How to improve your financial literacy

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To mark Canada's 150th birthday, the Financial Consumer Agency of Canada (FCAC) is rolling out a series of money management tips, "150 Tips in 150 Days," on Twitter and Facebook.

The tips have been posted daily since early June and will continue into November - which is, not coincidentally, financial literacy month. It's part of a national strategy to improve financial literacy in Canada.

"Financial literacy is important to help people gain the knowledge, the skills and the confidence to make informed financial decisions," says Lynne Santerre, media relations officer at the FCAC. "We know that financial products and services are becoming more complex, so financial literacy is key to help consumers navigate that."

Knowing how to handle your finances also can help you earn more and stay out of debt.

"Financial illiteracy causes many people to become victims of predatory lending, subprime mortgages, fraud and high-interest rates, potentially resulting in bad credit, bankruptcy or foreclosure," Jeff Schwartz, executive director of Consolidated Credit, said in a written response to questions.

One of the ways to protect yourself is through education.

"Financial knowledge is power, and it will give consumers the tools they need to stay on top of their finances and avoid debt," he said.

"Financial literacy includes the knowledge of making appropriate decisions about personal finance such as investing, insurance, real estate, paying for college, budgeting, retirement and tax planning," said Schwartz. "It includes how to manage money, invest it, grow it, save it, and how to make it work best for you."

Here's how to get started and to keep improving your financial literacy:

Where to start:

  • Begin with your budget.
    Budgeting is really the foundation of your financial health.

    "If consumers can budget, they can reduce their financial stress," says Santerre. Less than half of Canadians, 46 per cent, have a budget, she says, but most who do, stick to it.

    The FCAC offers several tools, such as a budget calculator (both an online version and in a downloadable format), to help consumers learn more about budgeting. You'll also find tips to help you make your budget and stick to it.

    Savings are an important part of your budget.

    "We know that many Canadians do not have savings, and they rely on credit for unexpected expenses," Santerre says. "We encourage consumers to build up their savings to reduce their reliance on credit."

    Again, the FCAC has many tools to help, including a financial goals calculator to help you choose the savings method that best suits your needs, and information about setting up an emergency fund.

    "We talk about why someone might need an emergency fund, how to set it up, and tips on how to use it," Santerre says. She points out that while it seems overwhelming to start saving, the savings module of the financial goals calculator will show how starting small, even $5 a week, will add up.

    The financial goals calculator also includes a module for paying down debt, which should also be included in your household budget.

    "We know that household debt levels are at record highs and that Canadian households that carry a lot of debt may become less resilient in the case of unforeseen events, such as job loss, illness or an accident, or in the event of an economic downturn," Santerre says. The FCAC offers tools, tips and a step-by-step process to help you become debt-free.

  • Discover what you don't know.
    The FCAC offers an online financial literacy self-assessment quiz that will give you an idea of your level of financial literacy and what areas you might need to improve. The questions cover topics such as keeping track of money and planning ahead. The quiz should take less than 10 minutes to complete.

    The quiz results will indicate how you're doing compared to other Canadians and highlight areas where you can boost your financial literacy and skills. In addition, you'll be given a link to the Canadian Financial Literacy Database and resources to help you improve your knowledge - and your score.

  • Plan for life events that affect finances.
    Are you preparing for a major milestone, such as buying your first home or starting a family, or experiencing a financial setback such as job loss? The FCAC has organized resources by life event so you can easily find the information and tips you need as your circumstances change.

    "We have information that helps you navigate some of the choices and some of the financial considerations that you will need to make at some point," says Santerre.

Where to learn more
You have a starting point ... now what?

"If more Canadians took the time to increase their knowledge of financial literacy, it would help them to manage their finances more efficiently," said Schwartz.

He suggests a few ways to increase your understanding.

  • Online resources.
    Make sure that you're looking at trustworthy sites.

    Consolidated Credit has a financial literacy page that includes tools and resources about different aspects, including budgeting, savings, paying down debt and credit.

    The FCAC also provides a wealth of information. You'll find content on budgeting, payment options (debit, credit card, cheques, etc.), insurance, estate planning, credit cards, rights and responsibilities.

    Chartered Professional Accountants (CPA) Canada has numerous resources on its website that can help you on your journey toward financial literacy. You'll find money management worksheets, blog posts on financial literacy topics, and a consolidated list of resources from other reputable sources.

  • Books and newspapers.
    The financial section in the newspaper and popular finance books also can be helpful resources, Schwartz said. CPA Canada also has several informative publications available on its website.

    With books, A Canadian's Guide to Money-Smart Living and A Parent's Guide to Money-Smart Kids are excellent starting points, while other guides best fit particular situations, such as planning for retirement or surviving a job loss.

  • Financial seminars and workshops.
    Your local non-profit credit counsellor, such as Consolidated Credit, may offer workshops or seminars to help you learn some of the skills you'll need.

    CPA Canada also offers information sessions for a number of targeted audiences, including new Canadians, adults, post-secondary students, and entrepreneurs.  The sessions are run by a volunteer CPA member, and they are all free of charge.

    "That's important because we want to make sure we're getting the information out there from a trusted source, but also, it's free," says Catherine Crawford, coordinator of financial literacy for CPA Canada. "Our mission here is to provide that information to help Canadians."

    You can find details about CPA Canada's information sessions or request a session on CPA Canada's website.

  • People around you.
    Schwartz recommends talking to friends, family and professionals, such as your bank or a credit counselling agency.

    "Ask questions and discuss financial topics," Schwartz said.

    "A lot of people are scared to ask because they think it shows a lack of intelligence, but it's important to get the information you need so you can make sound financial decisions."

"Financial literacy isn't something you can learn by reading one book or attending one seminar," said Schwartz. "It's a continuous life-long process of constantly doing your research and gaining knowledge."

See related: How pre-employment financial literacy can help, 5 reasons your card issuer is mailing you, Mid-year financial checkup: A look at your budget and goals
Updated August 18, 2017

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