Canadians across the country are saddled with high levels of debt, but many still say they have a poor understanding of how credit cards and mortgages work.
According to a recent Rates.ca survey of 1,061 Canadians, 44 per cent of respondents believe they have a poor financial understanding of credit cards, while 62 per cent say they have a poor financial understanding of mortgages. Another 40 per cent of Canadians said they don’t know what their credit score is.
“In 2019, it’s troubling that Canadians continue to have a low comprehension of how money works,” Sara Kesheh, vice president at Rates.ca, said in a statement, adding that financial literacy helps ensure “your money works hard for you.”
“Without that knowledge, debt management and even achieving a desired lifestyle may all be negatively impacted.”
While 75 per cent of respondents said they had one to three credit cards, 68 per cent said they didn’t know that interest on credit cards is calculated daily – not monthly or annually – on their balance. Many Canadians could be paying significant dollars in interest considering 30 per cent of respondents said they are unlikely to somewhat unlikely to make the minimum payment on their credit cards.
Mortgage comprehension appears to be even more challenging for some. For example, 61 per cent of respondents were unaware that a minimum down payment of 20 per cent is required to avoid paying government insurance. Another 90 per cent did not know that interest on a fixed-rate mortgage is charged semi-annually.
Almost all Canadians surveyed – a whopping 94 per cent – believe schools should be focusing more on teaching financial literacy to students. Nearly half of respondents (46 per cent) said people should be in charge of their own credit card by the age of 18, while one third of respondents feel that 21 is a more appropriate age.
“We need to collectively close this knowledge gap, through reading articles, news and leveraging the many online resources available, but perhaps more importantly through conversation, asking questions and being curious,” Kesheh said.
The Financial Literacy survey was conducted by Forum Research between Sept. 12 and 15. The ages of survey respondents ranged from 18 years old to more than 65 years old.