Financial Literacy Newsletter - November 2019

From: Financial Consumer Agency of Canada

Student showing her parents the budget calculator on a smart phone

Take charge of your finances this Financial Literacy Month!

A word from the Financial Literacy Month (FLM) team

Welcome to the special edition newsletter for the 9th annual FLM. The theme this year is:  Take charge of your finances!

As part of our celebrations throughout November and in the spirit of encouraging Canadians to take charge of their finances, we have unveiled our exciting new budgeting tool, the Budget Planner.

This new interactive tool allows Canadians to create a personalized budget that they can save and update online. It draws on behavioural research into how people make financial decisions, and uses personalized tips, guidelines and alerts to make budgeting easier. Its interactive features are designed to help consumers better identify their priorities, needs versus wants, where to cut expenses, and where to save. It also gives them next steps with suggestions and useful links, and allows them to compare their budget with those of other Canadians in similar life situations. Please give it a try and share it with your networks!

We just released Canadians and their money: Key findings from the 2019 Canadian Financial Capability Survey, which shows that many Canadians are actively taking charge of their finances by budgeting, paying down debt, as well as planning and saving for the future. The evidence shows that Canadians who budget are less likely to be falling behind on their financial commitments. They are also less likely to spend more than their monthly income or need to borrow for day-to-day expense because they are short on money.

We have also just released the full findings of an international survey in which Canada took part. The results of the Financial well-being in Canada survey identify some key behaviours that contribute to financial well-being. Specifically, Canadians who actively save and avoid borrowing for daily expenses have higher levels of financial well-being than those with the same income who don’t. So, take a look at the full report. It has a number of suggestions for practitioners to implement these findings in their work.

As you know, collaboration is a cornerstone of our work at FCAC when it comes to financial literacy, and FLM is all about working together to share information, resources, and best practices that will strengthen the financial literacy of Canadians. Learn more about Financial Literacy Month and consult our Canadian Financial Literacy Database to find FLM events, activities and resources from financial education providers across Canada.

As we near the end of FLM, we want to thank you for all your collaborative efforts!  But, let’s not restrict them to one month of the year. Let’s keep sharing and working together in the weeks and months ahead!

What’s new

Demystifying credit scores

By Julie Kuzmic, Director of Consumer Advocacy at Equifax Canada

Why do we have credit scores

Let’s start with the purpose of credit scores. They are intended to help financial risk managers and others make fair decisions on whether or not to “take a risk” on someone. The risk might involve giving that person a loan (will they repay it?), offering a credit card (will they make the payments?) or approving their apartment rental application (will they pay their rent?). Credit scores are designed to predict the likelihood that individuals will pay their bills on time. While your credit score is important, it is only one of several pieces of information an organization will use to determine your creditworthiness. For example, a mortgage lender would want to know your income as well as other information in addition to your credit score before it makes a decision.

What does it mean to have a high credit score

Credit scores range between 300 and 900 and are calculated using the information in your credit report. The higher the score, the more likely you are to pay your bills on time. Your score is not part of the data included on your credit report. Rather, it is calculated when needed.

What are some common misconceptions about credit scores

There are plenty of myths and misconceptions around credit scores, but two of the most common are that we each only have one credit score and that checking your credit history will lower your credit score. Here's why they're both not true.

Do we only have one credit score

Contrary to popular belief, there is not a single “standard” or “master” credit score version. Each credit bureau has multiple scoring algorithms and lenders typically request only one of them when making decisions. While all score versions have the same purpose (to predict the likelihood people will pay their bills), there are some differences in the calculations. The credit lending community uses different scoring models for different purposes. Even two versions of the same “risk assessment” score (such as the Equifax® proprietary model) can produce different results.  The different versions of the score calculation may use slightly different weightings for the factors involved in the calculation. Here’s an example of an individual’s credit scores, all calculated by different scoring algorithms on the same day: 741, 773, 814 and 831. Which one is correct? All of them!

Will checking my own credit history lower my credit score

Checking your credit history (often called a credit file or credit report) at least once a year is an important part of managing your personal finances. Not only is it helpful in spotting possible unexpected changes in your credit report over time; it can also help uncover identity theft or fraud. The vast majority of people will find everything is accurate, but it pays to know. Learn how to obtain your credit reports for free here.

When your credit history is accessed for any reason, the request for information is logged on your file as an inquiry. Certain types of inquiries may affect your score calculation, specifically those that are related to active credit seeking (such as applying for a new loan or credit card). Of course, not every new credit application is a sign of financial difficulty, and only a number of these inquiries, in combination with other warning signs on the credit report, might lead to a decline in a credit score.

Since the only type of inquiry on your credit report that can have an impact on your credit scores is an inquiry related to an application for credit, there is no impact when you obtain your own credit report or score. When you check your own credit history or obtain your own credit score, you are not applying for credit.

