Improve Your Financial Literacy

Last week the Government announced a national financial literacy campaign that aims to help Canadians better understand and manage their money. Using the hashtag #CountMeIn, the campaign was originally announced 6 years ago by the late former finance minister Jim Flaherty.

Yup, it took 6 years before anything formal was launched.

To be fair, Jane Rooney, Canada’s first Financial Literacy Leader was appointed in April of 2014. In October of the same year, Rooney put together a pretty strong 15-member National Steering Committee on Financial Literacy. The committee has members representing the banking and insurance sectors, the credit-counselling sector, and the Ontario Securities Commission. It also includes two personal-finance journalists; one of them being a personal favourite of mine, Kelley Keehn.

I have full confidence in the committee, but my main concern right now, is that it’s all just talk. Yes the Financial Consumer Agency of Canada (FCAC) has already put together a great resource; I’m just not convinced that Canadians are ready to make a change. Our “wealth” might be at record highs, but we’re also not too far off record debt levels.

Even though this was a major announcement, I could only find articles of the launch from Jacqueline Nelson, and Rob Carrick of The Globe and Mail, and from Ellen Roseman of the Toronto Star. I should note that those 3 are some of the best personal writers out there, so it’s no surprise that they covered the story. The Canadian Press did a small write up, but not even the Financial Post covered the launch. Forget about any TV coverage, people talking about money does not make a sexy news story.

So how to we get past all the talk and start to take action?

improve your financial literacy

New grads & young professionals

“Paying down student debt is a significant challenge for new grads who needed to rely on loans to pay for their post-secondary education” says Natasha Nystrom, Spokesperson at the FCAC. “Another significant challenge for young professionals is how to deal with the financial responsibilities of budgeting (and sticking to their budget) and managing their expenses.”

Related: The truth about money for new grads

Budgeting is something that anyone can relate to. It doesn’t matter if you’re paying off student loans, moving out on your own, or saving for your first home, you’re going to need a realistic budget to keep you on track. Begin by tracking your expenses for 2 months– literally log all your purchases during that time. Once you know where your money is going you can make adjustments and create a budget that works for you.

“There are a variety of resources out there to help” says Nystrom. “The Canadian Financial Literacy Database which was launched last fall can help users find the resources and organizations that can provide assistance in the areas they want to brush up on. The database contains resources from public, private and not for profit organizations across the country.”

Another option is to simply read a book. Here’s my favourite personal finance books for Canadians; reading just one of these books will drastically change the way you look at money.

Parents

“Brand new parents aren’t usually as well prepared as they should be” says personal finance author Gail Vaz-Oxlade. “With a loss of income due to maternity/parental leaves, most turn to credit to fill the gap in income, rather than trimming back to bare essentials or having some money saved.”

Babies don’t have to be expensive, but it’s easy to see how new parents can fall into debt because they didn’t plan for the cost of raising a child. The government actually offers a few different grants and tax credits to help out new parents, yet many aren’t taking advantage of them because they don’t know they exist, or they don’t have the extra funds available.

Related: Parents don’t like free government money

Financial literacy is severely lacking in the education system so learning about money needs to start at home. “The talking should start almost immediately” says Vaz-Oxlade. “Kids need to hear language to learn, so you might as well tell them what you’re doing. But tell them the truth so it’s a habit you get into.”

Don’t be afraid to talk to your kids about where money comes from, what bills need to be paid, or the mistakes you’ve made. It’s the only way they’ll learn. Talking and teaching your kids can be tough, but you can get tips from Gail Vaz-Oxlade’s book Money-Smart Kid$.

financial literacy

Planning for retirement

“Canadians should start saving for their retirement as early as they can” says Cairine Wilson, VP, corporate citizenship with CPA Canada and a member of the National Steering Committee. “The earlier you start, the more you can save. In fact, a goal of the Canada’s national strategy for financial literacy is to have Canadians plan and save for the future.”

The earlier you start saving, the more you can save. This should be obvious, yet many Canadians struggle to meet their savings goals. With money being cheap to borrow, it’s no surprise that Canadians are hooked on debt, but following just a few steps can put your finances on the right track.

  • Spend less than you earn
  • Pay yourself first
  • Establish and stick to a budget.

“You don’t need to be a financial whiz to be good with money. You just have to decide to act and make the time to get some valuable information” says Wilson.

All Canadians have access to a few different savings vehicles and we should be taking advantage of them. The Registered Retirement Savings Plan (RRSP) is meant for retirement planning since you get an immediate tax break, however taxes will need to be paid when you retire. Tax Free Savings Accounts (TFSA) offer no immediate tax break, but all gains made within the account are completely are tax-free. Which account is better really depends on individual situations, but either way, it’ll help your money grow fast.

Saving for the future is clearly a priority for the national strategy. “Our research shows that many Canadian households are not saving or paying off debt on a regular basis” says Wilson. “The national strategy calls for the mobilization and engagement of the public, private and non-profit sectors to strengthen the financial literacy of Canadians.”

Final word

I really hope this national strategy will help the financial literacy of Canadians, but it’s been proven that people just don’t want to listen. It’s great that individual organizations are getting involved, and trying to bring awareness, but at the same time some companies make money based on our ignorance towards money. Regardless, this is a step in the right direction, it’ll be interesting to see if there’s any improvements.

By | 2016-10-17T12:42:08+00:00 June 15th, 2015|Personal Finance|

4 Comments

  1. Stephanie June 15, 2015 at 11:52 am - Reply

    It is an interesting initiative, but ultimately, our money is our responsibility. It is up to us to become educated in order to make the best financial decisions for ourselves. It is neither the Government’s fault if we are into debt, nor it is its job to get us out of it.

    • Barry Choi June 15, 2015 at 11:55 am - Reply

      Stephanie,

      Yes depending on others to teach you about money is not the best solution. I always recommend people take control of their finances.

  2. Christine June 18, 2015 at 10:42 am - Reply

    Most times, the onus is on the individual to educate themselves on financial literacy but it also takes education for someone to realize how important financial literacy is. People won’t intuitively read up on budgeting, saving, or investing if they don’t understand the value in it, unfortunately. Hopefully one day financial education will be as standard as gym class or sex ed.

    • Barry Choi June 18, 2015 at 12:04 pm - Reply

      Christine,

      For sure it’s up to us to learn about money our own. Seriously who’s going to care more about your money than you? I’m not entirely convinced a financial education will help. There’s so many mandatory classes I took in high school where I basically retained zero information a few years later.

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