Speech Article from
Remarks by Jane Rooney, Financial Literacy Leader, at the Conference Board of Canada
Financial Wellness and Retirement Readiness
January 23, 2017
Check against delivery.
Good morning and hello everyone! Thank you for that kind introduction, John (Brewer).
I’m so pleased to have been invited to participate in this conference. I want to thank the Conference Board of Canada for organizing this event.
And I am delighted to see so many people here today who share my passion for financial literacy.
I always say I have the best job because what I do helps Canadians.
Last November marked Financial Literacy Month (FLM). Throughout November, my team and I crossed the country talking to Canadians and stakeholders.
There was a lot of discussion from coast to coast about why it’s so important and how, collectively, we can improve financial literacy in Canada.
FLM started with a conference on financial literacy, hosted by the Chartered Professional Accountants Canada. During FLM, I also saw the launch of new programs for youth and newcomers and an app to help young people learn about money, spoke with 150 Ontario teachers, and went to other events.
We make financial decisions all the time, whether it’s about renting versus buying a home, finding the best credit card for our needs, deciding whether we can afford a vacation this winter, or saving for a child’s education.
At this conference, we’re talking about Millennials through to retirees. That’s important because financial literacy is about lifelong learning.
It’s reaching young people with lessons about delayed gratification early in life, which the Consumer Financial Protection Bureau in the U.S. says should start at ages three to five, based on its research.
It’s having those dinner table conversations about spending and saving.
It’s learning about money and personal finances in the classroom.
It’s helping people in our workplaces.
It’s planning for retirement.
We have a generation of young people entering the workforce at a time when there’s a lot of precarious employment. Young people may not get permanent jobs. Nor might they get access to a workplace pension.
We live in a digitized world and financial products are increasingly complicated.
We have too much household debt and chronically low levels of savings.
And we have an aging population.
At the same time, our research shows there are significant gaps in financial literacy, particularly for women, low income Canadians and Indigenous Peoples.
So what we’re discussing today is incredibly relevant and important.
There are many challenges ahead. But we also have an opportunity to make a real difference in the lives of Canadians.
What does the FCAC do?
Some of you know what we do at the Financial Consumer Agency of Canada. I see some familiar faces and some of you have worked with us.
For those of you who don’t know us as well, we lead the national strategy on financial literacy and collaborate with stakeholders towards achieving the goals of that strategy.
We work with other government departments, the provinces, companies, non-profit groups and grassroots financial literacy networks across the country. We work with people like many of you who are on the frontline helping Canadians.
We have a mandate to regulate and monitor financial institutions and we also provide consumers, and those organizations that work with us, with unbiased information that helps people make responsible decisions for themselves and their families.
We developed a national strategy because many Canadians lack the knowledge, skills, and confidence regarding money decisions. I’m going to talk about this briefly because we want all of you to help us implement the strategy.
I see financial literacy as a shared responsibility: Government, the private sector, schools, community based organizations, and individuals all have a part to play.
In my job, I’ve had the help of a national steering committee of experts from across the country. Elizabeth Mulholland of Prosper, who is speaking this afternoon, has been a member of my committee. I will be naming a new committee in two weeks and I’m excited to move forward with their support.
The National Strategy for Financial Literacy – Count me in, Canada has three goals to help Canadians:
- manage their money and debt wisely;
- plan and save for their future; and
- prevent and protect themselves against fraud and financial abuse.
We have a research sub-committee, which also guides our work. Simon Brascoupé, who is presenting today, is a member.
National Research Plan
We just completed our National Research Plan for Financial Literacy 2016-2018. It covers four priority areas:
- paying down household debt;
- building savings;
- the increasing complexity of financial products and services.
We will be conducting research to find ways to help change behavior around these areas.
Why these four areas?
Paying down household debt
First, paying down household debt. As Brigitte (Parent) already mentioned, Canadians’ debt-to-income ratio is 167 percent.
In other words, Canadians owe $1.67, including consumer credit and mortgage and non-mortgage loans, for every dollar of disposable income.
You might have also seen a recent Equifax Canada report that linked low interest rates and falling oil prices to consumer debt and increased delinquency rates.
It’s so important for consumers to manage their debt and we’re working on helping consumers to do just that.
The power of a budget
Second, budgeting. We know from our research that budgeting is a key way to start on the path to financial wellbeing. Budgeting helps consumers save, live within their means, and plan for all stages of life, including retirement.
When we asked Canadians, less than half (46 percent) say they have a budget. Yet among those who do have a budget, 93 percent “usually” or “always” stick to it.
