Canadians lack financial education, literacy

Canada is generally considered to have an excellent education system and average levels of literacy when compared to other industrialized countries like Britain and Italy, according to reports from the Organization for Economic Cooperation and Development and the Canadian Council of Learning.

Canada is generally considered to have an excellent education system and average levels of literacy when compared to other industrialized countries like Britain and Italy, according to reports from the Organization for Economic Cooperation and Development and the Canadian Council of Learning.

But when it comes to financial education and literacy, Canada is not getting such a good grades.

A recent study from The Investor Education Fund (IEF) found that a significant portion of high school students aged 14 to 18 don’t have the appropriate knowledge to make informed financial choices.

Less than half of students surveyed know how to create a budget, less than a third believe they make good spending decisions, and only 38 per cent feel they are prepared to manage their money after graduation.

The survey found that 90 per cent of students still go to their parents for financial information. While the students believe it’s important for schools to provide them with information on managing money and personal finances, only 18 per cent say their school is doing well in this area.

“The survey results are a concern,” said Tom Hamza, president of the IEF, a not-for-profit organization established by the Ontario Securities Commission to offer unbiased financial information to the public. “Without the skills to manage their money, students run the risk of developing poor spending and financial habits that will affect their ability to meet future financial needs.”

The IEF recently launched a series of personal finance cartoons designed to introduce young people to the challenges of money management and an online tool to help students estimate the cost and payment options for post-secondary education.

The Funny Money series of cartoons contain a lively narrative and a cast of comical characters that discuss such topics as credit and building long-term wealth. They introduce children and teens to facts about how credit card payment strategies impact costs and credit ratings, impulse buying, depreciation, investing, compound interest and long-term growth.

The cartoons are an extension of the IEF’s Funny Money lecture series that tours high schools across Canada.

The university cost and debt calculator approximates annual total tuition costs and helps students plan for the long-term implications of debt.

Besides providing tuition fees for universities across the country, the calculator approximates costs for room and board, books, entertainment, transportation and other items, and gives students an idea of what it will take to pay for their education through part-time employment, bursaries, scholarships or cutting back on spending.

The Canadian Federation of Students estimates the average debt load for undergraduate university students in 2006 was $24,047.

“Students are finishing university with overwhelming debts, and this tool provides a high-level of understanding of what the total student debt level might be and offers suggestions on how to pay it back before it becomes an issue,” Hamza said.

The issue of financial education and literacy in Canada has captured the attention of the federal government.

In June this year, Finance Minister Jim Flaherty announced the establishment of a task force that will study the issue and develop an action plan to improve financial literacy in the country.

“Our economy is built on millions of everyday financial decisions by Canadians,” Flaherty said. “Recent events have shown us that there are major risks and that financial literacy is an important life skill. Whether it’s saving for retirement, financing a new home or balancing the family cheque book, improving the financial literacy of Canadians will add to the stability of our financial system and make our economy stronger.”

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors. He can be contacted at boggsyourmoney@rogers.com.

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