Lack of financial literacy could hold Canadian millennials back: report

A BMO Wealth Management report suggests many millennials lack basic financial literacy. Getty Images

Canadian millennials are better educated than their parents, have more skills, and are more likely to spend money on philanthropy, according to a BMO Wealth Management report.

Overall, the “Generation Why” report says millennials are well-equipped to succeed in the workforce.

READ MORE: Why Canada’s top 3 ranking in global youth financial literacy test isn’t much to celebrate

But there’s one caveat — millennials have poor financial literacy. According to the July report, that could hold millennials back.

The report cites a PwC study, which found that only 24 per cent of millennials have basic financial literacy, and eight per cent have high financial literacy.

“This lack of financial expertise may have an impact on the ability of millennials to attain the financial success they desire,” the report notes.

Story continues below advertisement

WATCH: How to clean up your personal finances

Click to play video: 'How to clean up your personal finances with Kelley Keehn'
How to clean up your personal finances with Kelley Keehn

Chris Buttigieg, BMO Wealth Management’s director, said those with basic financial literacy know only about their assets, expenses and income.

Higher literacy comes with an understanding of taxes and knowing how to use different types of bank accounts. He said those with a more “sophisticated” understanding know how mortgages work, and how to properly invest money.

While the BMO report highlights the importance of knowledge in making financial decisions, it adds that many millennials aren’t too concerned.

READ MORE: Quebec to introduce finance to high school curriculum at expense of world history

About 39 per cent of millennial men said they were concerned about their level of literacy, while 29 per cent of women said they were worried.

Story continues below advertisement

Millennials said addressing other personal matters — such as job security, relationships and living situations — was more important than learning about finances.

WATCH: How the BoC’s interest rate hike will affect you

Click to play video: 'How the BoC’s interest rate hike will affect you'
How the BoC’s interest rate hike will affect you

But the report goes on to explain that millennials are still serious about saving money. About 72 per cent of millennials surveyed by BMO said they were saving for a specific purpose, such as buying a home.

That’s where Buttigieg says knowledge would be useful.

“Millennials are saving, but they’re not saving in the appropriate vehicle,” he said, explaining that they could be using RRSPs and tax-free savings accounts to reach their goals “a lot sooner,” but tend to stick to traditional savings accounts.

WATCH: Maximizing savings during the summer spending months

Click to play video: 'Maximizing savings during the summer spending months'
Maximizing savings during the summer spending months

Lack of knowledge about finances isn’t exclusive to millennials, Buttigieg says, but he adds that older Canadians have the experience to back them up.

Story continues below advertisement

The same is true for older millennials, who are in their 30s, Buttigieg noted.

BMO’s findings aren’t the first time the issue of financial literacy has been flagged.

In February, a study released by the Financial Consumer Agency of Canada (FCAC) found that Canadians still don’t understand some basic financial rules.

READ MORE: Canadians still struggle with basic financial rules, rights, study finds

Three-in-ten Canadians didn’t know that they are responsible (and not the bank) if they lose their wallet and someone finds their bank card, resulting in a loss of funds.

And one-in-five of still believe that a bank can issue a credit card without a customer’s prior approval.

Buttigieg suggests that greater financial literacy in Canada can be reached if schools offer “consistent programs” across the country. He added that parents also have a responsibility to educate children and that those wanting to learn more can access several tools online.

— With files from Global News reporter Monique Scotti

Sponsored content