How Financially Savvy Are You?

So you know the difference between a GIC and a savings account. But what else?

I know, I know…talking about finances is about as much fun as going to the dentist! I don’t blame you, but it is a topic of primary importance. Money touches every aspect of our lives; everything from grocery shopping, to applying for a mortgage, to paying for our children’s education.

So why do we lack interest in it? Two main reasons are:

Lack of Time
Lack of Knowledge

If you’re a mom, you understand the time issue. After making dinner, taking kids to sports classes, doing homework, baths and laundry…you are completely exhausted. The last thing you want to do at 11pm is discuss finances with your spouse. But what about the lack of financial knowledge? Is it fear of the unknown?

Financial literacy was never part of the school curriculum, so maybe you just never bothered to learn it. Or perhaps your parents did not pass on any financial knowledge to you because money was a taboo subject. Don’t worry, you are not alone.

Nearly 1/4 of Canadians have trouble:

Keeping track of their finances
Planning ahead
Staying informed about financial matters

Financial literacy isn’t a luxury. It’s a basic life skill, like reading and writing, or learning how to swim. Understanding personal finances means you are able to thrive, not just survive. It can empower you and boost your self-esteem, allowing you to make smarter money moves throughout your life.

Not everyone is as passionate about finances as I am (it’s my chosen career), but I do encourage you to learn at least two new things this year, related to finances. It could be something simple like finding out how a TFSA works, or how to set up an RESP. Whatever you learn, it will lead you one step further on the path to wealth.

To test your financially savvy, go to the next page to take a short quiz....

Let's test how financially savvy you are! Answer these five questions....

1. Which of these investments provides guaranteed income that cannot be outlived?
a) Mutual fund
b) Annuity
c) Stocks
d) GIC

2. If your investment declines by 60%, what increase is needed to get back to break-even?
a) 60%
b) 120%
c) 150%
d) 180%

3. Which of these investments risk losing value?
a) mutual funds
b) blue chip stocks
c) high-yield bonds
d) they all have risk of losing value

4. Dollar-cost averaging is:
a) A strategy of buying low and selling high.
b) A way to sell shares to minimize capital gains.
c) Investing the same amount of money in a fund at regular intervals.
d) None of the above.

5. Which kind of life insurance allows you to build up savings while providing life insurance coverage?
a) Term life insurance
b) Universal life insurance
c) Mortgage insurance

6. Which is a true statement? Having a Will:
a) Allows you to specify guardianship for a dependent
b) Is only important for people with a lot of property
c) Is not necessary if you have a Power of Attorney

I hope you didn’t cheat! Here are the correct answers. (1b, 2c, 3d, 4c, 5b, 6a)

All correct? Congratulations! You’re a smart cookie.
4 out of 6: You have a good financial base! Keep it up.
3 or less: Time to get learning! Here’s how: