Financial Literacy: A Little Goes A Long Way
Finance Tips Having the basic knowledge to manage your finances is the very first step toward realizing your dreams.
Do you know how to improve your credit rating? Are you aware of different types of banking and credit fees, or different types of interest? You’re not alone if you’re unsure. With six out of 10 Canadians lacking numeracy skills — the ability to understand basic math — many people don’t have the knowledge, skills and confidence to make responsible decisions about their money. But it’s never too late to learn.
"With six out of 10 Canadians lacking numeracy skills — the ability to understand basic math."
“It doesn’t have to be intimidating,” says Kim Parlee, VP at TD Wealth Management, and host of Business News Network’s Money Talks. “Financial literacy doesn’t get the attention it deserves, because it is not seen as important, and people don’t think it’s relevant to their lives; but financial literacy is the first step to getting what you want.”
The more literate we are about money, the better we understand the consequences. That $5 cup of coffee that you buy everyday will cost you more than $45,000 over 25 years. But if you had invested that amount over the same period you would have more than $70,000 in your pocket. It’s important to know that there are tradeoffs; and the decisions you make today can impact your future.
“In the time it takes to get your hair done, you could have a financial plan, and regardless of your income level everyone should have these basic, foundational skills. It’s about getting what you want in life.”
Time and not having enough money are two reasons people put off learning how to manage their finances, but Parlee says these reasons shouldn’t discourage people. “In the time it takes to get your hair done, you could have a financial plan, and regardless of your income level everyone should have these basic, foundational skills. It’s about getting what you want in life.”
Eating well, sleep and exercise are all important aspects of a healthy lifestyle, and financial literacy should be as well. While Parlee thinks schools can do more to educate young people about money management issues, parents need to also include their children in financial decisions. Take them to the grocery store and talk to them about purchasing decisions and the tradeoffs that often need to be made. Take your teenage children to the bank with you and expose them to conversations about savings, investments, loans and mortgages.
Easy access to credit and low interest rates may have caused Canadians to take on record levels of debt. One good thing about the times we are living in is easy access to online information that makes it easier to understand our finances and debt levels — though it’s important to ensure the information comes from a credible source.
"Wherever you are in life, grab the knowledge and skills that will help you make the best decisions about your money."
Conversations about money management need to be age relevant. For some this may be about retirement, but for younger people it may mean considering university, buying a home and thinking about the kind of debt you take on. Wherever you are in life, grab the knowledge and skills that will help you make the best decisions about your money.
“We get a personal trainer to develop an exercise plan and help keep us accountable even when we don’t feel like it,” adds Parlee. “The same should be true for financial planning. Get some wins and track your progress.”