Even well-educated Canadians demonstrate relatively low levels of financial literacy, says the U.S. National Bureau of Economic Research (NBER). It found that only about 42 per cent of respondents to a survey could correctly answer three simple questions about the fundamental financial concepts of compounding, inflation, and diversification. The paper says that this lack of financial literacy should be important to the ongoing policy debate over retirement savings reform in Canada. “Retirement planning is strongly associated with financial literacy. This result has been found in many countries and the estimates in Canada are similar to those of other countries,” it says. “This is relevant in the Canadian context because of the relatively low level of financial literacy, even among the more fortunate Canadians (those with higher education and income), who may need to rely more and more on voluntary savings programs to fund their accustomed level of consumption in retirement,” it says.
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