An article[1] from the Urban Institute profiled a young woman who “…gave up on her local bank five years ago” and now relies exclusively on store front cheque cashing companies (such as payday loan companies).  Her “bank account” is a pre-paid or re-loadable debit card.  She admits that she sees no need to ever use a bank again.  These less traditional money stores are more accessible to her and offer lower service fees than do traditional banks.  This approach takes living pay-cheque-to –pay-cheque to a whole new level.  Unfortunately, based on the information provided in the article, these non-traditional money exchangers and lenders are increasingly used, by low income earners and surprisingly also used by those earning $50,000 annually.

Living literally paycheque to paycheque provides no cushion or contingency for life’s surprises.  Not only are there no savings to rely upon, but future opportunities are limited because no credit history is built.  Alternative income sources such as pawn shops can only be tapped into as long as the flow of personal saleable goods is available for pawning.  Most alarming is the lack of financial experience and knowledge of these individuals.  Younger individuals’ financial preparation for adulthood would be insufficient and increase their vulnerability to a lifetime of financial instability and stress.

In his 2011 article, Jonathan Chevreau noted the effects of financial illiteracy for seniors and their “…failure to take free money when it’s available”.  The article referenced findings from the Canadian Task Force on Financial Literacy of $1 billion in unclaimed Old Age Security (OAS) entitlements.  This is a high personal price to pay for low financial knowledge.

Other research has found that those most likely to be unprepared for retirement are those with the least financial knowledge[2].  In an era where financial risk is increasingly the responsibility of the individual as entitlements such as defined benefit pension plans disappear, personal financial literacy needs to improve…dramatically.  Otherwise, as the research authors go on to explain, society pays for the problems of those financially illiterate through increased need for government welfare benefits and other social supports.

Financial literacy needs to be a priority at all ages and stages of life, providing:

  1. techniques to stay out of financial trouble;
  2. preparation for future needs ranging from living on one’s own through to retirement;
  3. resourcefulness to recover from financial troubles should they arise;
  4. access to eligible financial entitlements.


[2] Lusardi, A. & Mitchell, O.S. (2011).  Financial literacy and retirement planning in the United States.  Pension, Economics & Finance(10), 509-525.