Did you know that November is Financial Literacy Month?

If you didn’t know, financial literacy is about understanding how to:

  • manage your personal finances,
  • keep track of your expenses through a steady budget and
  • invest wisely.

Many Canadians are aware of the importance of financial literacy. But at the same time, many  Canadians are struggling with debts and having a hard time saving up for the future. And, with the COVID-19 pandemic still persisting, many people continue to have difficulty keeping track of their finances.

Why is it so hard for people to have a clear understanding of how their finances work? Let’s look into it a bit: 

Why is financial literacy such a stubborn problem?

Sure, finance is a complex and technical subject and it can be difficult to grasp if you haven’t studied it for a long time. But the complexity of the subject isn’t the only issue.

There may also be a problem with the way we’re trying to teach it. Adult learning theory — a field pioneered in the 1830s by German educator Alexander Kapp — explains a number of things about how adults prefer to be taught new information. This theory includes these four examples:

  1. Your preferences may have become engrained over time.
    Like in so many other aspects of our lives, we can become set in our ways. For instance, you may prefer reading, while another person would rather listen. Or, perhaps you learn best by doing. The older we get, the stronger these preferences can become.

  2. A lot of us prefer to learn in private.
    People don't like to be embarrassed. So if the information being presented is technical or in some way challenging, many would rather learn one-on-one or via some recorded medium.

  3. You may have trouble memorizing new information.
    Adults differ dramatically from children on this. You may believe you’re prepared to learn new concepts. But you may also feel less interested in remembering large amounts of detail.

  4. You may be action-oriented.
    Your motivation to learn is highest when we have a task to complete. It can be much easier to engage an adult about an aspect of their finances when a decision is pending.

Those last two points are key. Generally speaking, some adults don’t have the time, capacity or patience to learn new information they don't have a pressing need for.

So what’s the solution to improving your financial literacy? You can start with this one tip:

Improve your financial literacy with help from an advisor

The answer to Canadians' difficulty with personal finance could be getting professional help.

That's where a good advisor comes in. When you work with an advisor, you get the benefit of having access to their financial knowledge and expertise.

One of the hallmarks of a quality advisor is that they take the time to answer your questions and help clear up any confusion. An advisor can help answer questions you may have about:

  • budgeting,
  • reducing debt,
  • saving money,
  • investments, or
  • insurance options.

An advisor can also tell you about things related to financial needs that you may not know about. For example, they could tell you more about savings vehicles like registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs). Or, they can help you figure out what type of insurance suits your needs and goals.

The best advisors are just as committed to educating their clients as they are to recommending the right products.

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