A conversation with Ruth Stephen, Director of FCAC’s Behavioural Finance Lab

How does the Behavioural Finance Lab contribute to strengthening financial literacy and protecting financial consumers?

The Behavioural Finance Lab is the division of FCAC’s Research, Policy and Education Branch that leads the development and measurement of the National Financial Literacy Strategy, which brings stakeholders together around specific priorities to strengthen the financial resilience of consumers. At its core, the work of the Behavioural Finance Lab is about understanding how consumers are making financial decisions, and developing interventions and digital tools using behavioural science techniques to influence them to make better financial decisions. It’s important work, because financial literacy is having the knowledge, skills and confidence to make good financial decisions. Our experiments and interventions have reached over 700,000 consumers, and our digital tools are accessed 4.5 million times per year. It’s an efficient way of achieving the Agency’s mandate of strengthening the financial literacy of Canadians because we are having a direct impact on that end goal of better decision-making.

Can you describe some findings from a recent experiment that will help Canadians make better financial decisions?

One third of the financial literacy gender gap is due to women having lower financial confidence than men. We recently collaborated with Carleton University on a study to strengthen the financial confidence of young women. We tested the impact of “social norming” [the informal rules that govern behaviour in groups and societies] and sharing on financial confidence. We asked a group of young women to share a time in their life where they made a good financial decision and felt confident. We also asked them to look up a new financial term and explain it to others in their own words. The second (control) group wasn’t asked to engage in any activity. We then looked at the difference in outcomes between the groups. By the end of the study, the first group had higher financial confidence than the control group, even up to 1 month later. They also experienced decreased financial worries and increased engagement in financial behaviours like paying off bills. But what was really interesting is that the young women who were in the control group, who only took the pre- and post-study survey about their finances, also experienced small but significant increases in financial confidence and behaviours and decreases in financial worries. This suggests that the mere action of reflecting on one's finances and being exposed to information about financial behaviours can have positive effects on one's financial confidence and financial behaviours.

How can these research insights be leveraged on a wider scale? 

The next step is to look for ways to scale up our interventions. We presented our research findings at various conferences and financial institutions and companies that deliver financial knowledge workshops expressed their interest in integrating our behavioural insights into their programming, to strengthen their positive impact and outcomes. The insights from the experiment have also benefited FCAC, by providing evidence for the effectiveness of the upcoming Financial Literacy Month “Talk Money” campaign in November.

What are some other ways behavioural research insights have tangibly benefitted financial consumers?

We use behavioural insights to develop practical and unbiased digital tools and resources that help consumers make better financial decisions. For example, FCAC’s free Budget Planner tool shows how your personal expenses line up with those of Canadians who are in a similar financial situation. The tool provides a little “nudge,” because social norming can influence behaviour. We have also embedded behavioural nudges like colour coding in the budget planner, so that when people see certain colours, they think, “Oh, I should pay attention to this. If something is red, I should improve in that area; maybe my expenses are exceeding my income.”

The Behavioural Finance Lab recently launched a new digital platform. Why is the Research and Data Exchange an important initiative for FCAC?

I am so excited about this initiative! Our goal with the Research and Data Exchange (RDX) platform is to share FCAC’s financial literacy and well-being data in a more interactive and dynamic way. We are providing reliable data so that stakeholders can produce more research on how Canadians are faring, with the ultimate aim of improving our policies, programs and interventions in order to meet the diverse needs of Canada’s population.

The RDX platform is being released in phases. What might excite financial ecosystem stakeholders in phase 1?

In phase 1, we are releasing interactive dashboards that share data on the financial well-being of Canadians in a more dynamic way. The National Financial Literacy Strategy dashboard provides a streamlined and user-friendly platform for tracking the progress of stakeholders in fulfilling the priorities of the National Strategy. We recently released the Canadians’ financial well-being dashboard, which shares the results from our monthly survey on Canadians' financial management and well-being. We are currently developing the Canadian Financial Capabilities Survey dashboard, to share data on Canadians’ knowledge, abilities and behaviours as they relate to longer-term financial decisions, like retirement planning. These dashboards don’t just report on the findings in a readable format. They enable a more dynamic understanding of the data by providing many different filters for exploring the data. For example, if someone wants to look at the proportion of the population that has emergency savings to last 3 months, they can look at those data by age, gender, income, or province. The dashboards report key insights in a way that's much more user-friendly. The RDX platform makes it quick and easy for stakeholders to go to the dashboard, get insights, and integrate them into their work.

What will phase 2 of the RDX platform involve?

Phase 2 will introduce a new function to the platform which will help match researchers with industry and community organizations working on financial well-being projects. For example, a community organization that wants to develop an intervention that helps their clients repay their credit card debt will be able to go to the RDX collaboration portal to get matched with a researcher with expertise in designing those types of interventions. FCAC has always played a central role connecting stakeholders, and we have seen a lot of impactful partnerships as a result. The collaboration portal will be an efficient way to foster that synergy and bring the ecosystem together to help advance financial well-being and resilience.

How can the RDX platform benefit smaller organizations that don’t have research capacity?

I love this question, because that's one of the key reasons we built the platform. Bigger organizations can request FCAC’s anonymized datasets because they tend to have the internal capacity to analyze them. However, many community organizations don't have that capacity, so we are providing them with data where we’ve done all the back-end work, slicing and dicing the different demographics aligned with the survey questions, so they're able to see immediate insights on their screen. The collaboration portal will also help smaller organizations expand their networks and their reach. And phase 3 of the RDX platform will also include a portal where researchers can profile their research, which will help bring extra visibility to the work of smaller organizations. 

What’s one action you would like stakeholders to take right now to help amplify the impact of the RDX platform?

Check out the Research and Data Exchange! Your insights and feedback will help us improve and expand its impact. And please share it with your community and others in the financial ecosystem who can benefit from insights on the financial well-being of Canadians.

Your work as Director of the Behavioural Finance Lab immerses you in behavioural finance insights. Has this led to any personal finance “a-ha” moments?

After seeing the research findings that show that talking about money increases financial confidence, I realized that I was very fortunate in my childhood: we didn't have a ton of money, but oh, we talked about money openly. Even as children, we were included in budgeting activities, such as shopping for the best prices on household items. There were financial worries, but I was taught the importance of planning, stewardship, and having a savings mindset. I was also taught the value of generosity, and that money can be used to have a positive impact on others. I remember being fascinated with math, science and research at an early age. I loved watching the show “Street Cents” and learning new ways to be a smart consumer. Today, I'm grateful that I have the opportunity to integrate these interests and skills to improve the financial well-being of Canadians. It’s like everything has come full circle. I also love working with our stakeholders; everyone in this space is so passionate about improving the financial health of Canadians!