While Canadians’ real net worth more than doubled between 1990 and 2024 to a household average of $415,000, that hasn’t been accompanied by gains in financial literacy, according to a commentary published this week by the C.D. Howe Institute that suggests advances in AI could help close the gap.
At the same time, financial decisions have become more complex as fewer Canadians have workplace retirement plans to rely on, making private savings more important. That’s especially so in light of longer lifespans, report the authors, Pierre-Carl Michaud and Bernard Morency in Learning to Fly: Howe Canadians Navigate a More Complex Financial Landscape.
A major sign of Canadians’ lack of financial literacy is their knowledge gaps around registered accounts and the tax advantages of RRSPs versus TFSAs, as reported in the Retirement Savings Institute’s RSI Index data from 2021-2024.
“Understanding of the tax treatment of contributions, returns, and withdrawals is limited,” Michaud and Morency wrote. “Many believe there are penalties for withdrawing from RRSPs and TFSAs early. Most do not understand how future contribution rights work.”
The RSI asks simple questions covering key dimensions of financial literacy — such as compound interest, purchasing power (inflation), the relationship between bond values and interest rates, compound interest on debt, risk diversification and mortgages.
The authors note that less than 26% of working-age respondents are able to answer more than half the questions correctly — and that such ignorance can be costly.
“The wrong choice of savings vehicle, depending on marginal tax rates, can severely impact the net rate of return on savings.”
AI (plus advisors) to the rescue
Consumers who want to educate themselves on household and retirement finances are left mostly on their own to “navigate a patchwork of tools gathered across the internet, often coming from financial institutions themselves,” Michaud and Morency write.
But they see potential in AI to help increase financial literacy and arm Canadians with the knowledge they need to make better decisions, when they need it.
Conversational chatbots have the potential to provide education and customize feedback to an individual’s circumstances. The authors also suggest regulatory bodies or professional organizations like FP Canada, which educates and certifies financial planners, could develop tools using large language models (LLMs) “trained on the expertise of certified advisors.”
“Access to such an LLM could then be made free to the public and promoted at key life stages, since many consumers simply don’t know what they don’t know,” the authors write. “One avenue would be for the [Financial Consumer Agency of Canada] FCAC, along with provincial financial services regulators, to build and host those tools and promote their use or mandate financial institutions to inform their customers about their existence.”
This avenue isn’t risk-free, however, for financial or other organizations, or for consumers. The authors note that LLM-based tools whether publicly available or privately trained are prone to hallucinations.
“Two-step validation of advice provided by AI, where an advisor verifies the advice, is a safer bet,” they write. “This may also help rein in other forms of implicit bias due to stereotypes or other social constructs in AI recommendations. In the end, advisors should be responsible for the advice provided.”
In response to a request for comment on the C.D. Howe paper, FP Canada said it has “no plans at this time to develop or invest in technology solutions around AI-created advice.”
However, it did note that it recently formed a Fintellect task force with the Institute of Financial Planning to explore how technology is impacting financial planning.
“One area of our research is around how technology can be leveraged to enhance access to financial planning,” it said in an emailed statement. “An important point to underscore in this work is that financial planning is an intensely personal relationship between a professional financial planner and their client, and while technologies such as AI can be leveraged to support that relationship, the human element of planning is vital to driving positive client outcomes.”
As part of the Fintellect Initiative, FP Canada is developing the first fintech code of standards for solution providers, expected to be published in early 2026. The code will “provide guidance on how fintech companies can incorporate into their technology solutions principles of professional excellence and ethics that are consistent with the professional standards set by the FP Canada Standards Council,” it said.
Government’s role
Michaud and Morency note that the government has a crucial part to play in facilitating retirement planning and financial literacy solutions for Canadians. First, it needs to provide clear regulatory guidelines for the financial services sector on how AI can be used, and put guardrails in place to ensure privacy and other protections.
They also argue the government needs to put someone in charge of this push combining policy and education around household finances and retirement savings.
For example, they say, public pensions are fragmented, with CPP’s independent investment board, the Office of the Chief Actuary and Employment and Social Development Canada — which manages OAS and GIS — all playing separate roles.
“No one is really responsible for assessing how changes to employer pension plans are affecting the retirement income prospects of future retirees, nor for monitoring how RRSPs and TFSAs complement retirement incomes.”
A July paper by Kathryn Bush, a senior fellow C.D. Howe, called for a pension dashboard that could help Canadians more easily gauge their retirement income by collecting data about their entitlements and savings in one place.