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Financial literacy doesn’t necessarily mean financial wellness

Financial literacy doesn’t necessarily mean financial wellness

May 24, 2018

I have heard investors say they need to read more about financial matters in order to better manage their financial affairs. Not necessarily so, says research compiled by Mercer Canada, a large, well known, pension consultant.

According to their Inside Employee’s Minds™ Financial Wellness Survey, Mercer Canada found that financial literacy does not directly relate to financial wellness.

Of the more than 1,500 Canadians surveyed, half said they were knowledgeable about financial matters. However, half said they were stressed by them.

Having half the population stressed by financial matters might seem surprisingly high. That can be explained by considering other findings in the research, which spans all ages, income levels, and gender.

Only three out of every 10 respondents felt they were financially positioned in the event of a financial shock. Financial shocks are sudden hits to your finances such as being laid off or having to pay large expenses for car or home repairs. Many of these events are inevitable and having seven out of 10 not prepared should sound an alarm.

Perhaps even more discouraging is just under four in 10 people have monthly loan payments that exceed their take-home pay.

These results underscore why the Bank of Canada has repeatedly said one of the most significant risks we face is high household debt. Is household debt the house of cards that at some point will come tumbling down?

The conclusion is Canadians are not confident about their finances and this lack of confidence is justified. So, what is the solution?

Some employers offer financial information but only four in 10 trust their employers.

Seven of 10 trust their financial advisors. That is not very reassuring because it means three in 10 do not trust them.

I think we can all agree on one thing: Canadians should be encouraged to spend more time taking care of their financial planning matters.

Ultimately, each and every one of us is responsible for our own financial well-being. Decide what needs to be done and create an action plan.

Is it time for you to get your financial affairs in order?