Why does my credit history matter

The rules that govern credit bureaus allow certain types of businesses to access your credit history. Many people are aware that credit reports and scores play a role in lending, however they can also be accessed by prospective employers, potential landlords, cell phone providers, insurance companies and others. Having no credit history or a poor credit history can make it harder for you to get credit, get a job or rent housing. A good credit history can help you qualify for lower interest rates, which can save you a lot of money in the long run.

For more information, the FCAC has a wealth of information on credit reports and scores as well as consumer credit rights and responsibilities.

Government of Canada can help you save for a child’s education

From Employment and Social Development Canada

Raising a child can be expensive and, for many families, saving for a child’s education can be a challenge. More than just the cost of tuition, there are also expenses for computers, books, transportation, tools and rent.

Young people need education and experience to prepare for the jobs of tomorrow. During Education Savings Week, the Government of Canada encourages you to learn more about Registered Education Savings Plans (RESPs) and the education savings incentives linked to RESPs that can help you save for a child’s post-secondary studies.

Anyone can open an RESP to save for a child’s education after high school: a parent, a grandparent, a family friend, a foster parent or a public primary caregiver. When you open an RESP, the Government of Canada can help with the costs related to a child’s post-secondary education. The Canada Learning Bond provides up to $2,000 in an RESP for an eligible child, and you do not have to contribute any money of your own for an eligible child to receive the Canada Learning Bond.

In addition, the Canada Education Savings Grant (CESG) will help make your RESP savings grow. Even if you put just a small amount of money into an RESP, the Government of Canada will add between 20% and 40% of your contribution for an eligible child, depending on family income and the amount contributed. The CESG is available until the calendar year in which the child turns 17, for a maximum lifetime amount of $7,200.

Finally, depending on where you live, there may also be provincial education savings incentives that are linked to RESPs.

How do I start

It’s never too late to start saving for a child’s education. Research suggests that saving even a small amount in an RESP can positively impact a child’s attitude towards their future.

To get started, make sure that you and the child each have a Social Insurance Number (SIN). To find out how to get one, go to Canada.ca/social-insurance-number, call 1-800-622-6232, or visit your nearest Service Canada Centre.

Then, make an appointment with a financial organization that offers RESPs. Bring the SINs for you and your child and tell them you would like to open a RESP and get the Canada Learning Bond and Canada Education Savings Grant for your child. 

To learn more, visit Canada.ca/education-savings, call 1 800 O-Canada (TTY 1-800-926-9105) or visit a Service Canada Centre

Teaching financial literacy in the workplace

From ABC Life Literacy

Financial literacy has been a hot topic for several years now, and schools across the country are beginning to integrate financial literacy programming into their curriculum. But while youth are improving their financial literacy skills at school, an important group of people who could benefit from financial education have been forgotten: adults in the workplace.

According to a survey by the Canadian Payroll Association, 78% of employees would be interested in obtaining financial education programming in the workplace with saving for the future and better budgeting being the two most popular topics. But perhaps most importantly, nearly half (43%) of all respondents said financial stress impacts their workplace performance. Poor financial well-being is a growing problem in the workplace, impacting performance, health and absenteeism rates.

A separate survey by Willis Towers Watson found that 23% of respondents identified themselves as struggling. Among that group, almost half said that worries about finances were preventing them from performing their best at work. Presenteeism is also an issue, with only 29% of the struggling group reporting they’re fully engaged at work compared to 42% of employees without money concerns.

More than 70% of this group also reported higher than average stress, while 33% said their health was poor and the rates of absenteeism were higher among struggling employees. Among the employees without financial concerns, only 36% said they were more stressed than average and 14% categorized their health as poor.

Stress related to financial well-being has a major impact on the workforce. When employees experience stress about their financial affairs, they may become less engaged and productive, making it harder for organizations to reach their goals.

Several recent reports have suggested that providing staff with financial wellness tools, education and resources will lead to less financial stress and better outcomes for the employee and for the organization. As well, investing in an employee’s career well-being through methods such as clear career paths, flexible work and compensation plans will enhance the chances of keeping employees, as well as attracting new ones.

While some companies are starting to offer programs to help employees address financial wellness, Canadian employers have only scratched the surface.

National literacy organization ABC Life Literacy Canada is hoping to change that by encouraging more employers to provide financial literacy training for their staff. The charity offers a free financial literacy program, entitled ABC Money Matters, available in English and French to employers, community groups and literacy organizations across the country.

ABC Money Matters’ core program offers four topics to choose from – spending plans, banking basics, borrowing money, and RESPs and savings. Host employers can choose to run workshops around any or all of the four topics. Each workshop offers training materials written in clear language for adult learners.

Research and evaluation findings from the program indicate that ABC Money Matters is well-positioned to support learners in building financial confidence and developing key money management skills that can advance their financial well-being, particularly with respect to saving regularly.

