Younger Australians would spend extra income on shopping for clothes and new mobile devices before considering using the money to get financial protection for the first time or increase their life insurance cover.
And while clothes and mobiles are less of a priority for older Australians, all generations would first use extra income to build savings and pay down debt as their main priorities, according to consumer research by Australia’s largest life insurer TAL.
As part of TAL’s ongoing research into consumer attitudes and behaviours, Australians were asked what they would spend an extra 10% increase in income on, and they said overwhelmingly they would use the money to ‘deleverage’.
The research found that 87% of Australians would choose to deleverage across four areas: building up savings which was the highest individual response category at 59%, followed by putting towards the mortgage (38%), paying off credit card/personal loan (30%) and paying off bills (28%).
After these immediate financial needs, Australians would next put the extra income towards paying for a holiday (38%).
And while taking out life insurance/increasing life cover scored very low across all demographic areas, more Generation Xers would prefer to spend extra income shopping, going out to dinner and new technology than their older generations.
TAL Group CEO Jim Minto said: “This survey reveals the very low priority people place in thinking about using extra income to ensure they have adequate financial protection. It is a massive challenge but we need to change this mindset.
“The global financial crisis marked a turning point in consumer attitudes towards savings and debt, and deleveraging became an important priority. What we are seeing from this research is that this trend continues.”
“And with interest rates having been low for some time now, it seems people are paying down their mortgages while they feel they can.”
After ‘deleveraging’ and using extra income for a holiday, the areas people were least likely to spend extra income on were upgrading the car (15%), increasing spending on shopping for items such as clothes (10%) and going out for dinner more often (9%). Life insurance and ‘other insurance’ spending each came out last at 4% each.
“We undertook the poll because we want to understand the relative importance of life insurance versus other areas of spending priority,” Mr Minto said.
“People have expressed a desire to increase their financial buffer by building savings and reducing their outgoing payments on debt, but life insurance remains a low priority for many.
“This is a concern because in the event that a primary earner is no longer able to provide for his or her family, life insurance, income protection, critical illness and disability cover can help ensure that outgoings are still met without having to dip into savings.
“And for many people, a 10% increase in household income would more than pay for a policy or ensure adequate cover that gives this peace of mind.”
Mr Minto said life insurance not only protects what people have created in life and their immediate obligations, but it can also help achieve what they dream of for the future.
