Australian Families’ Experiences of Financial Stress

Learn how financial stress is affecting average Australians in the wake of the pandemic
Published on January 28th, 2022
  Written by 
Adrian Edlington
Adrian Edlington is PR & Communications Manager at Savvy. With a keen interest in personal finance, car loans, the mortgage industry, cost of living pressures, electric vehicles and renewable technology, Adrian's research includes conducting primary data surveys and analysis of up-to-the-minute secondary Australian data sources. His work on behalf of Savvy has been featured on ABC.net.au The Conversation, the Sydney Morning Herald, AFR, News.com.au, The Age, Herald Sun, Adelaide Now, SBS On The Money, 7News, Car Expert, Which Car, Drive.com.au and more. In his spare time, Adrian enjoys mountain biking and business podcasts.
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Financial Stress

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The COVID-19 pandemic and government response to it has been hard on many Australian families. In the early days of the pandemic, when governments across the globe were shutting down offices and venues where many people gather, there was much uncertainty. Would casual hospitality and retail workers be able to have an income? What about paying off mortgages or rent? Bills and groceries?

In this report, we analyse Australian families’ experiences of financial stress in the wake of the pandemic and the tapering off and eventual end of government support such as JobSeeker, JobKeeper, The Pandemic Disaster Payment, and other programs designed to alleviate financial stress amid lockdowns and/or industry shutdowns. We’ll also look at which demographics are most at risk of financial stress according to recent research, and what you can do to protect against financial stress.

Australian Families' Financial Stress

What is financial stress?

Financial stress is a situation in which a household or individual has trouble making ends meet – that their income is stretched beyond reasonable limits and starts to take a toll in their life and those around them. Some may call it “financial hardship.” There is no concrete definition of financial stress – unlike mortgage stress, which we’ll delve into – but indicators of financial stress may include, but is not limited to:

  • Sudden retrenchment or unemployment without income protection
  • Lack of savings
  • Overuse of credit cards or debt
  • Inability to pay the mortgage or rent on time
  • Asking others for help, such as family or charity
  • Struggle to pay bills on time
  • Asking for mortgage or debt repayment holidays
  • Paying credit card bills off with other forms of credit
  • Taking credit card cash advances
  • Unable to come up with significant sum of money to cover car repairs, major appliance repair, medical bill, etc.
  • Pawning or selling household or valuable items
  • Not heating or cooling one’s home in fear it may drive up bills
  • Going without meals
  • Withholding children from excursions or extracurricular activities, due to added cost
  • Imminent bankruptcy or Part IX Debt Agreement
  • A combination of two or more of these experiences.

Financial stress and mortgage stress

As we’ve discussed previously on this blog, the commonly accepted definition of mortgage stress is a household using 30% or more of their income to pay their mortgage. Mortgage stress is also referred to as ‘rental stress’ and ‘housing affordability stress’ in the media.

Roy Morgan Research has a different view: they say that those directing between 25% and 45% of their income toward their home loan as “At Risk” while homeowners spending over 45% of their income on their home loan is declared “Extreme Risk.”

At the end of 2020, the survey considered 783,000 mortgage holders “At Risk” with 454,000 considered at “Extreme Risk.”

According to Digital Finance Analytics, 41.3% of Australians were experiencing mortgage stress on average as of June 2021.

Concern about family’s current financial situation

No Data Found

Source: AIFS.com.au, Families in Australia Survey 3, p. 2

Concern about family’s future financial situation

No Data Found

Source: AIFS.com.au, Families in Australia Survey 3, p. 2

Mental health effects of financial stress

Financial stress can cause serious mental health effects in families and individuals. According to Lifeline, financial stress can cause arguments with others, withdrawing from social activities, feelings of guilt, difficulty sleeping, tiredness and low energy, tension headaches, and even generalised anxiety or depression, which can lead to panic attacks or depressive episodes. Some may simply deny the reality of the situation, while others try to “hypercorrect” – such as scolding household members for leaving lights on even if they’ve only left the room to come back in a short while or guilting them for spending money on small treats or unnecessary items.

According to some psychologists, this mirrors symptoms of Post-Traumatic Stress Response. PTSR (also known as PTSD, with D standing for “disorder”) is not simply “cured” by gaining more income, paying off debts, or remedying the acute financial situation.

PTSR is a whole-body phenomenon. People can seek treatment with cognitive therapies such as Cognitive Behaviour Therapy or Rational Emotive Behaviour Therapy, in combination with other physical therapies.

The book The Body Keeps the Score by Dr. Bessel van der Kolk explains how our bodies and minds hang on to stress – long after the events have occurred – and how it can affect our daily lives. As Dr. van der Kolk describes it in a podcast with the Science of Success, “post-traumatic stress is not about post trauma, it feels like it is happening right now.”

If you are experiencing acute mental stress due to finances, contact Beyond Blue on 1300 22 4636 or Lifeline on 131 114.

