Budget Aims to Boost Financial Literacy

By Cindy Chan, Epoch Times
February 5, 2009 1:33 am Last Updated: October 1, 2015 10:15 pm

In the 2009 federal budget the government committed $5 million toward a task force to develop a national strategy aimed at improving the financial literacy of Canadians. (Photos.com)
In the 2009 federal budget the government committed $5 million toward a task force to develop a national strategy aimed at improving the financial literacy of Canadians. (Photos.com)
A year and a half ago, Jenny’s husband used to look after all the household finances and Jenny, a stay-at-home mom with a three-year-old son, knew little about financial matters.

Then the Vancouver resident decided to take a money skills course advertised at her local family centre.

Since then, Jenny, 32, and her husband work as a team to make plans and set goals. Every month they review their financial statements together to see whether they are living within their budget.

“Together we make a better team than putting the whole burden on him to set our goals and take care of our money matters,” said Jenny, who preferred using her first name only.

They’ve become more credit savvy, eliminated their debt, reduced their banking fees, and started saving for an emergency fund.

This has become especially important since Kodak, where Jenny’s husband works, announced last week that it expects to lay off at least 3,500 employees in its worldwide workforce in 2009.

“My ears tend to perk up now certainly way more about financial news than before. That’s helpful so that I am aware of when there are some changes and you can further ask questions, whether it’s to a financial planner or looking online to get more information,” Jenny said.

With greater confidence and the basics under her belt, she is starting another course on money this week, called Women and Wealth.

Jenny credits this to Money Skills, a four-week financial literacy program that she took through Family Services of Greater Vancouver (FSGV), a non-profit community-based organization that offered the course free to the public.

When last week’s federal budget announced the creation of “an independent task force to make recommendations on a cohesive national strategy on financial literacy,” Jenny called it “fabulous.”

The budget described financial literacy as “an important life skill,” defining it as “the ability to understand personal and broader financial matters, apply that knowledge and assume responsibility for one’s financial decisions.”

“I think every Canadian would value reviewing some of the concepts that were brought up in the course,” Jenny said, especially those “in a high-credit spending situation and living above their means.”

‘An ongoing process and continuum’

Casey Cosgrove is director of Financial Literacy Initiatives at Social and Enterprise Development Innovations (SEDI), a national non-profit organization that helps low-income Canadians reach self-sufficiency through financial literacy, asset building, and entrepreneurship.

SEDI called on the federal government last September to create a task force to develop a national strategy for financial literacy.

In November, SEDI launched the Canadian Centre for Financial Literacy, an initiative that aims to partner with businesses, governments, and communities to help low-income people, who include over 4.7 million Canadians according to Statistics Canada.

The budget announcement “is a terrific start,” said Mr. Cosgrove, who heads the centre.

Financial literacy “is an ongoing process and continuum” that would benefit all Canadians, not only those on low-income, he said. “There are always changes, new products, new services, and new benefits available, whether they be government benefits or tax benefits like the Tax-Free Savings Accounts that are there now.”

There is an abundance of information available on topics such as budgeting, credit, debt, insurance, investment, and saving for home ownership, post-secondary education, lifelong learning, and retirement. A great deal, however, is associated with selling a product or service. Meanwhile, the government is increasingly using the complex tax system to deliver social benefits.

The challenge is to educate the public to keep up to date and make informed choices based on their own circumstances.

“It’s a very complex environment even for the most knowledgeable people,” said Mr. Cosgrove.

Meanwhile, the centre’s January newsletter cites a recent survey indicating that one in five Canadians spend beyond their means. It also echoed the view of many analysts that lack of financial knowledge contributed to the U.S. mortgage crisis where people took loans they could not afford.

The U.S. President’s Advisory Council on Financial Literacy published its first annual report last month. In the news release, Council Chairman Charles Schwab noted, “There is no question that the lack of personal financial literacy has been a major contributing factor to the economic and financial crisis in the United States.”

Among the council’s recommendations were mandating financial education from kindergarten to grade 12, exploring tax incentives to employers to provide financial education, and increasing access to bank accounts for “the tens of millions of unbanked and underserved Americans.”

Mr. Cosgrove said a growing number of other countries have developed strategies to improve the financial literacy of their citizens, including the U.K., Australia, and New Zealand.

Need for a coordinated national effort

FSGV, where Jenny learned about the Money Skills course, is one of more than 800 non-profit and government agencies across Canada that has worked with SEDI since 1986.

In 2005 FSGV partnered with Vancity credit union to deliver the course through schools and other community-based organizations.

Melanie Buffel, a Money Skills facilitator at FSGV, said about 3,600 people have benefited from the course over the last three years, including many low-income people, immigrants, refugees, and at-risk youth.

The course covers a wide variety of topics, including banking, budgeting, credit, savings tools, financial goal setting, and consumerism. The complexity of the financial system is one of the major challenges facing Ms. Buffel’s clients.

“People don’t understand their rights and obligations,” she said.

Among her clients is “a large number who don’t have a bank account … and they get taken advantage of by the cheque cashers and payday lenders and spend lots of money there that they don’t have.”

Moreover, “the credit card is an enormous topic of conversation.”

There’s a lot of marketing associated with credit cards, and people are getting access to cards but not really understanding how interest and fees are being charged and how offers like balance transfers and visa cheques work, Ms. Buffel said.

Amid the current downturn, “people are talking about money and our phone is ringing off the hook for workshop schedules,” she said.

Ms. Buffel noted that the government has financial literacy efforts taking place, such as through the Financial Consumer Agency of Canada, but “it’s not well coordinated and [does not provide] great opportunities for people to share knowledge and practices across the country.”

She added that there is “really no established network for that” and “no real comprehensive money skills approach” in schools.

“If we had a national strategy for financial literacy, we would all be working off the same page and we’d know there was political support and hope that translates into some funding across the country to do this work.”