Canadians admit that their knowledge of personal finance is less than stellar; but they’re increasingly recognizing the importance of saving for retirement, according to the results of two recent surveys.
A poll of nearly 3,000 Canadians conducted by Harris/Decima on behalf of Investors Group shows that most Canadians plan to invest at least as much in Registered Retirement Savings Plans as they did last year. Three-quarters say they have an RRSP or plan to open one in the coming year, and 83% of those who plan to invest say they will increase or match their 2010 RRSP contribution – up from 79% who reported similar intentions last year.
“Canadians have used RRSPs as the cornerstone of their personal investment and savings plan for many years and it is encouraging to see this level of continued commitment,” said Jack Courtney, assistant vice president of advanced financial planning at Investors Group.
Particularly encouraging is the growing proportion of young Canadians who are saving for retirement. The survey showed that of Canadians age 18 to 29, 54% currently own an RRSP or plan to open one in the next year, and roughly half plan to increase their RRSP contribution this year, compared to just 27% of boomers who are planning an increase.
“Getting an early start in the game is crucial for long-term success,” Courtney said. “It appears that many young Canadians recognize this and are trying to find ways to invest regularly while meeting life’s ongoing financial obligations. While finding the money to invest can be difficult, starting small and establishing good saving and investing habits early in life can lead to big returns.”
More Canadians are also embracing Tax Free Savings Accounts as vehicles to save for the future. The survey showed that half of Canadians have a TFSA, up from 45% last year and 25% in 2009. Of those who still do not have a TFSA, 25% say they plan to open one in 2012.
Only 9% of Canadians give themselves an ‘A’ for financial literacy
A separate survey from BMO Financial Group shows that while there’s room for improvement in financial literacy, Canadians are confident in their knowledge of RRSPs and other retirement savings vehicles.
In the inaugural BMO Financial Literacy Report Card, which polled more than 1,500 Canadians, 37% of respondents said they deserved a grade of B on their level of personal finance knowledge, while 31% said they deserved a C. Only 9% of Canadians gave themselves an A.
“It’s clear from the numbers that Canadians see room for improvement when it comes to their overall understanding of personal finance,” said Su McVey, vice president at BMO Bank of Montreal. “Given the challenges faced by households in Canada, enhancing this skill set should be a priority for everyone involved – including the financial services sector.”
Of all aspects of their finances, Canadians are most knowledgeable about RRSPs, TFSAs and the Canada Pension Plan, according to the report card. They’re least knowledgeable about Registered Disability Savings Plans, exchange traded funds and dividend reinvestment plans.
Almost two-thirds of Canadians feel they would benefit from a Personal Finance 101 course.
Tina Di Vito, head of the BMO Retirement Institute, said many Canadians struggle to understand the ‘big picture’ of their finances.
“In many cases,” she said, “Canadians are well-informed financially, but a common stumbling block is understanding how everything fits together.”