Why is financial literacy so important?

6 Minutes Read

Taking control of your life and finances.


Financial literacy 101

Financial literacy refers to having the knowledge and skills to make informed financial decisions. Budgeting, managing debt and investing all fall under the umbrella of financial literacy.

A financially literate person is someone who can: 

  • Confidently manage their finances
  • Apply financial concepts to daily life 
  • Set and achieve financial goals
  • Evaluate financial products, services and advice 

Ultimately, financial literacy is kind of like a driver’s license – you use it to get yourself where you need to be. If you’re ready to begin your financial literacy journey, you’re in the right place. Keep reading to learn what financial literacy is, where it’s taught and tips for strengthening your understanding of basic concepts.

Let’s do it!



Financial literacy in context

Studies suggest we’re not very confident about money. The 2020 OECD Survey of Adult Financial Literacy found that only 17% of respondents self-assessed their knowledge of financial topics as high. 26% estimated their knowledge as low.

The thing is, financial literacy is an essential part of our daily lives. Money has the power to impact everything from our relationships to mental health. And we rely on savvy financial decisions to get the things we want in life, whether that’s a house or a gym membership (which, let’s be honest, is almost as expensive as a house). 

Financial literacy has become even more important in recent years, as credit and investment options grow more complex. The products we’re choosing from today (I’m side-eying you, BNPL) are more sophisticated than those available to our parents and grandparents – and advancements in technology add another layer of complexity. Not to mention that the sheer number of financial products has also increased, meaning we have more options (nice!) but also more information to consider before making a decision. 

Plus, the skills associated with financial literacy are essential during a crisis. During the COVID-19 pandemic, many people lost their jobs. Schools and businesses shut down and economic uncertainty surfaced. Basic financial knowledge can help those who get left behind in economic downturns take back some control. 

Our financial environment is global and constantly changing. Economic factors like inflation and technological advancements like electronic trading have made markets more volatile than ever before – meaning prices move up and down a lot, contributing to higher risk. Financial literacy is essential to navigating these rapid changes.



Financial literacy gaps

The playing field is not level when it comes to financial literacy.

Socioeconomic and political barriers such as systematic inequality and employment discrimination can prevent marginalized groups from accessing the same financial resources, hands-on experience, and benefits afforded to others – resulting in a financial literacy gap. 

In fact, a 2018 national survey by the Financial Industry Regulatory Authority (FINRA) found differences in financial literacy levels among age groups, racial groups, ethnicities, and between sexes. This survey asked Americans 5 basic financial literacy questions and found that in general, scores were lowest among racial minorities, women, young people, and those with less education.

These complex societal inequalities make financial education even more important – accessible education from all sources is crucial for minimizing gaps in literacy. 


Where is financial literacy taught?

Financial education has many sources – and your preferred method of learning may depend on your generation.

For example, Canadians between 18 and 34 years old are more likely to consult their social circle or the internet before asking a financial advisor for help, according to the 2019 Canadian Financial Capability Survey. In contrast, Canadians older than 65 will typically turn to a financial advisor or bank for guidance, rather than searching for answers on the internet. 

Here’s an overview of some of the ways we learn about money…


Starting early



Most Canadians don’t really think about their financial education until their 20s, but experts say that learning about money from an early age (as young as 7 years old) can build healthy habits for life. 

According to the 11th Annual Parents, Kids & Money survey, a quarter of parents reported being reluctant or extremely reluctant to discuss financial topics with their children. Kids, on the other hand, are often open and willing to learn – half of the children surveyed said they wished their parents taught them more about money. 

It's best to have solid financial skills before entering adulthood. If you’re a parent, guardian or older sibling: consider teaching kids money basics as early as possible. Explain what money is and how it’s used and help them practice saving with a piggy bank. Modelling good financial behaviour is also crucial. Talk to kids about your own money habits and model responsible decision-making whenever possible!


What about schools?



Young people are expected to make big financial decisions right after graduation, like whether to take out a loan for college or what to do with money earned at their new, full-time job. Some grads might even be moving into their own apartment for the first time, resulting in surprise expenses (you have to buy cutlery?) – not to mention credit checks. 

Young adulthood is tough, but basic financial skills could make it easier. 

In recent years, we’ve seen an uptick in financial literacy programs all over the country. In 2019, Ontario made financial literacy part of a mandatory career studies course for high school students. And the Alberta government is investing $5 million in financial literacy programs for grades 3-12 over the next three years.

But there’s still work to be done! 

