Financial Literacy Newsletter – Special edition: Reporting on the Progress of the National Research Plan on Financial Literacy 2016-2018

From: Financial Consumer Agency of Canada

Unpacking financial literacy – Beyond the books!

A word from the Leader

Welcome to a special edition of the Financial Literacy Newsletter in honour of the release of a report on the progress of the National Research Plan on Financial Literacy 2016-2018, which I encourage you to read.

Some of the key findings included:

  • Canada ranks third globally on financial knowledge, attitudes and behaviour
  • Eighty-five percent of Canadians rate their financial knowledge as average or above, however, only 61 percent are able to answer five of seven (70 percent) of financial knowledge questions correctly
  • Money is the main source of stress for many Canadians
  • More than half of Canadian adults are interested in accessing financial education through their workplace
    • The most highly-sought programs are those that teach about how to plan and how to save
  • Indigenous Peoples face unique barriers to their financial well-being
    • These barriers need to be addressed in the design, delivery and measurement of financial literacy interventions
  • Financial knowledge on its own is not enough to lead to financially desirable behaviours
    • Financial confidence is a key complementary factor that contributes to financial behaviours and financial well-being
  • It is important for students to learn to manage money early in life
    • Students that have bank accounts and students who discuss money matters with their parents once or twice a week score better on a financial literacy assessment compared to their peers who do not
  • Targeted financial literacy interventions delivered through a mobile application increases knowledge and confidence related to budgeting among non-budgeters
    • These interventions also enable non-budgeters to begin budgeting

We at FCAC would love to hear your thoughts on the report. You can share them with me directly at, or connect with us on social media via our Facebook and Twitter accounts; we’re also on YouTube and LinkedIn. When you’re talking about the report on social media, please tag your posts with #FinLitResearch to help others follow the discussion.  I can’t wait to hear what you have to say!

This month I have some interesting articles to share with you on topics found in the National Research Plan including an innovative strategy for teaching children about money, and an interview with some researchers on the topics of financial literacy and financial well-being. If there is something in this newsletter that you like, please share it with your network.

As always, I encourage you to check out the various tools and resources that we have available on our website!

Jane Rooney

Financial Literacy Leader

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What’s new

FCAC resources

Mark your calendar

  • Find events the financial literacy community is participating in across Canada in the Canadian Financial Literacy Database (or submit your own)
  • November 26 to 27 is FCAC’s Research Symposium in Toronto

Classroom experiment: Virtual economy

We know from the report on the report on the National Research Plan on Financial Literacy that teaching children about money using experiential methods yield the best results. From a practical perspective, we wanted to provide a concrete example of how experiential methods are applied in classrooms within Canada and demonstrated the results achieved. In canvassing for inspirational stories about teaching children about how money works, we came across the story of the “virtual economy” created by Nichole Van Sickle of British Columbia, for her grade 6/7 class in 2013. She designed a working economy for her students where they could enjoy learning about finances. The project let them feel like grown-ups as they were getting a window into how the real financial world works.

Here’s the fascinating tale in her own words:

“I believe that financial literacy is so incredibly critical to our students' educational experience.

In one of my first years as a classroom teacher I read a great book by Rafe Esquith called “Teach Like Your Hair’s on Fire”. It had a chapter about the economics system that he used in his classroom and I thought the concept sounded excellent not only as a classroom management tool, but also as a means for keeping students engaged and excited about learning. It was also the first year after I got married; times were tough for my husband and me financially – paying off wedding, school and car debts – and I was keenly aware of how little financial knowledge I had as an adult. Thinking back on my own educational experience, I couldn’t remember learning much about money and budgeting at all in school, apart from one project in high school. 

Financial education is one of the most critical real-life concepts that should be taught in schools, and it seemed that it was slipping through the cracks. Debt is one of the leading causes of suicide and yet students are graduating all the time with very little financial knowledge. (Since I began my economics program back in 2012, B.C. has released a new curriculum which includes financial literacy across all grades.) My thought back in 2012 was that bringing an economics system into my classroom would be a way to begin introducing critical, real-life financial concepts in a fun, interactive way.

The chapter in Esquith’s book served as the foundation for my own classroom economy. Like Esquith, my students applied for various classroom “jobs”, were paid differing salaries on those jobs, and paid rent on their desks. Also like Esquith, my students could save up enough money to buy their desks and own them outright. They could also purchase other students’ desks and collect rent from them. In Esquith’s system, there were various bonuses students could earn and fines for which they could be penalized. Otherwise students could also spend their hard-earned cash at the end of the week during their weekly class auctions.

