Few of us have such a poor grasp on finances as Homer Simpson who, in the episode Boy Scoutz ‘n the Hood, was upset to find a twenty dollar bill under the couch when all he wanted was a peanut. You probably wouldn’t have to hold an internal conversation during which your brain explains money can be exchanged for goods and services. But just because you have the basics down pat doesn’t mean there isn’t a lot left to learn about finances.
According to Standard & Poor’s Rating Services recent study, the Financial Literacy Around the World, 28% of Canadians fail to understand basic financial concepts essential to making informed decisions about money.
The survey, conducted in person or through telephone interviews, involved over 150,000 randomly selected representatives from 140 countries. It tested participants’ grasp on financial theories like inflation, compound interest, risk diversification, and basic numeracy.
The results revealed only 1-in-3 adults around the world were financially literate. Compared to the global average, Canadians performed well. With a passing grade of 68%, Canada tied with Israel within the top 5 highest scoring countries, behind Denmark, Norway, and Sweden — all of which clinched 71%.
Canadians know they can do better than a C+. And this isn’t just so we can brag about broadening the gulf between us and the U.S., which sits in a distant 14. Financial literacy is an essential skill for anyone interested in saving, buying a house or car, applying for a loan, or planning for retirement. (In case you were wondering that encompasses just about everyone).
Without understanding how interest and compound interest works, Canadians can secure a savings account, mortgage, payday loan, or RRSP that doesn’t work for their financial profile. All of these financial products rely on interest that affects how much can be saved or owed. When basic math and financial fundamentals fail you, you can accept a loan outside of their capabilities or lock into a savings plan that doesn’t work as hard as it could for you.
The thought of improving your financial literacy is a scary one. With words like compound interest and risk diversification, it promises a tedious lesson plan at the very least. But you’re already on the right track by reading articles like this one. Reading is at the heart of financial education.
Whether you’re researching your options for online payday loans in Canada or a lease for a brand new car, you need to read the full rates, terms, and conditions of the contract. It’s the only way you can determine if the payday loan or lease is within your financial capabilities.
If simply reading these contracts doesn’t reveal any secrets—and you don’t have a brain like Homer that’s willing to teach you—turn to a trusted source for help. Financial advisors can help you understand the full reach of your finances, including how much you can borrow.
Certain national lenders will also help you understand their terms, as it’s in their interest that you repay their loans. The specialists at GoDay, for example, are available to take your questions regarding your small dollar loan at any time during the lending process — including before you even fill out an application.
Canada may be sitting pretty high on a global context, but the country can do better. Do your part and improve your financial literacy. Your efforts will do more than boost the national average. By dispelling financial ignorance, you’ll find it easier to manage your money, secure personal loans, and invest in savings than ever before.