Expert Q&A: The ABCs of financial literacy

When Canadians head on holiday this winter, they might want to consider packing a book by legendary investor Warren Buffett. According to the latest research from Investors Group, a Toronto-based financial services company, Canadians rate themselves as solid B students on their level of financial literacy. Yet despite the good grade, nearly half (47 per cent) are not satisfied with their level of literacy.

learn-by-example

That's not all. Only one-third (32 per cent) are happy with what they save or invest regularly. A whopping 68 per cent of Canadians say they do not, or cannot afford to save or invest. And only half of boomers are comfortable with their knowledge about retirement planning.

In this interview with Debbie Ammeter, vice-president of Investors Group, Canada.CreditCards.com explores the reasons behind poor financial literacy and what Canadians can do to score a higher grade.

CreditCards.com: How would you define a high level of financial literacy?

Debbie Ammeter: It all comes down to being aware of what decisions need to be made, when they need to be made and knowing how to take advantage of the opportunities that arise as you journey through different life stages. But the reason why financial literacy is important is what really matters. We all want to have the best life we can with the money we have.

CreditCards.com: We're a country of smart, educated people. Yet less than half of those polled are satisfied with their level of literacy. What's standing in the way?

Ammeter: Good question. It's probably a combination of things. I think some people are intimidated by information overload. With the ease of access to information we enjoy, it can become very difficult to determine what should matter to you and what doesn't apply to your own situation. I also think some people feel that they don't have enough money to worry about being financially literate. Obviously, a working level of financial literacy is important for everyone. And finally, I think people are a little confused about what financial literacy means and -- most importantly -- what it means to them in their everyday life.

CreditCards.com: Only one-third (32 per cent) of respondents are happy with what they save or invest regularly. What challenges do Canadians face when attempting to save money?

Ammeter: I think the main reason is a lack of understanding what is possible and what is normal compared to what is expected. Most people will tell you they would like to be able to save and invest more, and many will say they don't because of a lack of money (58 per cent in our survey). For some people -- those raising a family for instance -- there are several competing priorities in their life. It is understandable that they would be saving a little less. But for many people, it comes down to personal spending discipline and knowing how to identify opportunities to save and invest. That's one of the areas where talking to a financial advisor can be really helpful.

CreditCards.com: Only half of boomers are comfortable with their knowledge about retirement planning. How should financial literacy levels change from one personal milestone to the next?

Ammeter: Financial literacy is a lifelong process. Feeling equipped to make good financial decisions and take advantage of the opportunities that arise at different life stages comes with age and experience. But learning is a lifelong process and, even with the wisdom of age, it's important to stay informed.

See related: It's Financial Literacy Month: Here's how to take advantage of itStudy: Ignore your financial advisor and keep savings simple
Published November 23, 2011

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