Did you know that November is Financial Literacy Month in Canada?

For ten years running, Financial Literacy Month has focused on helping Canadians better understand their finances and empowering them to:

It’s also a challenging time for many Canadians who may be struggling financially because of the COVID-19 pandemic. In fact, nearly half of all Canadians feel less financially secure due to COVID-19. That’s why it’s more important than ever to understand your finances.

What is financial literacy?

Financial literacy is your knowledge and application of personal finance concepts like:

Why is financial literacy important?

Very simply, the more you know about financial products, concepts and practices, the better decisions you can make about your money.

Being financially literate means knowing what different financial terms mean and how they can potentially help you.

Take the financial literacy quiz

The goal of Financial Literacy Month 2020 is to help Canadians gain financial confidence and make informed financial decisions that are specific to their circumstances. This is especially important during challenging times.

To help find out how much you know, here’s a quick quiz to test your knowledge of a few key financial terms. Choose the statement you think best answers each of the following questions. Then, add up your responses to see your financial literacy score.

1. What can affect the amount of interest that you would pay on a loan?

a.  Your credit rating

b.  How much you borrow 

c.  How long you take to repay the loan

d.  All of the above

2. Which of the following can hurt your credit rating?

a.  Making late payments on loans and debts

b.  Staying in one job too long

c.  Living in the same location too long

d.  Using your credit card frequently for purchases 

3. Which of the following will help lower the cost of a house?

a.  Paying off the mortgage over a long period of time

b.  Agreeing to pay the current rate of interest on the mortgage for as many years as possible

c.  Making a larger down payment at the time of purchase

d.  Making a smaller down payment at the time of purchase 

4. A credit report is...

a.  A list of your financial assets and liabilities

b.  A monthly credit card statement

c.  A loan and bill payment history

d.  A credit line with a financial institution 

5. If each of the following persons had the same amount of take home pay, who would need the greatest amount of life insurance?

a.  A young, single woman with two young children

b.  A young, single woman without children

c.  An elderly man, with a spouse who is also retired

d.  A young, married man without children

6. By using unit pricing at the grocery store, you can easily compare the cost of any brand and any package size.

a.  True

b.  False

7. If the inflation rate is 5% and the interest rate you get on your savings is 3%, your savings will have at least as much buying power in a year's time.

a.  True

b.  False

8. Do you pay tax on the earnings on investments held inside a Registered Retirement Savings Plan (RRSP)?

a.  Yes, the same rules apply to registered and non-registered investments.

b.  Yes, but you only pay tax on the earnings when you withdraw the funds.

c.  No, you only pay tax on contributions that are above your annual allowable limit.

d.  No, the earnings are tax-free.

9. What are capital gains?

a.  Income earned in a given tax year.

b.  Profits on the sale of investments.

c.  Interest paid on guaranteed investments.

d.  Annual pay increases.

10. What is a payout annuity?

a.  An annual dividend payment.

b.  An annual interest payment.

c.  An annual income tax refund.

d.  A way to convert savings into regular income payments.

Quiz answers

Now, compare your answers against the correct answers to see what your financial literacy score is.

Question

Answer

1. What can affect the amount of interest you would pay on a loan?

D – All of the above

2. What can hurt your credit rating?

A – Making late payments on loans and debts can hurt your credit rating. Always try to pay by the due date and make at least the minimum payment.

3. What will help lower the cost of a house?

C – By making a larger down payment, you will have a smaller mortgage loan amount. This could allow you to save on interest charges over the life of the mortgage.

4. A credit report is…

C – A loan and bill payment history. It's a good idea to check your credit report at least once a year.

5. If each of the following persons had the same amount of take home pay, who would need the greatest amount of life insurance?

A – A young single woman with two young children would need the greatest amount of life insurance.

6. By using unit pricing at the grocery store, you can easily compare the cost of any brand and any package size.

True – Unit price is the cost of a single unit of measure of an item. By using unit pricing at the grocery store, you can easily compare the cost of any brand and any package size and determine any savings.

7. If the inflation rate is 5% and the interest rate you get on your savings is 3%, your savings will have at least as much buying power in a year's time.

False – Your savings will not have as much buying power in a year's time if the inflation rate is 5% and the interest rate you get on your savings is 3%. Inflation increases the cost of goods and services you buy, and reduces the buying power of your savings over time.

 

8. Do you pay tax on the earnings on investments held inside a Registered Retirement Savings Plan (RRSP)?

B – Yes, but you only pay tax on the earnings when you withdraw the funds.

9. What are capital gains?

B – Profits on the sale of investments

10. What is a payout annuity?

D – A way to convert savings into regular payments

* The quiz was sourced, in part, from the Government of Canada’s Financial literacy self-assessment quiz, November 2019. 

What’s your financial literacy score?

What did you score out of 10? See what your score says about your financial literacy:

Your score

What does it mean?

9-10/10
You know your stuff. You understand financial terminology. This should help you to continue to make financially literate decisions to reach your goals.

5-8/10

You’re almost there. Looks like you’re taking financial literacy seriously. Keep up the good work as you continue to become more financially literate.

0-4/10 You could use some improvement. The fact that you took this quiz shows you know how important financial literacy is. Hopefully this quiz identified some areas for you to learn more and increase your financial literacy.

How can you improve your financial literacy?

Financial illiteracy can cause you to make poor financial decisions – with potentially negative effects on your finances. That’s why improving your financial literacy is vital to getting better at managing your finances. Spending time educating yourself – even if it’s just a few minutes a day – about personal finance will put you in a better position to manage your money.

  • Need help getting started? The Government of Canada’s financial literacy program offers a learning program on the basics of money management and a workshop to help understand your credit report.

Get professional help with your finances

Everyone can benefit from great advice. And, whether you know a lot or a little about personal finance, you may want to talk to an advisor. An advisor can:

  • fill in the gaps of your financial knowledge,
  • answer financial questions or concerns you may have,
  • advise you on options you might not know about, and
  • give you customized advice – specific to you and your financial situation.

Most advisors now offer to consult with people by phone or Zoom video chat. Connect with an advisor today.

We all know that money can have such a huge impact on our lives. But it’s not always easy to talk about it. Our new podcast series, Times & Dimes, speaks to everyday Canadians about their relationship with money. The series shows that having open, honest conversations about money can actually help people lead healthier, happier lives. Tune in now to hear their stories.

This article is meant to only provide general information. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.