Financial Literacy in Canada… Complex Evolution Over Time-Credo

Financial Literacy in Canada… Complex Evolution Over Time-Credo

Financial Literacy in Canada… Complex Evolution Over Time

by Credo, March 2017

 

How financially literate are Canadians?

The answer to this challenging, loaded question is: about 71%.

Okay, we admit that this response is just as ridiculous as the question. Still, this is where Credo is putting a stake in the ground – a stake we’ll be monitoring over time. Even without a fully agreed upon definition of financial literacy, Credo has been working for the last two years (with TC Media Publication, Investment Executive) to establish a quantified benchmark of Canadian financial literacy and here it is.

The graphic below shows the results of our monthly test of at least 1,000 Canadians. If it looks busy, it’s because it includes a regional breakdown in the analysis.

The results are as interesting as they are concerning.  Currently, our measurements indicate that the most financially literate of Canadians tend to reside in Western Canada and in Atlantic Canada.  The least literate, by contrast, tend to reside in Quebec. Still, Quebec’s interest in financial literacy development seem well represented on the National Steering Committee on Financial Literacyby the presence of Camille Beaudoin. He is taking on financial literacy development at the grass-roots level with creative initiatives to address his province’s clear issue.

There’s so much more than regional disparities going on, however.  As we mine through the data we’ve been collecting, so many important insights are being derived – insights that companies and policy makers are using to craft strategy to connect with Canadians and address their needs:

1. Men tend to score significantly higher than women with respect to financial literacy.  There is a tremendous need to help women… especially younger women… gain the knowledge and confidence they need to function effectively in an increasingly complex financial environment.  Most Canadian financial institutions recognize this but only a select few have made addressing this issue a true priority.  Leading consultants, like Paulette Fillion, are committed to helping companies meet the unique needs of women investors.
2. Financial literacy is strongly positively correlated with age; older people tend to be more financially literate.  This is understandable considering their life-long experience with financial matters. Financial literacy is also fundamentally and positively correlated with levels of education and income. So, the weakness is among the younger demographic.  Darren Hill‘s interest with youth (he leads Junior Achievement in Saskatchewan) and his involvement on the national steering committee should help drive financial literacy forward… hopefully in Canada’s schools, where an ounce of prevention begins.
3. New immigrants (sub-10 years in Canada) tend to have issues with financial literacy while longstanding immigrants (10 years+) tend to have higher levels of financial literacy than other Canadians.  Of course, new Canadians have all sorts of cultural and literacy challenges to deal with; financial literacy is just one more significant barriers for them.
4. Members of Canada’s First Nations tend to score significantly lower than other Canadians with respect to financial literacy. Terry Goodtrack‘s involvement with the National Steering Committee on Financial Literacy ensures that First Nations will have a seat at the table as public policy around financial literacy is gradually shaped.  We suspect that he will take little comfort knowing that Canadians whose origins were in either the middle east or Africa also tend to have lower levels if financially literacy than Canadians of European origin.
5. Married folks tend to be significantly more financially literate than single folks. Of course, there is plenty of research that demonstrates the many benefits of “coupledom.”
6. People who voted Conservative in the last federal election tend to be more financially literate than those who voted for the Liberal or the Green parties, too… but this isn’t about politics, is it.

There is clearly a considerable level of diversity within the Canadian population with respect to financial literacy.  There are deep pockets of challenge around every corner and there is considerable opportunity (and need) for improvement in financial literacy; people who have lower levels of financial literacy are significantly more concerned about their abilities to plan for their future and many of these people are currently not gaining access to the critical advice and guidance they need. Now is certainly the time to leverage the financial advice community in Canada to drive financial literacy forward.  As advisors are looking for ways to demonstrate the value they create for their clients, financial literacy initiatives are certainly an opportunity. Bank-affiliated advisors and independent advisors alike need to galvanize their resolve to address these critical needs of Canadian investors.

It is unfortunate that the Canadian Banking industry is currently in a consumer confidence crisis that is a result of questionable sales practices. The banks comprise a critical part of the framework that must address the issue of financial literacy. And, while this confidence crisis continues, progress on addressing financial literacy will surely be hampered.  Jane Rooney, Canada’s financial literacy leader at the Financial Consumer Agency of Canada needs to be properly resourced and given the support that she needs to initiate appropriate strategic and tactical initiatives. Though some would argue that an ounce of prevention now is too late to prevent the pound of cure we’re going to need as the Canadian baby-boomer generation evolves into its retirement, Credo believes that Gail Vaz-Oxlade is correct: it’s Never Too Late to commit to coming to terms with the challenging matter of financial literacy in Canada.

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Note: Credo’s ongoing research is conducted in close cooperation with Investment Executive, a TC Media publication. For more information about this research, contact Credo’s Hugh Murphy (tel. 905.919.1926) or TC Media’s Ozy Camacho (tel. 416.847.8531)