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Many Canadians are aware of how important managing their money is. And at the same time, many also struggle with debt and have a hard time saving for the future. But why is it so hard for people to understand how their finances work? It may come down to financial literacy – and in many cases, a lack thereof.
What is financial literacy?
It is all about knowing how to manage your personal finances, keeping track of your expenses, and investing wisely.
Do you know your financial literacy score?
Why is financial literacy such a stubborn problem?
Sure, money can be a complex and technical subject. It can be especially difficult to grasp if you haven’t studied finance. 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 is a field pioneered by German educator, Alexander Kapp in the 1830s. Using four examples, it explains how adults prefer to learn new information.
- Your preferences may have become engrained over time. Like so many other aspects of our lives, we’re sometimes 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.
- A lot of us prefer to learn in private. People don't like to be embarrassed. So, if the information is technical or in some way challenging, many would rather learn one-on-one. Or, through some recorded medium.
- 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.
- You may be action oriented. Your motivation to learn is highest when you have a task to complete. So, it can be easier to engage with an adult about their finances when they’re making decisions. For example, when choosing life insurance or savings plan options.
What is a solution for improving your financial literacy?
While financial literacy is a stubborn problem, there are some easy solutions. Getting a professional to help, is one of the best ways to improve your financial literacy. When you work with an advisor you get access to their knowledge while you’re making decisions.
An advisor can help improve your financial know-how in a few ways.
- They can answer questions you may have about budgeting, reducing your debt, and saving money.
- You may not know about the financial products and options available. But advisors do and can share that with you. For example, they can help you:
- better understand your savings options like registered retirement savings plans (RRSP) and tax-free savings accounts (TFSA), and
- figure out what type of health or life insurance suits your needs and goals.
The best advisors commit themselves to both teaching their clients and recommending the right products. If you’re ready to talk with an advisor, find one near you. Most advisors now offer to meet Clients virtually by video chat.
Want to improve your financial literacy?
An advisor can help. Find an advisor.
This article is meant to provide general information only. It’s not professional advice, or a substitute for that advice.
