A study conducted by the Toronto-Dominion Bank found nearly a third of Canada’s youth to be “not at all knowledgeable” about registered Retirement Savings Plans (RSPs).
Conducted by Environics Research and surveying 2,115 Canadians between the ages of 18 to 33, the study found nearly 50 per cent of those surveyed to have erroneous beliefs about what their RSPs can be used for.
Sixty per cent of respondents were unaware their RSP funds couldn’t be used for childcare expenses while 52 per cent incorrectly believed they could use their retirement fund to finance buying a car.
Fifty-one per cent of those surveyed thought RSPs could be used for personal loans, and 50 per cent believed RSPs could pay for renting an apartment or buying a second home.
Of those surveyed, only 50 per cent said correctly their RSP funds could be used to purchase their first home, and only 28 per cent of respondents knew their funds could be used to finance higher education.
Sixty-four per cent of those surveyed also falsely assumed they could use their funds to make charitable donations.
“By the time people get to university, they’ve already made some major, major financial decisions and people need to learn this financial literacy before they go off to university, not while they’re in university,” said Frances Woolly, professor and associate dean of Carleton University’s department of public affairs.
Woolly said she believes students experience lower levels of financial literacy because funds like RSPs barely affect their current monetary needs.
“Some of the lack of financial literacy is because the literacy questions are asking people about things like RSPs, and you know what, it doesn’t matter that people don’t know about RSPs because you shouldn’t be investing in an RSP,” she said. “Don’t even think about it until your student loans are paid off.”
Jessie Park, a third-year Carleton journalism student, said she believes youth are often financially illiterate, because “we don’t think it’s as important as it really is.”
“When you are in university a lot of us aren’t paying for our own schooling, we’re still kind of in that high school mindset, but we’re going to be in the real world really soon, it is important for us to start learning how to manage our money,” she said.
Woolly said students should look into what gets people into trouble with money.
“You have to look at the basic structures of society that are causing people to get into financial trouble. That’s what matters,” she said.