For both time and financial reasons, weekly auctions seemed unrealistic for my classroom (we do just two auctions per year – one mid-year and one in June), and I wanted to find a way to have a more frequent in-and-out flow of cash so that it truly felt like the kids were having to make hard, every day choices about how to spend their money.

I wanted to teach about budgeting so I came up with a budgeting plan that attempted to mirror the language of real-world budgets as much as possible. “Utilities” translated to leaving the classroom to get a drink of water (the “water” utility), and having to go to the bathroom during class time (the “sewage” utility). “Clothing” offered the option to wear a hat in class, Kanye West rapper glasses, or anything else slightly unusual and generally not allowed. “Food” was the option to eat snacks during class time, etc. Students would fill out a budget at the beginning of the month – one that encouraged both savings and giving to charity (needy peers who were low on cash) – and then would self-reflect at the end of each month on how well they stuck to their budgets.

Students were also given the opportunity to start their own businesses, which offered yet another venue for spending money. All kinds of businesses popped up, some of the most successful being duct-tape wallets (to store their classroom money and credit cards), candy/cookie/cupcake stores, and renting out a personal exercise ball for other students to sit on during class time.

It’s been very rewarding to see how the students help the project evolve. For example, in the first year, some students came up with the suggestion that we should have credit cards and brought in a digital card machine from a modern Monopoly game to show me. We purchased 5 Monopoly games and were then able to begin a credit card system in the classroom, all thanks to the students’ idea.

We also had some very motivated boys in the class one year who inspired me to allow students to purchase stocks. They followed the real stock market and were set up with “wealth managers” (two money-savvy students) who would give them risk assessments and suggestions for their portfolios. When we began our lesson on investments, one often disengaged student jumped out of his seat and yelled, “This is going to change my life!” He turned out to be one of our most successful investors.”

This fall, Ms. Van Sickle also plans to measure students’ financial knowledge at the end of the year and compare the results with initial levels of knowledge. This measure will complement the monthly self-reflections about budgeting that she currently incorporates into the program.

She hopes that the lessons her students learn from their year-long experiments with money carry into their adult lives. And that appears to be happening; one student’s mom even told her that the in-class activities (e.g., starting a business) were key in helping him to realize what career path he wanted to follow.

When asked for advice for anyone thinking of implementing a similar system in their own classrooms, Ms. Van Sickle stressed that consistency and follow-up are crucial. “If the teacher doesn’t take the system seriously, the students won’t either and it will fall apart. Also, go slowly. Don’t feel like you have to make an elaborate system right off the bat. It’s better for everyone (including the teacher) if you start small and let it grow organically, always involving the students in the process.”

In September, Ms. Van Sickle will be teaching much younger students in Grade 2, where the financial literacy objectives is that students learn about Canadian coins. She plans to implement a simplified version using cash only, along with several other modifications to help the children in her class learn more about dollars and cents.

If this project sounds familiar to you, it may be because at FCAC’s 2017 National Conference on Financial Literacy, Dr. J Michael Collins, University of Wisconsin, discussed the positive outcomes being generated by My Classroom Economy, a simulated economic system in which students are assigned jobs, earn dollars and make decisions about saving, spending and budgeting. This program was also inspired by Esquith’s book.

Students in My Classroom Economy (MCE) classrooms show consistent gains in financial knowledge, budgeting, financial socialization (i.e. talking to parents about money), and economic experience after 10 weeks. These effects range in size but are all statistically significant and positive. Overall, the results of this study are encouraging and highlight the promise of experiential learning programs like MCE for elementary school–age students.

  • Students who used MCE were more likely to have bank accounts and engage in money management behaviours outside of school
  • Parents of MCE students reported that their students were taught about money at school at much higher rates than the comparison group
  • Teachers reported high satisfaction with MCE, with 95% planning to continue using it

MCE appealed to teachers both as a classroom management system and as a financial education program. Teachers from a variety of backgrounds successfully implemented MCE.

Financial Literacy in a Box

In the summer of 2016, students at the Rotman School of Management, the University of Toronto's graduate business school, worked on developing a set of tools for the Behavioural Economics in Action at Rotman (BEAR) initiative on Financial Literacy in a Box (FLIB), which was one of the projects identified by the report on the National Research Plan on Financial Literacy.

