A recent CGA-Canada survey revealed that more than half of the respondents had no idea how much interest they were paying on their credit card balances, with many mistakenly believing it to be around 3-4%, similar to the prime rate.
This is a startling revelation. While not everyone may know the exact percentage, it’s concerning that so many people don’t even check their statements to see what interest they’re paying. This ignorance suggests that many Canadians are paying interest without much thought.
This lack of basic financial knowledge is troubling and could easily lead Canada down the same path to financial disaster that the U.S. experienced during the 2008 economic meltdown.
In response, the Canadian government has introduced new rules requiring credit card companies to provide detailed information about balance repayment on every statement. These statements now include specific details about how long it will take to pay off the balance if only minimum payments are made.
It’s baffling why our education system doesn’t focus more on teaching basic finance and budgeting. Equipping high school students with personal finance skills could help them avoid costly mistakes later in life. Financial literacy is a crucial step towards reducing our national dependence on debt and curbing the habit of spending beyond our means.
Teaching financial responsibility early in life is essential. We need our kids to develop the right financial habits and attitudes so they’re prepared for the real world when they become adults and start families.
A whole generation, influenced by banks and credit card companies, has grown up believing that the money they spend on credit cards is their own. The mentality of “buy now, worry about paying later” has become all too common.
One of the fundamental lessons we must teach every teen and young adult is the difference between a debit card and a credit card. With a debit card, you spend your money; with a credit card, you spend someone else’s money and must pay it back with interest. You likely know this already, but are you treating your cards accordingly? Do you find yourself using your credit card more often to earn points, only to forget to pay it off and accumulate interest?
Living beyond our means, fueled by credit cards and mortgage refinancing, can only last so long. Eventually, the debt must be repaid, and often with hefty interest. If the idea of paying back borrowed money doesn’t concern you, consider the additional burden of accrued interest.
Not everyone who falls into debt is financially illiterate. Some fully understand how credit cards and borrowing work but are caught up in the culture of instant gratification. This desire for immediate satisfaction, regardless of affordability, may be even more dangerous than financial ignorance.
It’s time to grow up and take control of your finances. And while you’re at it, help educate your family and friends too. They’ll thank you later in life!