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Financial literacy and retirement planning in Canada*


In this paper, we draw on internationally comparable survey evidence on financial literacy and retirement planning in Canada to investigate how financially literate Canadians are and how financial literacy is linked to retirement planning. We find that 42% of respondents are able to correctly answer three simple questions measuring knowledge of interest compounding, inflation, and risk diversification. This is consistent with evidence from other countries, and Canadians perform relatively well in comparison with Americans but worse than individuals in other countries, such as Germany. Among Canadian respondents, the young and the old, women, minorities, and those with lower educational attainment do worse, a pattern that has been consistently found in other countries as well. Retirement planning is strongly associated with financial literacy; those who responded correctly to all three financial literacy questions are 10 percentage points more likely to have retirement savings.

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We thank the Canadian Securities Administrators and the Quebec Autorité des marchés financiers for granting access to the data, and Innovative Research for providing us with the data files and documentation. Michaud thanks the Fonds de recherche du Québec – Société et culture (NC 145848) for funding this research. We also thank Thomas Lalime for excellent research assistance and Audrey Brown for editorial assistance. Findings and conclusions do not necessarily represent the views of the organizations involved.

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This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

T. Jappelli (2010) Economic literacy: an international comparison. Economic Journal, 120(548): F429F451.

T. Jappelli and M. Padula (2013) Investment in financial literacy and saving decisions. Journal of Banking and Finance, 37(2013): 27792792.

T. Lalime and P.-C. Michaud (2014) Littératie financière et préparation à la retraite au Québec et dans le reste du Canada. L'Actualité économique, 90(1): 2345.

A. Lusardi and O. S. Mitchell (2011 a) Financial literacy around the world: an overview. Journal of Pension Economics and Finance, 10(4): 497508.

A. Lusardi and O. S. Mitchell (2011 c) Financial literacy and retirement planning in the United States. Journal of Pension Economics and Finance, 10(4): 509525.

A. Lusardi and O. S. Mitchell (2014) The economic importance of financial literacy: theory and evidence. Journal of Economic Literature, 52(1): 544.

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Journal of Pension Economics & Finance
  • ISSN: 1474-7472
  • EISSN: 1475-3022
  • URL: /core/journals/journal-of-pension-economics-and-finance
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