November 19, 2014
Edmonton, Alberta
Thank you and good evening. Thank you to Money Mentors for inviting me to speak today. This is a great opportunity for me to reach out to a group of Canadians with a passion for learning about finance, learning about money and how to make their financial futures more secure and prosperous.
I’m very pleased to see Money Mentors once again playing such an active role during Financial Literacy Month, which is a great time for Canadians to renew their learning about financial matters. One of my main messages tonight is that learning and dialogue about financial literacy needs to take place between all Canadians— including individuals as well as the public, private and non-profit sectors.
The Financial Consumer Agency of Canada, or F-C-A-C, has a central role to play in the Government of Canada’s support for financial literacy.
Our mandate is, first — ensuring that federal financial institutions in Canada comply with consumer protection measures set out in legislation; and second — promoting financial education and raising consumers’ awareness of their rights and responsibilities.
We appointed a Financial Literacy Leader, in April 2014, to coordinate and collaborate with all sectors in Canadian society to provide people with the support they need to learn about the financial issues that affect them at every stage of life.
As you all know, different stages of life involve different types of decisions. This is why financial literacy involves life-long learning. Truly, you are never too young or too old to increase your knowledge, skills and confidence on money matters and financial issues.
Today, I would like to speak to you about our shared responsibility to achieve a higher level of financial literacy as a nation — this will help ensure the financial well-being of Canadians and the overall strength and stability of our economy. First, I will outline some of the current issues we face and where we stand in terms of financial literacy. Second, I will talk about collaboration, and how our efforts depend greatly on coordinating and collaborating with other individuals and groups involved in financial education. Third, I will point out some of the concrete actions being taken by government, private sector and non-profit organizations as we work toward our common goal of strengthening financial literacy. And finally, I will discuss some practical steps you can take in your lives, and point you in the direction of further resources and support.
To begin, I’d like to remind everyone where our efforts began — because the current focus on financial literacy did not emerge overnight.
More than any other single event, it was the 2008 financial crisis that heightened the importance of financial literacy issues in Canada. It was a watershed moment, and showed us that — along with many other issues — people’s lack of understanding of financial products and services, and personal financial management skills, needed to be addressed.
Among the Government of Canada’s many responses to this financial turbulence was the creation of the Taskforce on Financial Literacy in 2009, and the fielding of the Canadian Financial Capability Survey that same year.
This survey, the C-F-C-S, was carried out again earlier this year, allowing us to see changes and trends over the past five years.
The C-F-C-S tests people’s financial acumen in five areas – ‘making ends meet,’ ‘keeping track’, ‘planning ahead,’ ‘choosing products,’ and ‘staying informed’ of new products and services.
In 2009, the Survey found that nearly half of Canadians have not taken that first step toward personal financial management: making a household budget. More than half of Canadians ages 18 to 29, as well as the majority over 70, do not have a budget.
Worse, nearly a third of Canadians were struggling to keep up with bills and financial commitments. And of those Canadians planning to purchase a home, 48 percent had saved less than 5 percent of the cost, and 67 percent had saved less than 10 percent of the cost.
The Survey found evidence that Canadians lack financial knowledge. For example, 52 percent of Canadians planning to purchase a home were not expecting to incur any costs other than the down payment. Only 40 percent of Canadians had a good idea of how much money they needed to save to maintain their desired standard of living in retirement.
Now, what about the 2014 results? Well, there has been some slight improvement in some areas, but we’ve slipped back in others. About 3 out of 10 Canadians are struggling to meet their bills and payments. More than 6 out of 10 Canadian adults rate their financial knowledge poorly, and nearly six out of ten adults do not have a good idea how much money they need to save to maintain their desired standard of living in retirement. This indicates there is still an ongoing need for financial literacy initiatives.
The lack of knowledge is reflected in the sobering statistics regarding the record levels of consumer debt and low savings rates in Canadian households. I won’t go into the statistics, but from your own lives and those of family and friends, I’m sure you’ve heard many stories of debt worries and problems, and perhaps even personal bankruptcies.
My goal is not to shock or scare people. Despite the high number of Canadians reporting low financial knowledge, there is nonetheless cause for optimism and hope. Many Canadians are addressing their financial literacy — and your presence here today shows that you have an interest in confirming your understanding of personal financial management.
There is a consensus and momentum building across Canadian society — from school halls to the halls of government — that financial literacy should be considered as fundamental to a good quality of life as basic numeracy and literacy. We believe financial literacy accompanied by a sound consumer protection framework will contribute to a prosperous Canadian economy.
This brings me to the next section of my address, which is to further introduce the steps being taken, by the Financial Consumer Agency of Canada and others, to support financial literacy in Canada.
First, we are developing a national strategy for financial literacy. This involves collaborating with organizations and individuals interested in advancing financial literacy, and coordinating initiatives that strengthen the financial literacy of Canadians.
There are many groups — public, private and non-profit — making great progress in the area of financial education. FCAC is working with them to ensure that efforts are coordinated, resources are used and promoted widely, tools are shared and the impact of programs is properly understood, measured and disseminated to a wide audience.
We have been gathering input for a national strategy for financial literacy from many Canadians, thanks to online public consultations and stakeholder meetings. Two rounds of consultations have already been held — the first on seniors, the second on priority groups including Canadians with low incomes, people with disabilities, newcomers to Canada and Aboriginal Canadians. Online consultations for the priority groups will continue until December 10. The third round, on youth and adults, began as part of our national conference on financial literacy in early November and will continue until the end of December.
The consultations have already provided excellent feedback. We released Strengthening Seniors’ Financial Literacy, the first component of the national strategy, in mid-October. After we complete the remaining consultations and analyze the full results of the 2014 Canadian Financial Capability Survey, we will be ready to finalize, publish and start to implement a complete national strategy in 2015.