The initiative emerged as the BEAR research centre focused on how information is presented to consumers and how the presentation of information influences consumers’ perception of that information, which ultimately influences their decision-making process. One area BEAR researchers focused on was how, in situations that seem complex, people often gravitate towards inaction, as the path of least resistance.

FLIB, which aims to simplify the decision-making process of certain financial decisions by providing a new set of tools to bridge the gap between knowledge and effective decision-making. The ultimate goal of FLIB is to ensure that financial education leads to better financial decisions.

FLIB does this in part by highlighting and reminding people, when they are making a financial choice, of what they have previously learned through financial education. This reminder increases their awareness of their financial options in a given situation, helping them make an informed decision.

The developers relied on a growing body of evidence that suggests education alone is not enough to improve the financial well-being of Canadians. The team incorporated approaches from the behavioural sciences, choice architecture, and design thinking.

Financial Literacy in a Box currently focuses on three areas: 

  • Compound interest: distilling a complex concept into a more easily-understood form
  • Education savings: increasing enrollments for the Registered Education Savings Plan (RESP)
  • Receiving retirement benefits: getting people to think about when is the optimal time to start receiving their Canada Pension Plan (CPP) income

By helping to raise knowledge and confidence about financial education and financial decision-making behaviours, the FLIB initiative empowers Canadians to face these important topics head-on throughout the different stages of their lives.

Visit the project page more information on Financial Literacy in a Box.

Financial literacy researcher in the field: Dr. David Rothwell

We often hear about the results of research into Financial Literacy, but rarely do we get to hear the stories of the people responsible for driving that research. Meet David Rothwell.

Dr. Rothwell is a professor at Oregon State University (and former professor at McGill University), who sits on the National Steering Committee on Financial Literacy’s Research Sub-Committee. (The National Steering Committee provides guidance and advice to the Financial Literacy Leader, Jane Rooney, and the Research Sub-Committee helps to inform that guidance, as they did with the report on the progress of the National Research Plan on Financial Literacy.)

A former social worker, Dr. Rothwell is primarily interested in the condition of poverty, viewing financial literacy or the broader term he prefers to use, “financial capability,” as a natural extension of that research. The scope of his research also includes: poverty measurement, social policies on poverty, income transfer, and the social welfare system related to poverty. Dr. Rothwell stresses that one step in addressing the condition of poverty is improving people’s financial capabilities.

Financial literacy refers to having the financial knowledge, confidence and skills to make informed financial decisions, whereas, “financial capability examines the opportunities that are available, including access to financial products and services, as we are trying to look at the person in the context.”

This kind of examination also includes contextual factors, such as characteristics of the economy, and social policies. For example, a common question addressed in international financial literacy surveys, goes along the lines of “if you were to have an unexpected emergency, could you come up with [XX dollars]?” And when you look across countries, there’s a lot of variation on this indicator. Dr. Rothwell’s research considers the cause of these differences in the context of people’s assets and their social conditions.

When asked what prompted his passion for financial literacy and his research into the condition of poverty, Dr. Rothwell answered that it all came down to “experiencing and observing social inequality in our society and thinking how can I, as a person, contribute to [a solution]? I really got interested in the research side of things and thought that that might be the best way that I could contribute to our understanding of these things and hopefully work towards reducing some of the inequalities that we see.”

Working on the subcommittee helped Dr. Rothwell see ways to improve the Canadian Financial Capability Survey. He says it’s also been a unique opportunity for him to help the graduate students working with him, and to provide valuable experience for emerging doctoral students, as they see how policymakers work.

For example, one of Rothwell’s students, Mohammad Khan, was invited to give a brief presentation on his research during FCAC’s Research Symposium that was held in November 2016.

Speaking about his work with the Research Sub-Committee, Dr. Rothwell added that “I’ve really enjoyed learning about people’s work, seeing how it relates to what we’re doing. It’s been rewarding as a researcher to be part of this process and sharing our perspective to shape the future directions of policy and research on financial literacy.”

Financial literacy researcher in the field: Mohammad Khan

We’ve just heard from Dr. David Rothwell, now it’s time to turn our attention to his doctoral student, Mohammad Khan. Join us as we take a quick tour into his passionate research on financial literacy.

Mohammed Khan is completing his PhD in social work, with a focus on poverty and social development. His research focuses primarily on the financial capability of Canadians, individuals, and families living on low incomes, while his dissertation looks at understanding how financial literacy and financial knowledge varies across age groups, income groups, and gender.

