1 · What personal financial literacy actually is

Not a body of knowledge you either have or lack, but a small set of habits that let an ordinary household see its own position clearly and make decisions on purpose.

Financial literacy gets talked about as though it were a subject — compound interest, tax brackets, diversification. Some of that matters. But households do not fail because they cannot define a franking credit. They fail because nobody ever wrote down what the year actually costs, because the person who does not handle the money has no idea where anything is, or because a decision that looked small at the time turned out to have five years of repayments attached to it.

So it is worth being plain about what this handbook means by the term. Personal financial literacy is the ability to answer four questions about your own household, with numbers rather than impressions:

• What do we own, what do we owe, and what is the difference? That is the balance sheet — Section 4.
• What comes in, and where does it go? That is income and the budget — Sections 2, 3 and 5.
• What happens if we keep doing this? That is the forecast — Section 13.
• What happens if something goes wrong — illness, fraud, redundancy, death? That is Sections 7, 8 and 14.

Everything else is detail hanging off those four. A household that can answer them is literate in the only sense that changes outcomes, whatever it does or does not know about managed funds.

The gap between knowing and doing

There is an uncomfortable finding buried in most financial-education research: knowledge and behaviour are only loosely related. People who score well on financial-knowledge tests do not reliably save more. Understanding that a credit card at 20.99% costs about four times what a mortgage at 5.9% does is not the hard part — acting on it while the mortgage feels more virtuous is.

This app will tell you precisely what an extra $200 a fortnight does to your mortgage, or what a fourth day of work is worth after tax and childcare. It cannot make you do either. Almost everyone who fails at this fails on the doing, not the arithmetic — and no amount of better modelling fixes that. Pick one move, put a date on it, and tell someone.

That is why the handbook keeps returning to two unglamorous ideas: make the thing visible, and make the next step small enough that it happens this week. Sections 11 and 10 — the psychology of spending, and how to talk about money with the person you share it with — are not soft additions at the back. They are where most of the failure actually happens.

What the app is, and what it is not

The Personal Financial Literacy app is a single HTML file that runs in your browser. There is no account, no sign-in, and nothing is uploaded — your figures stay in that browser’s storage on that computer. It explains how tax, superannuation, credit and the Age Pension work, and lets you test decisions against your own numbers.

It does not advise on your circumstances, and it does not consider your objectives, financial situation or needs. Nothing in it, or in this handbook, is financial, tax, credit or legal advice. Where a question needs a professional, the handbook says so and names the kind of professional to ask.

The thirteen tabs, and where they appear in this handbook

The app is organised as thirteen tabs. If you have not opened it yet, this table is the map — and it doubles as the contents of everything that follows.