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Taking the Fear Out of Finance

Headlines in 2012 continued to sound the alarm over record levels of household debt across North America. Concerns were also raised that many people are saving too little and are unprepared to support their lifestyles in retirement.

What’s behind this unfortunate state of personal finances? Inadequate financial literacy – the knowledge, skills and confidence to make responsible financial decisions – has been identified as a key cause. Studies consistently reveal that one in two people don’t have a budget, don’t know where their money is going and don’t understand even basic financial topics, such as inflation, compound interest and the terms of their mortgage. Many North Americans have never been taught basic financial literacy skills.

Why financial literacy matters

Sound money management has become increasingly important – and complex – in the 21st-century economy. There are many more financial decisions to make, temptations to spend and financial products to consider, from sophisticated mortgage options to a myriad of retirement investments. People who lack financial understanding are more vulnerable to adverse financial outcomes.

As a result, experts agree that everyone now needs basic financial literacy. For those on the margins, the need is even greater.

TD 2012 Corporate Responsibility Report

“I didn’t know much about how to handle my money,” explains Maria, a 24-year-old single mother of three young children living in the Jane-Finch suburb of Toronto, Canada. She is acutely familiar with the constant stress of trying to make ends meet, pay down debt and prevent the deepening of poverty.

“The challenges I faced were to get enough money to pay the rent, to buy the groceries, to buy some of the things that my children really like.”

Life-altering impacts

Maria’s situation started to change after she attended a series of free, customized money management workshops developed by United Way Toronto. The lessons she learned helped take the fear out of finance, and soon Maria began balancing her budget and even saving for her children’s education. Today she feels in control over her financial life – and future.

Helping disadvantaged individuals and families gain that control is behind United Way Toronto’s recently created Financial Literacy Strategy. It focuses on building money-savvy people who can make informed decisions, build their savings and assets, and make the transition to financial stability.

THE STATE OF OUR FINANCES 42%

of U.S. adults give themselves a grade of C, D or F on their knowledge of personal finance.*

31% of Americans say that

credit card debt keeps them from reaching their financial goals.***

< 5%

of household income in Canada is put into savings, compared to 20% thirty years ago.**

$1.63

The average debt that Canadians had in 2012 for every $1 earned after taxes – a record high.**