Photo: KMR Photography/Flickr
When it comes to mortgages and home insurance Canadians aren’t as financially savvy as they think they are, according to a new poll by LowestRates.ca.
Nearly six in 10 Canadians don’t have basic financial knowledge on these subjects even though 78 per cent of Canadians believe they are indeed financially literate.
The poll by the borrowing rates comparison site also found that a surprising 70 per cent of Canadians don’t even know what a mortgage term means.
“Canadians, we’re not financially literate and as a result we’re essentially taking money, throwing it in the garbage and burning it,” Justin Thouin, LowestRates founder and CEO tells BuzzBuzzNews.
LowestRates partnered with Ipsos to create a 15-question true or false survey to test Canadians’ financial literacy.
The survey results, which were published on Tuesday, defines financial literacy as “one’s ability to understand how money works in the world.”
Conducted in May, the basic questions focused on mortgages, chequing accounts and home and car insurance, and about 1,000 Canadians aged 18 and over were polled.
Thouin says that a mortgage is often “the biggest financial decision” most Canadians will make, but each survey question related to mortgage and home insurance recorded an incorrect response rate of 50 per cent or more.
About 67 per cent of Canadians did not know that government insurance must be paid on mortgages with downpayments of less than 20 per cent, unless the home is worth $1 million or more.
When shopping for a mortgage, Thouin says many Canadians jump at the first offer they receive but he warns that not being financially knowledgeable will cost you.
“A one per cent difference on a $350,000 mortgage is a lot of money. It’s three and a half thousand dollars in interest per year,” says Thouin.
“Over five years that’s close to a $20,000 difference in interest that you could be penalizing yourself by not taking the time to compare and find the best rate for yourself,” Thouin adds.
Canadians appear to not know much about home insurance as well.
When asked if it was true or false that home insurance can sometimes protect a homeowner in the case of their dog biting someone in their residence, 54 per cent of respondents didn’t know that true was the correct answer.
In addition, 52 per cent of respondents didn’t know that home insurance will not always cover a dwelling if a tree were to fall on it.
Even though Millennials are generally considered digitally savvy, only 31 per cent of respondents, roughly between the age of 18 to 34, passed the quiz — the worst rating out of all generational cohorts.
However, other generations didn’t exactly ace the test either.
Just over half of Baby Boomers (52 per cent) passed, along with 45 per cent of GenX’ers.
“Canadians need to wake up, recognize that there is a problem and that they need to take it upon themselves to make themselves financially literate,” says Thouin.