Many curriculums focus on skills like how to do your taxes or budget your money – which are super important. But there’s also an opportunity to dive deeper. For example, experts would like to see more discussions about our relationship with money and systemic barriers to wealth included in curriculums. 


Navigating FinTok



Social media platforms offer tons of content about money management, from economic rundowns to budgeting tips and tips. TikTok, in particular, is exploding with influencers and educators offering advice on just about any financial topic (using hashtags like #fintok and #moneytok, of course).

The easy accessibility of financial content on socials can definitely be a good thing, especially if you do follow-up research. 

Unfortunately, technology is a double-edged sword. Because there are so many people talking about finance online (and not all of them are necessarily qualified) there’s a LOT of financial misinformation being spread. Millennials and Gen Zs are especially vulnerable to bad online financial advice because the aura of fun and humor that often surrounds financial information on sites like TikTok contribute to a feeling of missing out, which leads some to put their money into questionable investments without proper consideration.

So, what can you do to consume online financial content safely? Here are a few tips to navigate the sea of information out there:

  • Always do your due diligence when evaluating the source of information and never blindly follow a piece of information or advice. Consider the qualifications of the account that posted it and verify the information by checking multiple trustworthy sources (Investopedia, Corporate Finance Institute and The Balance are all useful resources!). A healthy level of skepticism is necessary.
  • Consider the intentions behind a piece of information. Is it a sponsored post – are they getting paid to say it? Is it based more on opinion than fact? Are they trying to sell you something? Basically, ask yourself if the poster has something to gain from you acting on their information. 
  •  Read beyond headlines and clickbait – if something sounds too good to be true, it usually is.
  • Don’t let FOMO dictate your decisions. It can be tempting to want to be a part of something other people are excited about, but investing in a specific stock or asset based on emotion causes you to underestimate risk and make suboptimal decisions.


Flahmingo Central 



You know we had to mention it. ;)


Flahmingo Central is a video-based learning hub – found right in our app! Learn the basics and complexities of investing all in one place and from a reliable source. Our videos are expert approved. 

Basic financial concepts everyone should be familiar with

We’re throwing a lot of info at you, we know! Here’s a quick guide to some basic financial literacy skills to start with: budgeting, taxes, saving, investing, and debt. 



Budgeting is how you plan to spend your money and involves balancing your expenses with your income. The goal is to understand how much money you have and where it goes, so you can use your hard-earned funds for things that are important to you

Check out this comprehensive resource from the Canadian government to learn more about budgeting.




Ugh, taxes. Understanding how taxes work – federally and provincially – is a good way to prevent any tax season surprises (and maybe get you a little extra money in your pocket). Basically, you want to have the knowledge, skills, and confidence to know the tax implications of your choices.

Thankfully, the Canada Revenue Agency provides extensive information about how taxes work (and we also have a couple blogs breaking down capital gains tax and the Canadian tax bracket system).



Saving involves setting your money aside somewhere easily accessible, like a savings account. Saving is better suited for short- term goals because inflation is working against you. Basically, your savings lose value over the long term but it’s still important to have savings on hand for emergencies!  

Check out this guide on setting savings goals from the Canadian government as a place to start.



Investing means putting your money to work by buying an asset with the expectation that its value will grow over time. Investing is a long-term strategy that carries more risk than saving but is essential for protecting yourself against inflation. 

The Government of Canada has a guide on the basics of investing –  and, of course, we also have many blogs on the subject!



Borrowing money is something almost everyone will encounter in their adult life. Common types of borrowing include mortgages, personal loans, and credit cards. Most borrowed funds incur interest, which means on top of the amount you borrowed, you also pay a percentage of the total amount to the lender – kind of like a fee they charge for giving you the money. 

Check out this guide on debt and borrowing from the Government of Canada.


To sum it all up



Financial education can be useful at any age and any income level. Just graduated? Landed a big promotion? Starting a family? Retiring? Every stage in your life will come with new financial responsibilities, and financial literacy will enable you to make the best possible decisions. 

Overall, having a solid understanding of financial topics can make it easier to:

  • Retire comfortably
  • Avoid accumulating too much debt
  • Deal with emergency expenses
  • Avoid scams and be less vulnerable to fraud
  • Make better financial decisions with less stress and anxiety
  • Be financially independent
  • Meet your personal finance goals

Dealing with money can be stressful and overwhelming. It’s often tempting to ignore your financial situation, but the benefits of learning these skills are tangible and indispensable. When you commit to improving your financial literacy, you also improve your ability to live comfortably and independently. The more confident you are in your financial decision making, the better off you’ll be.

Melissa Atefi