Canadians are more confident in their knowledge of financial terms compared to last year, but most still give themselves only a passing grade on their level of personal finance knowledge, according to a new report.
BMO Financial Group, Toronto, disclosed this finding in a survey released in tandem with Financial Literacy Month. The second annual BMO Financial Literacy Report Card, conducted by Toronto-based Pollara Strategic Insights, gauges the personal finance knowledge and understanding of Canadians.
Nearly three-quarters of the 1,000 survey respondents, all ages 18 and older, give themselves only a “B” or “C” regarding their knowledge of personal finance. Only one in ten (10%) believe they deserve an “A,” while 3% gave themselves a failing grade:
- A = 10%
- B = 41%
- C = 33%
- D = 9%
- F = 3%
The report reveals that Canadians feel most knowledgeable about:
- 401(k)-like Registered Retirement Savings Plans (RRSPs)—79%; up from 69%
- Canadian Tax-Free Savings Accounts (TFSAs)—72%; up from 64%
- Guaranteed Investment Certificates (GICs)—Canadian investments, most commonly issued by trust companies or banks, that offer a guaranteed rate of return over a fixed period of time—62%; up from 60%
But despite a notable increase in awareness, Canadians continue to feel least knowledgeable about:
- Registered Disability Savings Plan (RDSPs)— 23%; up from 15%
- Exchange-Traded Funds (ETFs)—24%; up from 14%
- Dividend Reinvestment Plan (DRIP)—25%; up from 14%
Half (50%) of Canadians say their financial knowledge has increased since the financial downturn of 2008.
As part of the research, Canadians were quizzed on three questions related to common financial concepts:
- Canadians are accurate in their belief that they deserve top marks for their understanding of the RRSP, with 80% correctly answering that you only pay taxes on RRSP investments when they are withdrawn
- The majority (68%) recognize that weekly mortgage payments enable a mortgage to be paid down sooner
- Just over half (57%) understand the benefits of compounded interest
However, the report finds, a successful understanding of the financial literacy quiz is tied to age, with the majority (54%) of those under 30 answering over half of the questions incorrectly. Furthermore, nine-in-ten (87%) of young Canadians believe they would benefit from an introductory course on personal finance.