The Hidden Benefits of Improving your Financial Literacy (and four steps to help you get there)

Posted on: November 16, 2022

By Jenny Reimer, CIM, CFP®
Director, Financial Planning

November is Financial Literacy Month and there’s reason to celebrate. Canada has one of the highest financial literacy rates in the world (1), with a recent survey finding that 68% of Canadians are financially literate (2). That also means there’s lots of room for improvement! At Money Coaches Canada, we are passionate about increasing every Canadian’s financial literacy. We know that making the right financial decisions can have a positive impact on so many other areas of our life: our relationships, our self-confidence and our health, just to name a few.

Financial literacy is defined as having the knowledge, skills and confidence to make responsible financial decisions. In practice, it can mean being able to follow a Spending and Savings plan, choose an appropriate investment strategy and understand the basics of taxes. It also includes planning for your retirement, having appropriate insurance coverage and signing estate documents that reflect your wishes.

Does this mean we all need to become experts in personal finance? Not at all. Your goal could be as simple as understanding the basics of your own financial situation and knowing who to turn to when you have questions.

While the majority of Canadians may be financially literate, a smaller percentage of us consistently take actions that support our financial well-being. And who can blame us? With so many competing demands for our time, energy and money, the idea of reviewing your investment portfolio or renegotiating your mortgage can feel overwhelming.

This fall, our team is reading Dr. Moira Somers’ book, ‘Advice That Sticks: How to give financial advice that people will follow.’ Here are a few of her tips that we are putting into practice:

1. Clear and open communication is key. If you don’t understand what your mortgage broker, investment advisor or financial planner is saying, ask them to clarify. If that doesn’t work, you may need to look for a financial partner who is responsive to your needs and listens without judgement. You can affect change for yourself and all Canadians by seeking out and supporting financial professionals who, in addition to holding the appropriate credentials and expertise, also rate highly in terms of communication, empathy, trust and respect.

2. Don’t disregard how emotional it can be to deal with your money. For many people, money evokes strong and often negative feelings that come from their current situation or from painful experiences in their past. To work through these emotions, seek out supportive and compassionate people. Speak with an empathic money coach or a trusted friend and continue to dialogue with your partner about your financial goals and values. Also make sure to talk with your kids about money – early and often. You may not have learned about money when you were young, but you can help set your own children on a path towards financial literacy and wellness.

3. Take small steps and don’t overestimate how much you can take on at once. You don’t need to solve all of your financial issues in one evening. Getting through one or two items and committing to work on another next week would be a great start. Acknowledge all of your wins, no matter how small. Success begets success.

4. Don’t be blindsided by predictable problems in follow-through. Have a plan for dealing with the inevitable obstacles that will crop up along the way. For example, if your insurance advisor’s office is on the other side of town and you know you’ll keep putting off your appointment to avoid the drive, ask if you could meet over the phone or online instead.

While money may never be your favorite subject, taking one positive step at a time is all that’s needed to improve your financial literacy and well-being. Dr. Somers found that when people do take action, they are ‘more able to reach deeply cherished goals: seeing the world, making charitable contributions, [or] moving out of their parents’ basement.’ (3)

And who doesn’t want that?

‘A little knowledge that acts is worth infinitely more than much knowledge that is idle.’ – Kahlil Gibran

Are you ready for the next step? We have a coach who can help.

1 Ontario Securities Commission, Investor Knowledge Study, September 2022

2 Leora Klapper, Annamaria Lusardi, Peter van Oudheusden, Financial Literacy Around the World: Insights from the Standard & Poor’s Ratings Services Global Financial Literacy Survey, Financial Management, Vol. 49, Issue 3, 589-614, 2020. The survey used the following four Lusardi questions: diversification, inflation, interest and compound interest and measured a person as financially literate if they scored 3 out of 4 correctly.

3 Somers, Moira. Advice That Sticks: How to give financial advice that people will follow (p. 24). Practical Inspiration Publishing.

Category(s): Financial Literacy
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