Last year during a panel discussion at CPA Canada's first-ever financial literacy conference, Garry Marr, financial columnist with the Financial Post, lamented that in this day and age, most of us would feel ashamed to admit if we were illiterate. Yet when it comes to being financially illiterate, many Canadians almost wear it as a badge of honour, proclaiming that they're just not that good with numbers or they don't enjoy math.
That lack of knowledge has some pretty severe consequences as Canadians are saving less, owe more than ever, many don't have adequate savings to weather even the smallest of emergencies, and a large number are losing sleep at night mulling over their financial woes.
According to a study by the Financial Planning Foundation, stress alone is not enough to motivate someone to seek financial help. Instead, it's self-efficacy—a person's belief in their ability to succeed by achieving a desired outcome—that is a consistent and strong predictor of help-seeking behaviour. The more overall confidence a person has in their ability to undertake and successfully complete an activity like financial planning, the more likely they are to take action and get started.
Where Does this Lack of Confidence Stem From?
Dr. Moira Somers, a neuropsychologist from Winnipeg who specializes in financial well-being, thinks back to the 1980s and the self-esteem movement in schools, where educators were trying to instill self-confidence in students who were struggling academically.
"The notion was that kids who couldn't read, write or do math at the same level of their peers were taking a hit in the self-esteem department," Dr. Somers says. "Lots of effort went into trying to increase kids' self-esteem. It turned out that nothing increased kids' self-esteem as much as success in the domain that they were trying to succeed in."
What's a Better Way to Gain Confidence?
Dr. Somers works with a variety of financially fearful patients and her approach is: If you want to build your money confidence, you must build capacity and competence.
"That may start out with just 'making friends with' or actually looking at your bank balance. Your bank statement, your online banking. Really just learning how to be in the presence of financial information without hyperventilating."
Competence Comes with Exercise
Dr. Somers suggests these six simple tips to build your money confidence:
- Do something on a regular basis to increase your knowledge about money, like listening to the business report on the radio in the morning and on your drive home from work
- Open up a financial blog often and read some financial articles
- Subscribe to a money magazine
- Read business articles in the newspaper – just spend five or ten minutes a day familiarizing yourself with the language of money and people's different approaches to money
- Learn about trends in business as well as personal finance
- Every week, have at least one conversation with someone about money. Talk to your peers, talk to the elders and young adults in your life. How did they learn about money? Talk to your child, teenager and spouse too!
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To learn more about how financial planning can benefit you, read A solid financial plan boosts financial and emotional well-being and Focusing on bite-sized goals helps people overcome their financial blind spots and watch What is financial planning.