It’s Financial Literacy Month, and studies confirm that most Quebecers don’t master basic concepts of personal finance and economics. They would benefit from being more educated.
With one in three Quebecers living paycheck to paycheck, it’s no surprise that consumers have never been so indebted that they are panicking with soaring inflation and swings in financial markets. If their level of financial literacy was higher, things would be completely different.
Specifically, Quebecers’ financial literacy knowledge score is 54%, according to a study by the Financial Markets Authority (AMF). “And progress has been slow over the years, which is a challenge,” comments Sylvain Théberge, AMF spokesperson.
But this assessment differs. The lower the education or income people have, the less financial and economic knowledge they have and the less prudent they are with their finances.
“This means that Quebecers, on average, would be neither worse nor better compared to financial literacy levels elsewhere in Canada and even the United States. These deficiencies are observed almost everywhere in the world,” adds Mr. Théberge.
Take control
“With one in two people budgeting and saving for their education, most people don’t really understand when we talk to them about RRSPs, TFSAs, mutual funds or GICs, which doesn’t surprise me,” analyzes Youcef Ghellache. , Professor of Finance at Montmorency College, founder of ÉducFinance.
According to him, only a part of the population takes the time to learn about financial issues. “Many poorly educated people make poor decisions about consumption or savings. They are not interested in finding out and remain consumers instead of investors.”
He realizes that there is a financial education course in high school, but it’s not enough to push through once we reach adulthood, especially when we use a credit card, buy that first property, save for retirement, pay our taxes, insure our property or our health.
On the other hand, these stages of life are often a trigger for figuring out financial matters, adds Sylvain Théberge.
“We also noticed that the more diverse financial products a person has at an early age, the higher the level of literacy. “Financial literacy starts early and is a lifetime job,” he insists.
No knowledge
“I regularly meet people who have no knowledge of the economy or personal finance,” reveals Johanne Leblanc, budget advisor at Option Consommateurs. A large proportion of consumers have limited concepts. There are, of course, several ways to learn online, but people need to be informed to try.”
Why are we interested in these questions? “The more you have good literacy, the more you think about these issues, the more you improve your financial situation,” he continues. We are more confident about what can be done to improve our situation. It’s hard to use the right tools when you don’t know them.’
Some things in life we cannot control, such as illness, death, job loss, separation or divorce. “The more we know about personal finances, the better equipped we are to deal with crises. Everyone can acquire the basic knowledge to make the best possible life decisions,” says Johanne Leblanc.
In other words, the more financial knowledge you have, the more you control your destiny, concludes Youcef Ghellache.
Who is more careful with their personal finances?
The Access to Law and Justice 2022 study, published by the Financial Markets Authority (AMF), makes it possible to measure the literacy level of Quebecers and, above all, their prudence when making decisions.
• About one in two people have a personal budget.
• One in three Quebecers do not compare the interest rates obtained on their large loans.
• One in four Quebecers complains about their debt levels.
• People who have a college or university degree and earn more than $80,000 a year are more financially prudent than those without a degree who have a secondary diploma or DEP.
• College graduates and workers earning more than $80,000 a year are the most financially literate.
• People who are unemployed, full-time home workers, students, retired or part-time workers are more likely to be unskilled or financially incompetent than full-time workers.
• The self-employed are more financially competent than the rest of the population.
• Homeowners and parents have overall greater financial competence than renters and households without children.
• Couples are, on average, more financially prudent than singles.
• People who live “hand to mouth” are the least financially savvy.
• Consumers who have financial products (mortgage, card or line of credit) are more financially prudent and competent than those who have personal loans or say they are in debt.
• Most Quebecers do not seem to understand the relationship between risk and return or their risk tolerance when it comes to investing.
• Most borrowers compare interest rates offered by different financial institutions and are more competent than those who have never borrowed.
• Consumers who own investments (mutual funds, stocks, work-sponsored funds, RRSPs) are more competent than those who do not.
• Those who have insurance are more careful than those who do not.
• Workers who have a private pension plan (other than public plans) say they are better able to assess their retirement income than those who do not.
• Every second consumer (45%) knows how to react if they become a victim of financial fraud.
Source: AMF, ADAJ, University of Montreal