Post on 11-Oct-2020
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The Importance of Financial LiteracyThe Importance of Financial Literacyin Canadain Canada
Donald Stewart, ChairDonald Stewart, Chair
Task Force on Financial LiteracyTask Force on Financial Literacy
November 26, 2009November 26, 2009
Advocis Symposium – The Future of Financial ServicesDistribution
OverviewOverview
What is Financial Literacy?
Why is Financial Literacy important?
Canada’s Task Force on Financial Literacy
Observations to date
Task Force in 2010
The role of advice
Concluding observations
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What is financial literacy?What is financial literacy?
Financial literacy means having theknowledge, skills and confidence to make
responsible financial decisions.
Financial literacyFinancial literacy
Affects all Canadians
Transcends language, culture and origin
Consumers need to have a really profoundrelationship with their money
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Why financial literacy?Why financial literacy?
Financial crisis
Demographic trends
Major shift of responsibility to individuals
Increasing complexity
Many others, including economic and consumerbenefits
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Broadly-based concernBroadly-based concern
Financial security is important to Canadians:
6 out of 10 Canadians say they worry abouttheir financial future
23% so much so they are losing sleep over it
(Source: CMA, 2009)
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Growing gap between concern andGrowing gap between concern and
actionaction
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CanadiansCanadians’’ saving vs other countries saving vs other countries
0
U.K.
5
10
15
20
U.S. Germany France
4.6%5.1%
6.5%
12.5%13.4%
Canada Italy
10.1%
Estimated 2010 household savings rates
Source: OECD Economic Outlook
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Debt to income ratio increasing 2000 - 2009Debt to income ratio increasing 2000 - 2009
Debt to income annually
Source: Statistics Canada. CANSIM National Accounts. Table 378-0012Financial indicators, persons and unincorporated
businesses, computed annual average (percent), Debt to personal disposable income.
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Canadian Task Force on Financial LiteracyCanadian Task Force on Financial Literacy
Established June 2009
13 members from business, communications,community and educational sectors
Prescribed mandate
Provide advice and recommendations to theMinister of Finance on a national strategy byDecember 2010
www.financialliteracyincanada.com
Task force mandate for national strategyTask force mandate for national strategy
Overall objectives, as well as a focused, concreteplan of action
How to leverage existing resources
How best to promote financial literacy
A framework for collaboration among allstakeholders
How stakeholders should collaborate
How to assess progress in strategy implementation
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MembersMembers
Task force observationsTask force observations
An extremely broad topic
Many stakeholders
Immense amount of information exists
Vital role of behavioural economics
Federal / Provincial / Territorial dynamics
Developing framework
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Scope of financial literacyScope of financial literacy
Lifelong education
Consumer behaviour
Borrowing
Saving
Retirement
Protection
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International benchmarksInternational benchmarks
AustraliaConsumer and Financial Literacy Task Force – 2004
New ZealandShift from retirement planning to lifetime financialplanning in 2001
Financial Knowledge Surveys in 2006 and 2009
United KingdomBuilding Financial Capability in the UK – 2003
UK Treasury Long-Term Strategy – 2007
United StatesFinancial Literacy and Education Commission – 2006
Taking Ownership of the Future: The National Strategyfor Financial Literacy – 2006
Many stakeholdersMany stakeholders
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Increasing complexity and amount ofIncreasing complexity and amount of
financial information in Canadafinancial information in Canada
Over 90,000 publications on finance/economicsare currently available
Google search of “personal finance” + Canadaresults in 20,000,000 hits
Each year, approximately 6,000 newpublications become available
Four-fold expansion of Advocis Best PracticesManual
Source: Global Books in Print
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Behavioural economicsBehavioural economics
Offers a blend of psychological and economicinsights into household financial management
Provides a framework for studying inconsistentor irrational behaviours
Explains why despite factual knowledge, peoplemay still make poor decisions
Links between knowledge and action
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Laying the foundation: BC and OntarioLaying the foundation: BC and Ontario
Developing framework of Task ForceDeveloping framework of Task Force
The Education System’s Vital Role
Understanding Consumer Behaviour
Debt and Borrowing
Saving and Investing
Planning for Retirement
Preventing Financial Fraud
Evaluating National Progress on Financial Literacy
2020
Statistics CanadaStatistics Canada
Canadian Financial Capability SurveyCanadian Financial Capability Survey
Demography
Labour Force
Ongoing Expenses
Financial Management
Major Expenses
Postsecondary EducationFunding
Retirement Planning
Assets and Debts
Income
Financial Choices
Subjective PersonalAssessment
Objective PersonalAssessment
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Milestones in 2010Milestones in 2010
Stakeholder engagement
Releaseconsultation
documentPublic
consultationsFinal report
to Minister ofFinance
Dec2010
Nov2009
Feb2010
April - June2010
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Task force outreach in 2010Task force outreach in 2010
Vancouver
Toronto
Charlottetown
St. John’s
Edmonton
Saskatoon
Winnipeg
Quebec City
OttawaMontreal
Moncton
Yellowknife
Whitehorse
Iqaluit
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Consultation processConsultation process
Encourage active participation of financialadvisors
Task force invites your ideas
Role of adviceRole of advice
Growth of information, regulation, technologyetc. will outpace ability of many citizens to keepcurrent
Challenge to all professions
Availability of information isn’t, by itself, makingCanadians literate
Advisors make information understandable andactionable
Advisors can ensure plans are acted upon
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Concluding observationsConcluding observations
Financial literacy is a vital life skill
Education is necessary but not sufficient
Canadians need to build better financial habits
Leveraging existing resources is key
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