 Percentage very concerned about family financial wellbeing, by weekly income, May–June 2021

No Data Found

Source: AIFS.com.au, Families in Australia Survey 3, p.2

Experiences of financial stress

According to Digital Finance Analytics data, through to June 2021 approximately 39.45% of all families in Australia were experiencing financial stress (as an average.)

The leading experience of financial stress for families in Australia, according to an Australian Institute of Family Studies survey of 5,483 respondents from May to June 2021, 21% reported that they asked for financial help from friends or family.

18% said they could not pay utility bills on time; 13% said they went without meals; 11% said they could not pay the rent or mortgage on time; 11% pawned or sold something; 10% could not heat or cool their home; and 8% asked for assistance from a charity or community organisation.

33% said that they experienced more than one of these stresses. 12% said that they experienced three or more of the above.

The Families in Australia Survey showed that one in six respondents were “very concerned” about their families’ current financial situation. A third were a “little concerned” about their current or future financial situation.

The biggest issues that people reported were about current costs of living and into the future. Others were worried about having enough savings for retirement, sudden loss of employment or reductions in work hours, physical or mental health issues, or giving help to family members in need.

Most at risk of Financial Stress

The Digital Finance Analytics data indicates that the highest percentage of financial stress (55.82%) falls within the “young growing families” category, followed by “young affluent” on 50.02%. Others that self-report high amounts of financial stress are “multicultural establishment” (49.47%), “battling urban” (46.36%), and “disadvantaged fringe” (44.04%.) The “multicultural establishment” also recorded the highest average of rental stress (56.09%) while “young growing families” recorded a whopping 75.76% average of mortgage stress – that’s three in four young growing families. This also hews with the AIFS report saying the 20s and 30s age bracket were under the most amount of financial stress.

The AIFS report delved into concerns about financial stress. As for income brackets, 32% households on less than $499 per week said they were “very concerned” about their current financial situation, while 37% said they were “very concerned” about their future situation.

26% of renters were “very concerned” about their family’s current financial situation and 36% for future financial situations) than those who had a mortgage (10% for current and 15% for future financial situations.) 21% of singles said they were “very concerned” about current finances (29% for future finances) compared with 8% (now) and 12% (future) in couples.

Stressors to look out for

Inflation and wage stagnation

Inflation is often called an “invisible tax” as it eats into the purchasing power of your dollar. That means staples, fuel, luxuries, and other commodities increase in price while the amount of money you earn stays the same.

Trading Economics says that inflation forecast for Australia sits at about 3.2%, with the inflation rate sitting at 3% from the September 2021 quarter. Contrast this to Australian wage growth rate of 2.2% in the last quarter, with an annualised growth of 2.2%. Australia recorded the lowest ever wage growth of 1.4% in the first quarter of 2021, which meant inflation hit families harder than usual.

Expenses exceeding income

Australian household debt compared to Gross Domestic Product (GDP) is at 120% and is set to rise. If you can set a reasonable budget and ensure expenses do not exceed income, you can alleviate financial stress over time. Read more about setting a budget and other assistance you can get with managing your finances.

Experiences of financial stress, by weekly income, May–June 2021

Income Range One or More Two or More Three or More
$2,000 - $2,999
$3,000 - $3,999

Source: AIFS.com.au, Families in Australia Survey 3, p. 5

Families’ experiences of financial stress, May–June 2021

Types of Stresses Experienced Percentage
Could not pay gas, electricity or telephone bills on time
Could not pay the mortgage or rent on time
Pawned or sold something
Went without meals
Were unable to heat (or cool) home
Asked for financial help from friends or family
Asked for help from a welfare or community organisation
One or more of the above
Two or more of the above
Three or more of the above

Source: AIFS.com.au, Families in Australia Survey 3, p. 4

How to avoid financial stress

Refinancing / debt consolidation

If you haven’t refinanced your mortgage, you could save on repayments by refinancing with a lower rate. If you have multiple small debts, it may be worth looking into applying for a debt consolidation loan that “clears out” your credit card or revolving credit debts and allows you to pay it off using one repayment. It also means each repayment you make is another step toward a zero balance.

Credit negotiation

In some circumstances, hiring a professional credit negotiator can help reduce your debts and reach a payment solution with banks, collectors, or the Australian Tax Office. It won’t eliminate your debt, but it will give you peace of mind.

Income protection insurance

If you are worried about losing your job or hours, you may want to consider buying income protection insurance. Yes, this is an added cost on top of all your others. If you set a strict budget and can accommodate the payments, it can take a lot off your mind. Income protection insurance usually covers 70-80% of your income if you’re made redundant, laid off, or unable to work due to injury or extended illness.


As interest rates are at record lows, having money in the bank means your savings will be unable to fight inflation. Investing in all the securities listed on the ASX market would yield a return of 5.39% (All Ordinaries) over one year. The aim is to beat inflation by gaining returns above inflation rates. Remember to consult a stockbroker or financial adviser before investing in securities.

What’s Next

Though financial stress seems to be on the rise, you can combat it with some wise financial decisions and taking care of your mental health. Getting free financial counselling or financial advice could help lift you out of financial stress and get you back on track.

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