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What is financial literacy?

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KEY TAKEAWAYS

✔ Financial literacy is about increasing your knowledge about money and learning skills that can help you achieve your goals. 

✔ Understanding money and how it works will help you to make better decisions and will prepare you for the unexpected. 

✔ Budgeting, saving, managing debt and building good credit are things you can learn more about to improve your financial literacy.

During your first few years in a new country, there’s a lot to learn about managing your money. You’ll have questions like: how much do things cost? Will I make enough money? And what do I need to save in case of an emergency? 

How you answer these questions depends on your understanding of how money works. This is called “financial literacy” and the good news is that anyone can become smarter about money with just a little effort and curiosity. 

Why financial literacy matters

The better you understand the relationship between what you make, what you spend, and what you save, the more confident you’ll be in making the right decision while managing your money. This is important because good choices, based on your financial literacy, can reward you for life. You will: 

  • Make smarter money decisions: from managing the day-to-day expenses to planning for retirement.
  • Be better prepared for something unexpected, like job loss, which will impact your finances.
  • Achieve your goals by building a plan toward a specific goal like saving for a house or continuing your education.

4 ways to improve your financial literacy 

Financial literacy isn’t just about learning about money, it also means that you should practice those money skills you’ve learned. Here are some important financial habits you can start doing today. 

Know your spending habits

Budgeting is simply tracking and writing down how much money you receive (paycheque or other), with how much you spend (bills and expenses). Many great online tools have made it easy for individuals and families to create a household budget. Here are the 4 steps to take to create a budget:

Step 1: Gather your bills 

Step 2: Track income and spending 

Step 3: Set saving and budget goals 

Step 4: Choose mindful spending 

Discover how each one of these steps helps you build a better financial future. 

Understand how to build good credit 

Countries don’t share any of your personal financial information. This means you get the opportunity to build a new credit history in Canada. Your credit history is important because having a good “credit score” can help you qualify for more kinds of credit at lower interest rates. 

As a new Canadian, it takes time to build good credit. There are many things you can do to increase your score quickly. Things like: 

  • Paying bills on time
  • Making at least the minimum payment on credit scores 
  • Trying not to use too much credit 

Find out some of the best ways to build credit as a new Canadian.

Get your credit score

A “credit score” ranges from a high score of 900 to as low as 300. Your credit score tells lenders how you use and manage credit. The value of the score is driven by how well you manage your debts and payment history. For example, late or missing payments will lower your score. 

You can get your credit score and report in Canada at Equifax or Transunion. To understand all the information in your credit report learn more here. 

Learn how to save

A simple way to start saving is to set aside a small amount of money with every paycheque before paying bills or expenses. This is called “paying yourself first”. With this method, you always have some money set aside in case of an emergency or unexpected expense. Make saving easy by setting up an automatic transfer into a separate account—that way your money can grow and you won’t miss it.  Saving for something now or in the future? Check out our tips to hit your savings goal. 

Make money-smarts a part of your life

There’s a lot to learn about managing money. The more you explore your options, the more confident you’ll become. Visit the goeasy Academy when you have some free time. There’s an entire section devoted to the needs of new Canadians, packed with good advice and helpful tips for building the path to a better tomorrow. 

Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.