Celebrating the Importance of Financial Literacy in NovemberPosted November 3, 2016 in Personal Finance
November is a busy month. We have “Movember,” an annual event where men grow mustaches to raise awareness of cancer. Clocks go back an hour for daylight saving time in most provinces. If that wasn’t enough, November is also financial literacy month. Financial literacy affects so many areas of our lives, such as our finances and the relationships with loved ones. Let’s take a look at what financial literacy is and why it matters so much.
What is Financial Literacy and Why Does it Matter?
Financial literacy is an essential skill that sadly far too many of us are lacking. The facts speak for themselves: half of Canadians are living paycheque to paycheque.
With household debt at an all-time high, financial literacy has never been more important. So why isn’t it mandatory in the school system? In many cases it’s up to parents to teach their kids about money. The fact that parents may not be financially literate themselves makes it even tougher.
Financial literacy may seem like a buzzword, but what does it really mean? It’s about having the skills and knowledge to make wise and educated financial decisions. Signing up for a credit card or applying for a mortgage can be stressful when you don’t understand how these financial products work. But with proper financial literacy, you’ll be more confident in the important financial decisions that you make.
Getting the Most Out of Your Credit Card
Your credit card can be either your best friend or your worst enemy. It’s your choice. When you use your credit card responsibly, it offers many benefits. You can build your credit history, manage your short-term cash flow and earn reward points, to name a few. But if you use and abuse your credit card, it can come back to haunt you.
Carrying a balance on your credit card can mean it’s tougher to be approved to borrow money for a mortgage or car loan, as lenders see you as a higher risk when you’re carrying a lot of debt. However, when you’re financially literate, you make your credit card work for you, not the other way around. You can maximize the benefits, while never carrying a balance.
Sex Ed is Required. Why Isn’t Financial Literacy?
Sex education is mandatory in most schools, so why isn’t financial literacy? This is a question recently asked in an interesting article on CNN. In fact, in many provinces it’s up to individual teachers to include financial literacy in their curriculum. This needs to change.
Imagine operating a car without driving lessons or a driver’s license. This is no different than signing up for a credit card without understanding how compound interest works. It can be as scary as driving on the highway in the middle of rush hour. You can easily find yourself up to your ears in debt if you don’t understand basic skills like budgeting and debt management.
The Bottom Line
Financial literacy month may only be one month a year, but that doesn’t mean being financially literate isn’t important the rest of the year. Reading our blog is a good start to learning about finance. Besides our blog and education centre the FCAC website is another great resource. There are also personal finance books, other blogs and podcasts. Financial literacy pays off, so take the time to invest in yourself, and your pocketbook, all year around.