Many Canadians' confidence about their financial knowledge is not consistent with their decisions and habits, according to a recent study by Loans Canada.
The study found inconsistencies between Canadians' perceived and actual financial literacy. Of the 67% who said they make informed decisions about their finances, close to half admitted that they are not tracking their expenses and spending habits.
Around two-thirds of these self-proclaimed financial literates said they do not pay credit card bills in full every month. And while saving is one of the crucial aspects of financial literacy, seven in 10 said they do not save on a regular basis.
"When tested on their financial behaviour and decision-making, their performance was not in line with their claims," said Cris Ravazzano, chief technical officer at Loans Canada.
The study also tackled how Canadians deal with debt. When faced with unexpected costs, nearly half of Canadians borrow multiple loans from several lenders, a practice called loan stacking.
This practice, the study said, results in multiple monthly payments and increases the risks of default and violation of loan terms.
Another worrying behaviour exhibited by around two in five Canadians is not comparing lenders before applying for a loan. In fact, 60% of borrowers surveyed in the study said they rarely call lenders before submitting their applications.
Credit education is critical in improving the financial health of credit-constrained borrowers, said Caitlin Wood said, chief editor at Loans Canada.
"Our findings show that many Canadian consumers still have a lot to learn when it comes to their financial health, and we feel that financial education plays a very important role in financial decision making. We will continue to make financial literacy a key component of our content strategy moving forward," she said.