We have also appointed a National Steering Committee on Financial Literacy, with members who boast in impressive track record in financial education. They will act as champions for the strategy and in many cases will launch or oversee their own initiatives to engage Canadians.
FCAC is also playing a direct role with its own initiatives. Here, I’d like to play a short video that introduces our latest product.
[PLAY VIDEO]
I think that gentlemen does portray the stress some people feel about money matters. We want to lower that stress, and having a one-stop shop of information and resources is an important part of our overall effort. I hope you will all visit the database at the FCAC website to find the tools and resources available to Canadians from organizations across the country.
Other government agencies are playing their part as well. For example, Service Canada’s newly redesigned Canadian Retirement Income Calculator is another excellent tool that adds to our national efforts to provide Canadians with the knowledge, skills and confidence they need to address their financial concerns. This online retirement planning tool shows you how small changes in savings and financial behaviour can have a significant result later in life.
In the private and non-profit sectors, Credit Education Week (November 10-14) and Financial Planning Week (November 16-22) saw Money Mentors joined by organizations like Credit Canada Debt Solutions, Capital One, the Financial Planning Standards Council, the major banks and many others — all of whom hosted or participated in events geared toward helping Canadians take control of their financial futures.
I hope many of you participated in some of these events. If not, I’ll remind you once again to visit the Canadian Financial Literacy Database at itpaystoknow.gc.ca to search for activities or resources relevant to you. The same website has a self-assessment quiz to help you get started in identifying areas you may need to focus on.
I’d like to speak now on some of the specific steps you can take to gain control of your finances. I mentioned the five areas tested by the Canadian Financial Capability Survey, and how Canadians as a group have tested lower than desired in these areas.
The first area was ‘Making ends meet’ — which put simply means ensuring you are always spending less than you earn. Keeping a proper budget will be important here, but I believe the number one issue of concern for Canadians in this area is managing debt.
The FCAC website has some useful tips that will help you manage your debt, such as:
- Try to pay off your debts with the highest interest rates first, such as credit card debt.
- Use FCAC’s Credit card payment calculator tool to see if there is a way to pay off your credit card debt faster.
- Aim to pay your credit card balance in full every month. If you can’t, always make at least the minimum payment.
- If you have high-interest loans, consider consolidating them into a low rate option.
- If you are having trouble managing your debt, stop using your credit cards and other credit products until you have reached your debt repayment goal.
The second area to focus on is ‘budgeting wisely.’ As mentioned, many Canadians do not keep a basic monthly budget. This important step must be taken.
- Go online to FCAC’s website and download a simple budget sheet or obtain other budgeting resources.
- Record all of your spending, no matter how small. You’ll be surprised how some small expenses add up — the much-used example here is the long-term cost of a single cup of coffee purchased daily outside the home.
- When you can line up all of the items you spend money on in a typical month, use that list to identify your needs and wants. Almost everyone will find ‘wants’ that they can strike off their budget.
The third area is ‘planning ahead’, which means putting a long-term plan into action.
For Canadians in the workforce, always ensure you understand and are taking full advantage of possible employer matching of retirements savings. Learn about and use the tax-free savings plans available to all Canadians. There are important differences between traditional RRSPs and Tax-Free Savings Accounts, for example, and everyone should educate themselves on these differences.
For those in or approaching retirement, financial planning, including estate planning, becomes even more important. FCAC offers unbiased, third-party information.
If you decide to use the services of an experienced, accredited financial planner, FCAC offers a checklist of questions to ask and tips on how to choose a financial professional who meets your needs.
A fourth area to focus on is ‘choosing products carefully’ — which means understanding the terms and conditions of all financial products you purchase.
Choose products that have appropriate costs and benefits for your lifestyle and income level. Avoid high-cost services and products that don’t add value to your life and may hurt your bottom line. Comparison shopping for financial services is easier than you think — for example, the FCAC website has a credit card tool that allows you to compare among the hundreds of cards available in Canada.
Finally, stay informed of the financial world, including new products and services, or new government benefits or programs that may apply to you. Seek out third-party sources of information, and use neutral, third-party websites for your research. Sign up to receive information and posts from your favorite blogs or social media sites focused on personal finance issues. FCAC’s twitter handle in @FCACan and we are also on Facebook.
If you take these steps, you can take control of your financial future. Arming yourself with knowledge is the first step, after which comes the more difficult step of changing behaviour. For all of us, keeping within a budget and avoiding unnecessary expenses is a challenge. But it can be done.
Research shows that, if financial education is tied to relevant life events, it does help people make more informed financial decisions — such as preparing for retirement or saving for a child’s education. One British Columbia Securities Commission study shows that kids who have had financial literacy training do better with decision making overall.
FCAC’s engagement with consumers has shown us that many people view financial products like insurance and investment vehicles as very complicated. And because people’s needs change as they move through different life stages, they need to learn how to assess and choose different financial products. In other words, lifelong learning is key to making the right financial decisions for yourself at every life stage and transition.
The help and support you need is out there. Please take advantage of FCAC’s resources and the hundreds of resources from organisations from across the country that are found in the Canadian Financial Literacy Database, visit our website, or seek out non-profit organizations such as Money Mentors for additional assessments, coaching or support.
Financial literacy is a life-long journey. Making a commitment to improving your financial knowledge, skills and confidence will reap many rewards throughout your life, helping to ensure the financial stability and well-being of your family, community and wider Canadian economy.
I hope I have provided some positive reinforcement of the financial literacy message. FCAC is always open to feedback from consumers, and if you ever need additional tips and information to better manage your personal finances, we have a consumer services call centre in addition to our informative website.
Thank you for your kind attention.
