Why is financial literacy important for Canadians?
Nowhere does the concept of lifelong learning resonate more than when talking about an individual’s financial wellbeing. And since November is Financial Literacy Month, there’s no better time to talk about it.
A new Statistics Canada study, based on data from the 2016 Survey of Financial Security, concluded that debt-to-income ratio – which shows how much debt is owed for each dollar of household income – has been rising noticeably in Canada over the past few years. Debt-to-asset ratio, the study also concluded, is another ratio that is perhaps a better indicator of financial distress among families, as it measures their ability to withstand financial shocks.
For example, among families that had higher debt-to-asset ratios – above .50 (meaning the value of their debt amounted to more than 50 percent of their assets) – 16 percent skipped or delayed a non-mortgage payment in the year preceding the survey, compared with seven percent of families that had a debt-to-asset ratio of .25 or lower.
Studies like this shine a spotlight on financial literacy in Canada, which involves the availability of educational information and tools so individuals can better manage their finances and make better decisions as life circumstances change. It helps to show how well Canadians understand their own financial situation, how they approach day-to-day and longer-term money management and budgeting, and general financial planning.
Understanding what drives financial wellness will make it easier to enact programs to improve it.
Financial literacy basics
What does it mean to be financially literate? It means budgeting and better managing credit. It means knowing the benefits of saving for your child’s education. It means understanding what goes into operating your own business. It means having a sound retirement plan. It means understanding how to finance a home purchase, which could involve many different solutions and products via a bank lender or a mortgage broker.
Improving financial literacy translates into individual empowerment.
The Canadian government thinks financial literacy is such a high priority, it started a program comprising tools, strategies and initiatives designed to give Canadians a roadmap to financial wellness.
The government’s objective has been to build a national program mobilizing the different financial literacy programs out there into one coordinated, collaborative effort, involving organizations in the public, private and non-profit sectors. It’s an action plan that includes targeted deliverables, steps to determine best practices and analyze progress.
Task force on financial literacy
The process to develop an action plan started with a Task Force on Financial Literacy in 2009. From that came a Canadian Financial Capability Survey in 2014, the appointment of a Financial Literacy Leader to coordinate with all stakeholders and provide guidance and expertise, the establishment of a National Steering Committee on Financial Literacy, and the declaration of November as Financial Literacy Month.
The Financial Consumer Agency of Canada (FCAC), which receives annual government resources to conduct research, undertake programs and events, develop consumer-friendly programs and tools, met with stakeholders and had consultations across the country in 2014. Out of those meetings came the National Strategy for Financial Literacy – Count Me In, the government’s strategy to help Canadians strengthen financial literacy and improve their financial wellbeing. It focuses on empowering Canadians to better manage money and debt, plan and save for the future, and protect against fraud and financial abuse, as new scams are frequently discovered.
The strategy to improve financial literacy in Canada will evolve over time, in tandem with stakeholders across Canada, working towards common goals.
Ensuring that individuals have the skills, knowledge, and confidence to make sound, informed financial choices is aligned with the government’s priority of creating more jobs, contributing to economic stability and spearheading growth, ensuring the long-term prosperity of the populace.
Financial Literacy Month events
This year’s theme for Financial Literacy Month is “Take charge of your finances!” focusing on creating a budget, having a savings and debt reduction plan, and understanding your financial rights and responsibilities.
A complete list of financial literacy events and resources offered by Canadian organizations is listed here. The FCAC offers a calendar of events for the month here. Taking part in financial literacy events is a great way to start getting a better handle on your finances. The process of learning to better understand money, credit, and how they work together is a lifelong endeavour, and it’s easy to make missteps along the way.
Check out this article on rebuilding credit by consolidating debt, for example. For more information showing how you can find the right solution, unique to your financial situation, visit our website or call 1-877-903-2133.
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