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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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