Cashed-up empty nesters the most financially comfortable: ME Bank survey

Australian households' financial comfort levels improved over the first six months of the year with empty nesters the most comfortable and single parents the least comfortable, according to the latest Household Financial Comfort Report from ME Bank. 

Overall, household financial comfort has increased by 4% to an index reading of 5.5 out of 10 - its highest level since the report was first established in October 2011. 

The index, based on a survey of 1,500 households, quantifies how comfortable Australians feel about their household financial situation as well as their expectations and confidence with respect to their finances on a scale of 1 (least comfortable) to 10 (most comfortable).

“The positive effects from a strong rise in share markets and to a lesser extent the Australian housing market over the past six months have boosted the value of direct investments and superannuation of most households,” says the ME Bank report. 

“Lower borrowing costs have also increased most households’ comfort with their debt burdens and boosted their cash savings. It has also improved their expectations for financial comfort during the next year and in the longer term their standard of living in retirement.” 

However, households remain cautious preferring less riskier investments and keen on saving while there has also been a rise in the proportion of borrowers putting extra money into their mortgage repayments. 

For the first time since the survey was undertaken in October 2011, savers (51%) outnumbered spenders (49%).

“Households have preferred to pay back debt, with the number of households putting extra money into loan repayments increasing 6% to 56% in the six months to June, while investing in direct shares and bonds remained unchanged at 22% of households,” says Jeff Oughton, ME Bank’s consulting economist. 

“Overall, households’ are most worried about the cost of necessities (52% of households), level of savings and cash on hand (40%), their ability to maintain standard of living in retirement (32%), and the impact of the global economy on Australia (31%).” 

“As the Reserve Bank has continued to cut rates to stimulate the economy, Australians have continued to build a savings buffer and they remain financially cautious.” 

Empty nesters’ showed both the biggest increase in financial comfort over the past six months and the highest overall score of 5.96% - perhaps not surprising given that house prices are rising and interest rates are low. 

Apart from retirees (5% decline), all categories of households recorded an improvement in financial comfort. 

ME Bank attributes the deterioration in comfort of ‘retirees’ as largely reflecting the “negative impact of lower deposit rates on their investments given their relatively high and defensive exposure to bank deposits rather than growth assets such as shares and investment properties”.

“Unlike most other households, retirees have experienced little, if any benefit from lower borrowing rates given a lack of debt. Moreover, the vast majority of their wealth is somewhat illiquid equity in their owner-occupied home.

Perhaps a reflection of lower interest rates, the financial comfort of single parents increased by 8% over the six month period, though they remain the least financially comfortable demographic with a score of 4.89. 

Couples without any children have higher comfort ratings than those with children.

Birdhouse image courtesy of Nannette Turner /flickr.