He explained how access to resources, are key factors in his research as he applies a social work lens to financial capability, financial knowledge and financial inclusion. “It’s not just individual things,” says Khan. “It’s structural as well. Financial inclusion, for example, includes access to financial services.”

Khan’s interest in alleviating poverty stems from his childhood. “I am from Bangladesh, and the area where I grew up had a lot of poverty…people used to die from poverty and starvation,” he shared. “And then, when I came to Canada to do my PhD, everything clicked and financial literacy, this was the word for what I was wanting to do, what I was missing.”

Published in two parts, Khan’s study uses data on financial literacy that spans more than two decades to piece together a comprehensive picture of financial literacy in Canada.

The first of Khan’s papers identifies gaps in Canadians’ financial knowledge, as well as their ability to assess their level of financial knowledge. For example, Khan discovered that older adults 65+ tend to overestimate their financial knowledge, a finding which could help explain vulnerability to financial fraud, exploitation, etc., and inform possible strategies to counter these issues.

In the second paper, Khan built up a measure of financial knowledge using items from the Canadian Financial Capability Survey (CFCS) and then selected data in the survey without a bias to specific income groups in order to find a standard measure to compare all income groups. He found that the low income group displayed a significantly lower level of financial knowledge than other groups, even with these corrections.

Khan’s study also held a surprising twist. In his own words, “it is the first study to suggest that there is no gender gap in financial knowledge in Canada.” He states this with the caveat that this finding applies to the general population of Canada, since culture has a large impact on financial confidence and financial knowledge, there might be a gender gap among immigrant communities due to lower or no exposure to household finances. Khan emphasizes that financial literacy interventions can make a difference, if they are done right.

“There are initiatives here in Canada for helping low income people,” he says. “These individuals may have a low level of financial knowledge, but it isn’t reflective of their capabilities. It reflects how they have less exposure to financial activities. When they do not have resources, just providing financial knowledge is not very useful, so it must be combined (with exposure to financial activities). Because when you combine opportunities and knowledge, something very beautiful can come of it.”

Watch this space: Blog posts by Jane Rooney, Canada’s Financial Literacy Leader

The Financial Consumer Agency of Canada and the Research Sub-Committee have been devoting a lot of energy into carrying out the National Research Plan. It should be no surprise, therefore, to find that we have so much to share with you that it can’t be contained in a single newsletter.

Jane Rooney, Canada’s Financial Literacy Leader, has been providing weekly updates on her blog since the release of the National Research Plan. Read along for a recap, and watch as she goes into further detail about the findings of studies undertaken as part of the Plan.

Here’s a quick recap of the blog posts (click through to read more!):

1. Making an impact: Results of the National Research Plan

Two years ago, a distinguished group of research experts was appointed to our first Research Sub-Committee at FCAC. Their task was to work in collaboration with other stakeholders on research-related matters while advising me and my National Steering Committee.

I was very proud to work with the sub-committee to advance research efforts in the financial literacy domain. Now that its mandate has come to a close, I wanted to use this space to update you about the phenomenal progress its members have made toward the goals of its National Research Plan for Financial Literacy 2016-2018.

2. A baseline for financial literacy research in Canada: the importance of confidence

Confidence matters when it comes to financial literacy. That’s the takeaway of today’s post, in which I will highlight some of the exciting findings in the Progress Report: Canada’s National Research Plan on Financial Literacy 2016-2018, which we released last week.

3. A nudge in a new direction: behavioural economics and financial literacy

How do we change behaviour for the better? It’s a question that has preoccupied many researchers for a long time. One thing we know: it’s not easy.

The field of behavioural economics recognizes that humans don’t always act in rational ways, but are influenced by so-called “behavioural biases.” This means that the way people act depends on the situation and the context. Today we are learning more about the field of behavioural economics and how it can provide useful insights about how people will behave in a given context. Those insights can inform the design of better financial literacy programs and interventions.

4. How far we’ve come and what’s next: an interview with Dilip Soman

In this blog post, Jane is going to share a conversation with a member of the sub-committee, Dilip Soman, who was recently named as the Canada Research Chair in Behavioural Science and Economics. She asked him to gauge our progress to date and give a taste of where we need to go from here

You can also follow us on our Facebook and Twitter accounts to hear when new blog posts go live.

Happy reading!

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The Financial Consumer Agency of Canada's newsletter showcases financial literacy initiatives taking place across Canada, in order to promote best practices and spark new initiatives or partnerships that will bring us closer to a more financially literate Canada. 

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