The majority of Canadians still need schooling on financial literacy even though they have a high degree of confidence in their abilities, according to a recent survey from Toronto-based LowestRates.ca.
An IPSOS poll that LowestRates.ca commissioned asked 1,001 adult Canadians 15 true or false questions about their tax-free savings accounts, credit scores, mortgages and insurance to assess their financial literacy skills.
The result: although 78% of Canadians surveyed said they were financially literate, 57% did not pass the 15-question test, the report says.
The questions with the highest failure rates include:
> “A mortgage term refers to the length of time you need to pay off your mortgage.” The answer is false but 70% of participants answered true.
> “You must pay for government insurance on mortgages when you have a down payment of less than 20%, unless the home is worth $1 million or more.” The answer is true but 67% of people surveyed said false.
> “A car that is more expensive always costs more to insure than a cheaper car.” The answer is false yet 67% of survey participants reported this as true.
“Financial literacy continues to be a hot topic and we know it needs to improve, but Canadians need to be honest with themselves about what they don’t understand,” says Justin Thouin, CEO of LowestRates.ca, in a statement.
“For example, the area we found Canadians were the weakest in was mortgages,” he adds. “Considering that buying a home is probably the largest investment of your life, this is a serious problem.”
The survey shows that younger participants, in particular, greatly overestimated their financial knowledge. Compared with other generations, millennials were most likely to rate their financial literacy as “excellent,” but only 31% actually passed the test.
Older generations fared slightly better, with 45% of Generation X and 52% of baby boomers passing the test.
The survey also demonstrated that a university education pays off when it comes to outperforming peers on financial literacy as 87% of university graduates reported their financial literacy as either “excellent” or “good” compared with 77% of participants who have a high-school diploma and no post-secondary education.
In reality, 53% of university-educated participants passed the test while those with a high school diploma did not perform as well, at 38%. Those who did not complete their high school education struggled the most — only 23% passed the test.
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