 2021 quarter.

17.2 per cent were considered to be struggling (financial wellbeing score 0-30), compared to 10.4 per cent two years earlier.

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Improving financial wellbeing

A person’s financial wellbeing is influenced by a complex range of factors including their socio-economic circumstances, behaviour traits, attitudes towards money and their stage of life.

Some of these factors are beyond a person’s control. But there are two behaviours that can have a particularly strong influence on improving a person’s sense of financial wellbeing – active saving and not borrowing to pay for everyday expenses.

Developing a regular savings habit and having at least $1000 put aside can materially improve a person’s feeling of financial wellbeing.

Having a savings buffer can help give you a sense of control, especially when something unexpected – and potentially expensive - happens, like a car breaks down or an appliance needs replacing.

Almost 55 per cent of ANZ customers have a savings buffer in place, meaning they have at least $1000 in their bank account.

Approximately 21.5 per cent of ANZ customers are active savers, meaning they are regularly contributing into a savings account.

Saving can be really hard to do when we have high inflation and rising interest rates.

Anyone who has concerns, or who wants to talk about their finances, should contact ANZ.

ANZ has a range of information to help people manage their finances on our financial wellbeing hub.

The ANZ Financial Wellbeing Indicator Score provides a time-series measure of New Zealanders' financial wellbeing.

ANZ has partnered with Roy Morgan to replicate key financial wellbeing questions from the 2021 ANZ Financial Wellbeing Survey. This robust, quarterly snapshot of the personal financial wellbeing of New Zealanders identifies key questions from that survey and applies them to proxies within the weekly Roy Morgan Single Source survey of 7,000 New Zealanders annually.