At CSS Pension Plan, we believe that financial literacy is the cornerstone of a secure and prosperous future.
In today's fast-paced world, understanding how to manage money effectively can significantly impact your long-term financial security and overall well-being.
Let's delve into the importance of financial literacy, drawing insights from recent surveys of our CSS Pension Plan membership and other research to highlight its value.
Why financial literacy matters
Imagine Sarah, a young professional just starting her career. She’s excited about her new job but overwhelmed by the financial decisions she needs to make. From budgeting her monthly expenses to understanding her retirement plan options, Sarah realizes she needs to improve her financial literacy. Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. It forms the foundation for making informed decisions that lead to financial stability and growth. According to a study published in the Journal of Financial Literacy and Wellbeing, financial literacy is essential for making savvy financial decisions, understanding complex financial instruments, and improving financial resilience (Lusardi & Messy, 2023).
The far-reaching benefits of financial literacy
Research consistently shows that financial literacy has extensive benefits. It empowers individuals to make better financial decisions, avoid debt, and plan for long-term goals like retirement. Financially literate individuals are more likely to spend below their means, save for emergencies, and plan for retirement (Investopedia, 2024). Moreover, financial literacy can reduce inequality by promoting participation in financial markets and the savvy use of financial instruments (NEA, 2024).
Enhancing financial well-being
Sarah decides to take control of her finances by learning more about budgeting and saving. Financial literacy supports overall financial well-being by helping individuals manage their money more effectively. This includes creating and sticking to budgets, understanding and managing debt, and making informed investment decisions. A strong foundation in financial literacy can also protect individuals from financial fraud and scams (Fidelity, 2024).
Survey insights: Across all groups, about 50% are moderately confident that they can deal efficiently with unexpected financial events. The majority of our early to mid-career respondents find it hard to stick to a budget when unexpected expenses arise. It appears that as the person’s career progresses and into retirement, this confidence level does improve.
Building financial confidence
With financial literacy, Sarah gains the confidence to navigate the complexities of personal finance. This confidence enables her to make informed decisions about credit, insurance, investments, and retirement planning. Financially literate individuals are better equipped to handle financial challenges and achieve their financial goals (Capital One, 2024).
Survey insights: Over 70% of the retiree respondents mentioned that “retirement is better than I had expected.” However, 56% of this same group regret not saving for retirement earlier. All groups share a similar feeling that they are either very confident or moderately confident that they have taken or are taking the right steps to plan for their retirement. This confidence is important and only grows as you invest in your financial know-how and literacy.
Reducing financial stress
Financial literacy can significantly reduce financial stress and anxiety. By understanding how to manage money, individuals can avoid common financial pitfalls and feel more secure about their financial future. This sense of security contributes to overall well-being and peace of mind (Power of Positivity, 2024).
Survey insights: About 70% of the respondents in non-retiree groups indicated that they worry about running out of money in retirement. Whereas for those in retirement, about 34% expressed the same worry. Through financial literacy and retirement income planning (myCSSPEN Compass® Retirement Income Planner), we can work together to help reduce some of the financial stress that may be generated from this worry.
Promoting economic equality
Financial literacy also plays a crucial role in promoting economic equality. It helps bridge the gap between different socioeconomic groups by providing the knowledge and skills needed to participate fully in the financial system. This can lead to more equitable access to financial opportunities and resources (FINRA, 2020).
Survey findings: Through your CSS Pension Plan, you have access to world-class investment solutions that a typical investor may not have access to. The survey respondents put this key value in their top three most important aspects of the services and solutions that CSS brings to them.
Leveraging financial tools and advisors
To bridge the gap in financial literacy and enhance financial planning, utilizing tools like the myCSSPEN Compass® Retirement Income Planner and connecting with a CSS Retirement and Pension Advisor can be incredibly beneficial.
- myCSSPEN Compass® Retirement Income Planner: This tool helps you understand if you are on track to achieve your retirement savings goals. It provides actionable insights and recommendations to help you stay on course. By regularly using this planner, you can make informed decisions about your retirement savings and adjust your strategy as needed.
- CSS Retirement and Pension Advisors: Our team of experienced advisors is here to assist you every step of the way. They can help you create a customized retirement income plan that includes all your sources of retirement income, such as your CSS Pension Plan funds, RRSPs, TFSAs, CPP, and OAS. Advisors can also provide personalized guidance and help you navigate your retirement journey.
Practical steps to improve financial literacy
Improving financial literacy doesn't happen overnight, but there are practical steps you can take to enhance your financial knowledge:
- Educate yourself: Utilize resources like online courses, financial literacy websites, and books. Websites like Investopedia offer comprehensive guides and articles on various financial topics.
- Use financial tools: Take advantage of budgeting tools, retirement planners, and financial calculators to manage your finances better.
- Attend workshops and seminars: Participate in financial planning workshops and seminars to gain insights from experts.
- Consult financial advisors: Seek advice from financial advisors to create a comprehensive financial plan tailored to your needs.
Conclusion
Financial literacy is a powerful tool that can transform your financial future. By understanding and applying financial principles, you can achieve greater financial stability and security. Our surveys highlight the need for improved financial literacy across all age groups, emphasizing the importance of education and the use of financial tools. Start your journey towards financial literacy today and secure a brighter financial future.
References
Capital One. (2024). Financial literacy: 5 basic concepts to know. Retrieved from https://www.capitalone.com/learn-grow/money-management/financial-literacy/
Fidelity. (2024). Financial literacy: What is it and why is it so important? Retrieved from https://www.fidelity.com/learning-center/smart-money/financial-literacy
FINRA. (2020). New research: Financial literacy is significant indicator of positive financial outcomes. Retrieved from https://www.finra.org/media-center/newsreleases/2020/new-research-financial-literacy-significant-indicator-positive
Investopedia. (2024). Financial literacy: What it is, and why it is so important to teach teens. Retrieved from https://www.investopedia.com/terms/f/financial-literacy.asp
Lusardi, A., & Messy, F. (2023). The importance of financial literacy and its impact on financial wellbeing. Journal of Financial Literacy and Wellbeing. Retrieved from https://www.cambridge.org/core/journals/journal-of-financial-literacy-and-wellbeing/article/importance-of-financial-literacy-and-its-impact-on-financial-wellbeing/A5DBBF9D6F0696E5FD3733241EE28E66
NEA. (2024). Financial literacy & economic inequality. Retrieved from https://www.nea.org/resource-library/financial-literacy-economic-inequality
Power of Positivity. (2024). 10 benefits of financial literacy. Retrieved from https://www.powerofpositivity.com/financial-literacy-benefits/
