Chapter summary
  • There is a range of financial (deposit taking) institutions in Australia: banks, building societies and credit unions.
  • These deposit taking institutions offer a range of financial products and services to consumers.
  • Financial management can carry a level of risk for individuals.
  • Various factors influence an individual’s approach to financial management. These can relate to their approach – conservative (risk-averse) or higher risk takers – and their stage of life.
  • Debt can be classified as being ‘good’ or ‘bad’ and needs to be actively managed.
  • There is a range of investment options that allow people to accumulate future wealth – for instance, shares, government bonds and long-term deposit accounts.
  • There is a range of financial risks that consumers need to be aware of and protect themselves against, such as scams, identity theft and fraud, online shopping transactions, using ATM banking, and incorrect entries on credit and bank statements.
  • Insurance cover can provide protection against risk to a person’s property and self.
  • Superannuation is a compulsory savings scheme and acts as a method to help overcome the risk of not having adequate finances in a person’s retirement years.
Interactive activities

Key terms

Short-answer questions
  1. Define the following terms. Demonstrate your understanding by incorporating each term in a sentence.
    1. Dividends
    2. Government bond
    3. Superannuation
    4. Life insurance
  2. Categorise the following statements as either true or false:
    1. Buying shares in mining companies is popular with investors who are risk-averse.
    2. Individuals can operate a bank account at the Reserve Bank.
    3. In 2014 the rate of employer contribution for superannuation was 10%.
    4. A credit union is classified as a deposit-taking institution.
  3. Identify the issues that the internet has caused lawmakers to think about when acting to protect Australians in conducting their financial transactions.
  4. Analyse the strengths and weakness associated with having a credit card. In your analysis you need to include the possibility of your credit card being lost or stolen and the level of risk that would be associated with this.
  5. Outline the reasons why superannuation is so important and discuss why everyone needs to have superannuation.
Extended-response question

Compulsory superannuation has been in existence in Australia only since 1992. At that time employers had to contribute 3% on behalf of their employees into a superannuation fund. Over time this percentage has progressively increased with the target of 12% in 2025.

Discuss whether you believe Australia having a compulsory superannuation scheme is good for individuals, businesses and the government.