In a 2010 report, the Canadian Task Force on Financial Literacy defined financial literacy as "having the knowledge, skills and confidence to make responsible financial decisions." Over the past ten years, Question Retraite, a non-profit organization whose purpose is to promote financial security in retirement, has carried out a number of surveys that paint a dark picture of Quebeckers' financial literacy. Let's take a look at the situation using the various aspects of the definition.
Quebeckers think they are well versed, but...
Knowledge is the cornerstone of financial literacy. And yet, it is difficult to incite individuals to acquire knowledge on financial planning for retirement. This is especially true in the case of young people for whom retirement still seems a distant dream. The challenge is even greater given that a major portion of the population consider themselves sufficiently informed about the topic. However, the following numbers belie that belief:
Quebeckers say they lack financial skills
- 14% of unretired individuals aged 25 or older are unable to name even a single potential source of retirement income. The source named most often, registered retirement savings plans (RRSPs), was mentioned by a mere 55% of respondents.
- 45% of workers aged 25 to 44 have no idea how much they need to save to maintain their lifestyle in retirement.
- only 34% of workers aged 40 or older are aware of the approximate annual income they could receive in retirement.
Although Quebeckers think they know enough about financial planning for retirement, many do not feel they have the required skills. Only 44% of workers aged 25 or older believe that they could plan for retirement on their own. Less than half of those surveyed said that they had asked for advice.
Moreover, Quebeckers aged 25 or over are prepared to hand over responsibility for their financial security in retirement, as only half those surveyed consider themselves to be mainly responsible for it. According to 39%, the responsibility falls to the government and 11% were of the opinion that the burden was on the employer.
Parents are an important source of information
Knowledge and skill generally help build the third aspect of the definition of financial literacy: self-confidence. The surveys carried out, however, revealed another factor can have a major influence. The future financial behaviour of children is primarily influenced by their parents. Although specialists, advisors, the media and other sources of information do in fact guide people to make sound choices and decisions, children will follow their parents' lead when it comes to taking concrete steps toward financial planning. Despite this, parents remain hesitant to discuss finances with their children. One-fifth of workers aged 25 to 64 stated that their parents often discussed money issues or personal finances in their presence. However, for 21% of those polled, such conversations only occurred occasionally.
The situation does seem to be changing for the better: 43% of those in the 55 to 64 year age bracket stated that their parents never discussed the subject in their presence. That proportion dropped to 19% amongst 25 to 34 year olds.
Being a know-it-all can be risky
A significant number of Quebeckers are not conscious of the risks involved with certain behaviours and seem to be little informed of the legislation designed to protect the population.
More than 40% of workers aged 25 to 64 feel that making their own investments involves a slight to moderate degree of risk. Some people are capable of making investments unaided, of course. However, the beliefs concerning knowledge and skills noted above cast doubt on those capabilities.
If presented with guaranteed extraordinary investment yields, more than half of those polled would ask for more information on the offer and 1% would jump at the chance lest it disappear. While 1% may seem minor, as a percentage of nearly 4 million workers, it amounts to a potential 40 000 people being scammed.
Raising awareness about financial planning for retirement is warranted
It is still not easy to convince people to adopt a preventative approach when it comes to financial planning for retirement. The percentage of people with no retirement income objective has been stagnating at roughly 70% for the last 10 years. Less than 40% of workers aged 25 to 64 put savings first and spend the rest, whereas 58% do the opposite. Despite this, Quebeckers are optimistic and confident about their retirement.
Educational messages still have their place in Québec. The trick is getting Quebeckers to listen to them.