The increasing complexity of finances has made financial literacy more important than ever. A solid base of financial knowledge undoubtedly helps manage finances on a personal scale and also allows you to navigate the greater financial landscape. Across various studies and surveys, Canadians have shown a greater focus on long-term planning, in line with other developed countries. The current economic situation in Canada has contributed to some difficulty in living expenses, notably in terms of inflation and the rising cost of necessities, like food and housing. From this point of view, it is very timely that this year’s Financial Literacy Month in Canada focuses on financial transparency.
Financial Literacy Month
November is Financial Literacy Month in Canada, emphasizing the importance of financial education. This year is the 14th edition of this program, led by the Financial Consumer Agency of Canada (FCAC).
Financial systems and processes are becoming increasingly complex on a global scale, and there is a growing need for financial education. People may not be aware of the tools and resources available to them, or even what guidance they could have access to. Financial Literacy Month aims to close this gap.
The theme for this year’s Financial Literacy campaign is “Money on your Mind. Talk about it!” It encourages talking about money, which is still taboo for many Canadians. It can be difficult, especially if the financial matters may be negative or embarrassing. In reality, it’s kind of the opposite: research shows that talking about money can build financial confidence and can lead to better financial outcomes.
Key learnings
All data points below are taken from a TransUnion quarterly survey report for Q3 2024, on behaviours and attitudes regarding household budgets, spending, and debt in 11 countries, including Canada. Inferences and implications are our own.
Consumer optimism
Forty-three percent of Canadian respondents mentioned feeling optimistic about the next 12 months, compared to an average of 65% for the 11 countries covered in the survey. Forty-four percent of Canadians are concerned about rising living expenses in the next six months in terms of inflation for everyday goods. Next on the list are housing prices at 20% and employment at 10%.
This shows that Canadians seem to be more worried about how they will be able to handle daily living expenses, as well as the current housing market and higher rate of unemployment. This may be what contributes to Canadians’ lower optimism and muted outlook about their future finances, compared to a more positive global outlook in terms of the countries surveyed.
Financial priorities
Many survey respondents showed an interest in improving their financial health. People have goals like paying off debt faster (19% in Canada), saving more (11% in Canada saving more for retirement), building an emergency fund (17% in Canada), and contributing to their retirement savings.
This shows a higher awareness of the importance of financial literacy and stability. Canadians are saving, but less than most people are able to save globally. In fact, 15% of Canadian survey respondents have cut back on their retirement savings, but 11% saved more for it. This could be due to our ever-increasing cost of living and almost unattainable housing costs at this point in time.
When it costs more to manage your day-to-day expenses and pay for the bare necessities, it is natural to not have much left over to save. Even still, Canadians seem to be trying their best to save more and build an emergency fund.
Concerns about credit
Survey respondents were concerned about the accessibility of credit and the ability to pay off debt or even pay current bills. Twenty-nine percent of Canadian respondents have a pessimistic outlook about household finances, and expect things to get worse. This can subsequently make it even harder to get out of debt or stay solvent in their finances. This shows how many people are quite possibly living paycheck to paycheck, especially when people’s concerns are about not being able to pay their current bills. In fact, 15% of Canadian respondents have increased their usage of available credit.
In recent times, Canadians have seen and heard of many people who are going into credit card debt simply to pay for their basic living expenses. Forty-six percent of Canadian respondents plan to get a new credit card in the next year, and 17% plan to get a new personal loan. Twenty percent would also like to request an increase in available credit for an existing credit card. In light of this, it’s no surprise we have such a high number of respondents who think things might get harder.
Implications
Canadians seem to have a lower optimism towards personal finances in the next year, compared to a relatively more positive outlook globally. There is also a strong concern about living expenses, like dealing with inflation for everyday goods. Canadians are also saving less, although they still want to save for retirement and contribute to an emergency fund. Overall, Canadians have a strong focus on financial literacy and long-term growth, so this is hopefully a temporary trend in terms of financial concerns.
Many Canadian respondents also shared their plans to apply for new credit or an increase in their existing credit limit. There is a continued need for personal finance education in Canada, and neutral, relevant resources can be very beneficial. There are resources that teach how to manage money or create a budget, many of which are available online free of charge.
Though people may have varying money management skills, there is always scope to learn, improve, be debt free and be in control of finances. We can learn by asking the questions that are important to us and being open to learning more about our own priorities and budget. As the FCAC says, “Money on your Mind. Talk about it!”
