Literacy is more than just knowing the alphabet. It’s more than reading one word strung together to make a sentence. Literacy is about your reading comprehension of the piece as a whole and broken up into chapters, paragraphs, sentences and words. It’s about your confidence and understanding. The same goes for financial literacy.
Financial literacy marks your ability, knowledge and confidence to make informed choices about our money. It empowers you to improve your personal financial situation. It allows you to plan for your future and make smart goals that you will (hopefully) achieve one day.
The state of financial literacy in Canada
Unfortunately, when it comes to financial literacy, Canadians are still struggling. But, Americans are no better off, for their own reasons.
In a 2015 Organisation for Economic Co-operation and Development (OECD) Survey, only 61 percent of Canadians could correctly answer five of seven financial knowledge questions. Likewise, men score significantly higher than women respondents (but the times are changing with younger generations).
Worse still, according to the last federal government’s Canadian Financial Capability Survey in 2014, only 2.7 percent of answered all 14 questions correctly. The questions posed covered topics like debt repayment, bank fees and credit reports. Nearly a third of Canadians got at least half of the answers wrong—it will be interesting to see if this changes at all in the upcoming report.
This is probably not too surprising, however, considering that most of us did not receive any financial education in school—unless we sought it out individually—as we are right now.
The basics of financial literacy
Financial literacy encompasses how effectively we manage our finances and understand topics such as:
– Cash flow
– Personal finances
– Debt management
– Credit scores
– Interest rates
– Financial planning and goal setting
If the above list were a lesson plan in financial literacy, then lesson one on cash flow would cover the basics. Knowing when you’re spending more than your making is the foundation, per se, of your financial education. The final lesson on financial planning and goal setting in this list is a great jumping-off point to learn more about saving for retirement, investing to achieve your goals for your future and building your legacy, for example.
The link between financial literacy, success and well-being
It may not be surprising then, that the greater your knowledge of financial literacy is the greater your financial success tends to be. In fact, one study found that Canadians who engage in comprehensive financial planning have significantly higher levels of financial and emotional well-being than those without or with limited planning.
For example, if you have a deep understanding of how to invest your money, you are most likely doing just that—and perhaps accumulating wealth with your smart investments.
The opposite also holds true, unfortunately. If we do not have a good understanding of budgeting and cash flow, for example, how are we expected to manage our personal finances appropriately—and stay out of debt?
In the same way that your financial literacy and financial wellness are linked, so too is your own physical and emotional wellbeing. Your ability to meet financial goals, such as getting out of debt, can have an impact on your health and stress levels. When you feel secure about your financial future, you can relax and stop stressing over money, knowing that you have it all under control.
Learn more about financial literacy
We’ll start with the basics of understanding your income, spending and budgets, moving on to debt management, loans and credit scores, and onward and upward to saving and investing for your future.
Follow along by tuning into our weekly blog posts.
About MLI Marble Lending Inc. At Marble Financial (CSE: MRBL; OTCQB: MRBLF) we are a group of forward-thinking financial technology experts that understand Canadian’s occasionally need help in achieving longer-term credit health. Through our industry-leading proprietary technology solutions Fast Track Loan, Score Up, and Credit Meds, we guide our customers back to mainstream credit 50% quicker than traditional methods. Since 2016, We are proud to have empowered thousands of Canadians to a positive financial future and continue to establish ourselves as a leader in financial wellness.