Financial literacy and retirement planning in Canada

In this paper, we draw on internationally comparable survey evidence on financial literacy and retirement planning in Canada to investigate how financially literate Canadians are and how financial literacy is linked to retirement planning. We find that 42% of respondents are able to correctly answer...

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Bibliographic Details
Published in:Journal of pension economics & finance 2017-07, Vol.16 (3), p.277-296
Main Authors: BOISCLAIR, DAVID, LUSARDI, ANNAMARIA, MICHAUD, PIERRE-CARL
Format: Article
Language:English
Subjects:
Age differences
Canadians
Comparative studies
Compound interest
Diversification
Earnings
Educational attainment
Employers
Employment
Financial literacy
Financial planning
Gender differences
Illiteracy
Inflation
Interest rates
Literacy
Minority & ethnic groups
Minority groups
Older people
Pension plans
Questionnaires
Respondents
Retirement income
Retirement planning
Savings
Savings accounts
Savings plans
Securities regulations
Task forces
Trends
Women
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Summary:In this paper, we draw on internationally comparable survey evidence on financial literacy and retirement planning in Canada to investigate how financially literate Canadians are and how financial literacy is linked to retirement planning. We find that 42% of respondents are able to correctly answer three simple questions measuring knowledge of interest compounding, inflation, and risk diversification. This is consistent with evidence from other countries, and Canadians perform relatively well in comparison with Americans but worse than individuals in other countries, such as Germany. Among Canadian respondents, the young and the old, women, minorities, and those with lower educational attainment do worse, a pattern that has been consistently found in other countries as well. Retirement planning is strongly associated with financial literacy; those who responded correctly to all three financial literacy questions are 10 percentage points more likely to have retirement savings.
ISSN:1474-7472
1475-3022
DOI:10.1017/S1474747215000311