Financial Literacy: More Can Only Help

Bookmark and Share

Toronto, ON (Apr. 21, 2014) – Financial literacy – that is, a basic understanding of the workings of money, including investments, budgets, loans and more – is a laudable objective in a country like Canada. Hence it was good to see an announcement recently from the Canadian government that they had appointed the first Financial Literacy Leader with an annual budget of $3 million.

We congratulate Jane Rooney on her appointment.

Financial literacy specifically refers to the knowledge and skills that allow an individual to make effective and informed decisions with financial resources. As general literacy is recognized as being a contributor in rich countries and poor alike to the general standard of living and well-being of the population, financial literacy could help generate another step forward in those measurements.

Just this weekend, my brother, with significant perplexity, described a co-worker’s decision to use $5,000 to pay down his mortgage with an interest rate probably in the 5-6% range instead of paying off more of his credit card debt, which is most likely charging interest in the 20% range. There could be extenuating circumstances, but it makes you wonder.

My wife and I lucked into some general principles early on in our working careers. They have been a big boon to us.

  • To heck with the Joneses – let them compete with each other;
  • Spend less than we earn;
  • Pay ourselves first: always put something aside;
  • Use special purpose accounts (we have a car fund into which we put a little each month, and it paid for a new car two years ago, with some left over).

A certain amount of self-discipline also helps a lot.

But what has this to do with insurance? A lot, because insurance is a way to help manage risk, specifically the risk that you might lose some of what you have or peril might strike – a car accident, an injury or illness while travelling, a house fire, a disease or accident causing temporary or permanent disability, theft of valuables, death of a financial contributor. The list is long.

Financial literacy helps us all to make better decisions with our money. For our insurance, it will help us make better decisions about what insurance to buy, when and how.

Jane Rooney comes to her job with credentials and experience, being the former director of financial literacy and consumer education at the Financial Consumer Agency of Canada (FCAC). We wish her speedy success in the challenge she has taken on.