In 2001, the Canadian government created the Financial Consumer Agency of Canada to help educate and protect Canadians as they interacted with the financial services industry. It’s critical for all Canadians — especially small business owners and self-employed individuals — to have financial literacy.
Why? Unfortunately, financial literacy is a still relatively uncommon in today’s world. Being financially literate correlates with retirement preparation and making fewer mistakes with your money.
Why Financial Literacy Is So Important
In a 2014 study about financial literacy in Canada, participants who demonstrated high financial literacy scores were more than twice as likely to be adequately prepared for retirement, compared to those with the lowest scores. Even more dramatically, those with the lowest scores were three times as likely to not have any retirement preparation at all.
This occurs because those who are not aware about a problem are the least likely to prepare for it. In other words, they don’t know what they don’t know.
Without financial literacy, it is simply more difficult to budget properly, make intelligent decisions about credit cards and debt, handle emergency expenses, or take proactive steps towards retirement and long-term care needs. Additionally, it is generally easier for people or firms to take advantage of people without good financial sense.
Where Canadians Fall Flat
Statistics Canada points out that men tend to have higher financial literacy scores than women, although neither group performed particularly well when subjected to a 14-question survey on issues such as interest, inflation, and risk diversification. All told, less than one-quarter of Canadian men could correctly answer 5 of the 14 questions, compared with 15% among women. Clearly, the vast majority of Canadians could benefit from improved financial literacy.
Specific problem areas for Canadians appear to be:
- Retirement planning
- Investment fraud
- Money management
- Tax planning
How to Improve Your Financial Literacy
In Canada, many of the country’s prominent public and private organizations are working to provide financial resources to everyday Canadians who want to take control of their finances.
Interested individuals can find resources online through the Financial Literacy Action Group (FLAG), a coalition of seven organizations that work together and lobby for financial literacy.
As well, the FCAC website is a very useful tool. Included in the FCAC mission is the Canadian Financial Literacy Database, where individuals can locate information and events near them to learn more about budgeting, insurance, banking, investing, taxes, and general financial knowledge. Visitors can choose from in-person and virtual events, select which days they have spare time, and find the appropriate province or city where the events are held.
Of course, those interested in financial literacy have many options for learning aside from these official channels. Informal resources, such as YouTube or Khan Academy, are free and cover a huge variety of topics.