Toronto, ON (June 28, 2017) – The federal government may have a National Strategy for Financial Literacy but it still has some work to do. A survey commissioned by LowestRates.ca shows Canadians may be overestimating their financial literacy skills. A majority of Canadians (78 per cent) said they are financially literate, but when tested on their knowledge with a series of questions, nearly six in 10 failed to make the grade.
The quiz consisted of 15 true or false questions and the results suggest that Canadians are especially unclear about terminology concerning mortgages, auto insurance and tax-free savings accounts (TFSAs). Even of those surveyed who passed, most only attained a C or D grade.
The true or false questions with the highest failure rates included these (the correct answer is shown):
- FALSE: A mortgage term refers to the length of time you need to pay off your mortgage. (70 per cent provided the wrong answer)
- TRUE: You must pay for government insurance on mortgages when you have a down payment of less than 20 per cent, unless the home is worth $1 million or more. (67 per cent provided the wrong answer)
- FALSE: A car that is more expensive always costs more to insure than a cheaper car. (67 per cent provided the wrong answer)
“Financial literacy continues to be a hot topic and we know it needs to improve, but Canadians need to be honest with themselves about what they don’t understand,” says Justin Thouin, CEO, LowestRates.ca. “For example, the area we found Canadians were the weakest in was mortgages. Considering that buying a home is probably the largest investment of your life, this is a serious problem.”
Men were significantly more likely than women to believe they were financially literate – 84 per cent rating themselves as excellent or good, compared to 73 per cent of women. Canadians who rated their financial literacy high were more likely to pass the quiz but even so, fewer than half of them passed the test.
Baby boomers (52 per cent) and Gen Xers (45 per cent) were more likely to pass than Millennials (31 per cent). While Millennials were more likely to rate their financial literacy as excellent, they were the generation most likely to fail the quiz.
The survey showed strong financial literacy correlated with more educated Canadians. Nearly nine in 10 (87 per cent) of university graduates describe their financial literacy as either excellent or good, compared to 77 per cent of those with a high school diploma.
“Our financial literacy test is more than just understanding how to balance a cheque book and the questions are based on common questions asked by our site users,” explains Thouin. “There are misconceptions out there, so we want to provide correct information about every day financial decisions like mortgage and car insurance to help people make the right choices.”
View the full report: How Financially Literate are Canadians Really?
Quiz Results: Infographic
Quiz Results: Canadians Greatly Overestimate Their Financial Literacy Skills (LowestRates.ca survey)
About the Survey
These are some of the findings of an Ipsos poll conducted between May 18 and May 23, 2017, on behalf of LowestRates.ca. For this survey, a sample of 1,001 Canadians aged 18+ from Ipsos’ online panel was interviewed online. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±3.5 percentage points, 19 times out of 20, had all Canadian drivers been polled.
Based in Toronto, Ont, and founded in 2012, LowestRates.ca provides a free, independent service that helps consumers save time and money by comparing personal financial products from Canada’s leading financial institutions. LowestRates.ca has also become increasingly focused on arming people with unbiased information and educating them about personal finance. For more information, visit LowestRates.ca.