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Financial Literacy and Retirement Planning in Canada

Author

Listed:
  • David Boisclair
  • Annamaria Lusardi
  • Pierre-Carl Michaud
Abstract
Financial literacy and Canadians' capacity to plan for retirement is of primary importance for the policy debate over pension system reform 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 who does plan for retirement. We find that 42 percent 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 to 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.

Suggested Citation

  • David Boisclair & Annamaria Lusardi & Pierre-Carl Michaud, 2014. "Financial Literacy and Retirement Planning in Canada," CIRANO Working Papers 2014s-35, CIRANO.
    • Handle: RePEc:cir:cirwor:2014s-35
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    File URL: https://cirano.qc.ca/files/publications/2014s-35.pdf
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    References listed on IDEAS

    as
    1. Nicholas-James Clavet & Jean-Yves Duclos & Bernard Fortin & Steeve Marchand, 2013. "Réformer la sécurité de la vieillesse - Effets et alternatives," CIRANO Working Papers 2013s-05, CIRANO.
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      More about this item

      Keywords

      Financial literacy; retirement planning; international comparisons.;
      All these keywords.

      JEL classification:

      • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
      • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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