Pattie Lovett-Reid: Canadians greatly overestimating their financial literacy
We have so often heard about the importance of teaching youth about money. But it appears parents aren't all that financial savvy either. According to a survey conducted by Ipsos Reid for LowestRates.ca, 78 per cent of respondents claimed to be financially literate.
But, when asked a series of questions to test their financial knowledge, nearly 60 per cent failed.
The quiz consisted of 15 true-or-false questions and the results suggested that Canadians are especially unclear about terminology concerning mortgages, auto insurance and tax-free savings accounts. To make matters worse, of those who passed, most obtained a C or D grade.
Test your knowledge by answering the following statements with ‘true’ or ‘false’:
(answers at article’s end)
- A mortgage term refers to the length of time you need to pay off your mortgage.
- You must pay for government insurance on mortgages where you put down less than 20% of a down payment – unless the home is worth $1 million or more.
- A car that is more expensive always costs more to insure than a cheaper car.
- You never have to report interest and profits gained in your TFSA when filing taxes.
- You can have multiple TFSA accounts with different banks at the same time.
- Your auto insurance automatically goes down when you turn 25.
- Applying for a credit card can negatively affect your credit score.
- Home insurance can sometimes protect you if your dog bites someone in your home.
- Your home insurance will always cover you if a tree falls on your home.
- Checking your credit score has no impact on the score itself.
- The colour of your car affects your car insurance rate.
- All banks charge you money to have a chequing account.
- Auto insurance premiums can be cancelled mid-way through their term.
- You need to be licensed to buy stocks in Canada.
- There’s no need to get travel insurance if you’re travelling within Canada between provinces.
Men were significantly more likely than women to believe they were financially literate, as 84 per cent rated themselves as excellent or good, compared to 73 per cent of women. Canadians who rated their financial literacy high were more likely to pass the quiz, but even then, fewer than half of them passed the test.
Baby boomers (52 per cent) and Gen Xers (45 per cent) were more likely to pass than millennials (31 per cent). While millennials were more likely to rate their financial literacy as excellent, they were the generation most likely to fail the quiz.
The survey showed strong financial literacy correlated with more educated Canadians. Nearly nine in 10 (87 per cent) university graduates described their financial literacy as either excellent or good, compared to 77 per cent of those with a high school diploma.
Seems young and old alike have some work to do on their financial knowledge.
Quiz answers: 1 – False, 2 – True, 3 – False, 4 – False, 5 – True, 6 – False, 7 – True, 8 – True, 9 – False, 10 – True, 11 – False, 12 – False, 13 – True, 14 – False, 15 - False.