We Are Failing Personal Finance

failed

Just last week the Statistics Canada released notes that stated that Canadians are now more educated than ever. 54% of Canadians age 25 to 64 have post secondary education. That’s quite astounding when more than half the workforce in the country have high levels of education. Despite all that education, Canadians are failing more and more when it comes to financial literacy. Despite all the fancy bachelor, master and doctorate graduates that are walking amongst us, we are all walking zombies when it comes to personal finance.

A new study done by the Canadian Securities Association  polled Canadians of all ages and across the entire country and found some staggering facts:

  • 31% of those polled have no savings at all. 22% save but do nothing with their money
  • 40% of respondents don’t understand the meaning of inflation
  • 60% of people don’t realize mutual funds don’t provide a fixed rate of return
  • 75% of people answered don’t understand the relationship between bonds and interest rates
  • Only a quarter of respondents have a financial plan

If Canada has indeed achieved a higher level of education, it clearly hasn’t shown on their management of their finances. Perhaps that’s why out of all developed countries, Canadian households lead all in terms of debt-to-GDP:

canadian_debt

Is this what Canadians should be known for? Aren’t we supposed to be the nice, socially responsible and healthy Northerly neighbour rather than debt hungry financial illiterates?

Lack Of Action

As a country as a whole, the focus for Canadians has always been to get the best education possible. The unfortunate fact is, the education system doesn’t teach personal finance. Too many “well-educated” individuals are completing school without the basic necessities to manage their finances for the rest of their life. Most individuals are taught from what they already know from parents. Thus bad habits continue to be passed down to the next generation without them even realizing.

Today’s society is much different than the past, especially when it comes to financial issues. There is greater choice, more reliance on the individual and a lot more marketing and advertising than ever through various forms of media that are influencing our financial choices. What is correct?

In the past generation, unions took care of the retirement planning through pensions, companies provided life insurance plans for employees and investment brokerages didn’t exist. People didn’t have to care much more than putting food on the table. This isn’t the case anymore. The defined retirement pension is extinct. Employers don’t care for you as much as they used to, and if you don’t even know about online brokerages you’re already behind.

Despite the lack of knowledge, regular Canadians aren’t flocking to their local libraries or enrolling into classes to learn about personal finance. Quite the contrary. The study shows most people lack the time to learn or even care as a matter fact. That’s the scary part. Most think that having a job and a government pension is enough to get them by. I cringe to think, that in 30 years, these individuals will realize the paltry $500 dollars they receive in CPP will not be enough to live. Let’s not even talk about expensive cities like Toronto and Vancouver. I pray for these individuals and you should too.

Priorities

It’s Christmas time and no doubt the malls and shopping centers are packed full of people. It seems that buying gifts is more important than planning ones finances properly. This is the time for giving right? Too bad when January comes around the credit card bills become the hangover. Instead of budgeting for the holiday spending, people tend to splurge and worry about the consequences later.

If you’re thinking of buying gifts, maybe buy gifts that will help your special someone learn more about personal finance. I did that very thing one year. I got everyone I knew personal finance books. Hopefully some of them took the time to read and improve their lives. Some of my personal favourites are:

  • Millionaire Teacher by Andrew Hallam
  • The Wealthy Barber Returns by David Chilton
  • The Value of Simple by John Robertson

In fact some of these books make great stocking stuffers. So not only are you giving great gifts to your special someone, they get to learn about personal finance instead!

Getting gifts is great, but what’s more important is prioritizing the learning. Have get togethers with people and share the knowledge. Be open to speaking about personal finance. It’s always been a topic that is taboo for many people, but sharing personal stories and mistakes that were made is the easiest way to help people avoid the same pitfalls that we fall into over and over again. If you’ve found a way out of credit card debt, help that someone you know get out too. Teach others what you’ve learned and if everyone is confused, go find the answer. We shouldn’t be living our lives being ignorant of how to manage our personal finances.

Advertisements

One thought on “We Are Failing Personal Finance

  1. Pingback: Why Canada Is A Poor Place To Invest | Financially Yours

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s