To sign your company up to host a workshop, or for more information, visit abcmoneymatters.ca.

FENNS: Creating connections to financially empower Nova Scotians

By Jenny Benson Pratt, Chair, FENNS

The Financial Empowerment Network of Nova Scotia’s (FENNS) participation in its second Financial Literacy Month (FLM) is a testament to the power of creating time and space to connect.

Established in October 2018, FENNS is working to raise the levels of financial empowerment and financial literacy across the province. The network is bringing together organizations that are working to increase financial empowerment and financial literacy, as well as organizations whose work is impacted by a lack of financial empowerment and financial literacy. These organizations represent a broad spectrum of public, private and non-profit sectors.

Individually, the organizations that make up FENNS have their own mandates, but collectively FENNS is working together to: 

  • Make existing financial resources more accessible
  • Identify gaps related to financial empowerment and financial literacy throughout the province
  • Cross-promote resources, events and programs
  • Share best practices
  • Consider complex issues in this area

In our busy world of targets and deliverables, it is challenging to justify carving two hours out of a morning to connect and talk, but that is exactly what we asked each of our prospective network partners to do last October and it worked.

The need for this network to be established was made clear at its inaugural meeting when, within the first 10 minutes of the meeting, network partners were already discovering and discussing new ways to collaborate to the benefit of Nova Scotians.

Our (then) 18 network partners worked together on our first collaborative initiative to promote FLM 2018. Activities included 5,300 students being reached by Junior Achievement Nova Scotia, 284 piggy banks being handed out to grade four students from Credit Counselling Services of Atlantic Canada Inc., and the YWCA Halifax reaching 98 newcomers in 13 communities to talk about financial literacy basics.

During tax time, FENNS partners collaborated to successfully participate in Super Clinics across the province hosted by the Community Volunteer Income Tax Program (CVITP). These five clinics allowed Nova Scotians to access multiple services at the same time, including filing income tax returns with CVITP, signing up for Canada Learning Bonds (CLB) and Social Insurance Numbers, and receiving information on Consumer Protection and Fraud Prevention. CLB is a very under-utilized program in our province. The Super Clinics registered approximately 750 eligible Nova Scotian children to receive the CLB, an investment of $1.5M in post-secondary education.

In September, the network met to learn about the behavioural aspects of financial empowerment and financial literacy and how behavioural insights can be applied to make our work in these areas more effective and impactful.

As the connections between network members grow and strengthen, so do the possibilities for our network.

We organized an event for students in Halifax on November 1st to kick off FLM 2019. Hosted by network partner PennyDrops at Dalhousie University, this event involved Credit Counselling Services of Atlantic Canada providing an informative session for students, which was complemented by information booths from other network partners.

Nine of the 28 FENNS partners represent the Nova Scotia Public Service and we decided to use FLM 2019 to launch internal initiatives that will strengthen the levels of financial literacy and financial empowerment internally for Nova Scotia Government employees. Throughout the month, there were three Lunch and Learn sessions for staff across government hosted by the Provincial Government Employees Credit Union and the Nova Scotia Securities Commission.

With conversations about our big plans for #FLM2019 and #TaxTimeNS, the strong engagement and collaborative energy being brought to the table is undeniable. FENNS is looking forward to seeing what it can accomplish by taking the time to connect and collaborate in year two.

New interactive home buyers’ road map: making home buying a little less stressful

From the Canadian Real Estate Association (CREA)

It’s no secret first-time home buyers can feel overwhelmed when they are first trying to enter the market. Let’s face it, for many, this is the biggest purchase of their lives and represents an exciting milestone to cross off the adulthood checklist.

To help make it easier for Canadians to become homeowners, we’re pleased to introduce a new consumer-focused resource: the Interactive Home Buyers’ Road Map.

Every journey needs careful planning to mitigate unwanted roadblocks or detours, and that’s why CREA created this interactive, mobile-friendly guide to complement its successful and informative Home Buyers’ Road Map.

The Interactive Home Buyers’ Road Map is now available online as part of Financial Literacy Month. Its purpose is to provide a simple, fun and educational experience to alleviate some of the stress associated with purchasing a home. It will help guide potential buyers through what they can afford, how to get pre-approved, information about often-overlooked costs (like lawyer or notary fees, property taxes and home inspections) and where to find a REALTOR® who will keep their best interests in mind.

Are you able to afford your dream home downtown? Do you need a starter home outside of the city? Should you invest in a fixer-upper? Is the home you’re looking at situated in a flood plain or is there future development planned in the area? These are all valid questions first-time home buyers should ask.

After navigating through the Road Map, potential buyers will have a better understanding of their journey and how to get to their final destination: the comfort of home.

The Road Map is a collaboration between CREA and the Financial Consumer Agency of Canada. It is available on CREA.ca.

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