And this is consistent across demographics we studied; it’s the same regardless of income and gender.
Near seniors (non-retirees over the age of 55) who have a budget and stick to it are twice as likely to have a good idea of how much is needed for their retirement when compared to near-seniors who do not budget.
A budget is such a basic but effective tool. So we want more people to budget.
Our third priority is saving. In the fall, the Canadian Payroll Association released findings from its national survey of Canadian employees. It showed many working Canadians are barely making ends meet.
Almost half (48 percent) of survey respondents report it would be difficult to meet their financial obligations if their pay cheque was delayed by even a single week;
40 percent of respondents say they spend all of - or more than – what they earn in net pay;
Nearly one-half of respondents (45 percent) expect they will have to work longer than they had originally planned five years ago.
Our own research also tells us many households lack emergency savings. More than half of the Canadians we surveyed would use savings to cover an unexpected expense of $500. The others would resort to some sort of credit, including payday loans for some.
Increasingly complex products and services
Finally, our fourth research priority: the increasing complexity of financial products and services, something we know creates great challenges and opportunities for consumers.
We are watching all of these trends and looking for ways to help Canadians.
Financial literacy impacts seniors and near-retirees
When I took on this role, we consulted Canadians across the country. We focused on seniors and near seniors first.
Canadians are more active and living longer. That’s the good news.
But it also means people need to be prepared. The average Canadian who reaches 65 today can expect to live until 86.
People who stop work at 65 could be funding their retirement for 21 years, or longer.
Every five years, Statistics Canada carries out a Canadian Financial Capability Survey for FCAC.
The latest data from our 2014 survey shows that among those approaching retirement age, less than half know how much they need to save.
We are also seeing increasing levels of debt among retirees.
More debt in retirement is a major cause for concern. Many in this group are on a fixed income. What happens when interest rates rise?
The lack of savings also has implications for the next generation of retirees, who say they don’t know how much they need to save to live their desired lifestyle.
The Carrot Rewards app and budgeting
So how do we change behavior in consumers?
Since mobile banking is so popular, this summer we decided to use digital technology to try to improve financial habits. Craig (Alexander) mentioned that technology, not globalization, is what we need to adjust to.
We piloted a mobile app, known as Carrot Rewards, that offers consumers loyalty program reward points for completing simple activities.
In our pilot, the incentive related to consumers learning about budgeting.
You will hear more from Andreas (Souvaliotis) of CARROT Insights this afternoon.
Over the course of a month, we sent a series of consumer education messages, quizzes and questions to consumers and we tracked how they responded.
Our results show improvements in knowledge and confidence towards budgeting. At the end of the intervention:
- Knowledge of budgeting increased 10 percent, from 57 percent to 67 percent.
- Those who were “confident” in their ability to make and follow a budget increased from 32 percent to 37 percent.
- Those who were “very confident” in their ability to make and follow a budget increased to 22 percent (doubling from 11 percent!).
At the end of the analysis, our preliminary findings show budgeting increased significantly. After using the app, 14 percent of people who were not budgeting began to use a budget.
I am excited about this because, ultimately, we want to shift trends and change consumer behaviour in a positive direction. We want to further explore ways to influence behaviour using technology but we are also exploring other channels.
We know the workplace is an important place to talk about financial literacy and will be a key area of focus for my new steering committee on financial literacy.
This conference is taking place because things have changed in the workplace. I spoke about the increasing complexity of financial products. As well, the onus has shifted to individuals to take responsibility for their retirement.
At the same time, we know that finances are a major stressor and that leads to mental health and physical health issues, as Brigitte (of Sun Life) discussed. This is something we all need to pay attention to.
There is a lot being done to help employees in the workplace across Canada. But we need to do more.
We want healthy employees. And Canadians are not as prepared for retirement as they need to be. We all have a job to do to help.
Companies and organizations do not need to reinvent the wheel – there are many excellent programs to help employees.
I know some of you here today are from the insurance industry. The Canadian Life and Health Insurance Association just launched a microsite to help consumers. It’s called “Retiring Soon?”
Great-West Life, the Chartered Professional Accountants of Canada, and Sun Life Financial have all been leaders in workplace financial literacy.
They all have well established programs you can look at as models for your own workplace.
At FCAC, we also have content to help, such as online interactive tools and educational programs, including Your Financial Toolkit.
My colleague Geoff will highlight some of our tools and resources such as our Budget Calculator.
Wouldn’t it be great if all students started their career with a budget? Wouldn’t it be great if most adults had budgets and adjusted them as their circumstances changed and as they entered retirement?
As professionals, we can all promote this one simple thing: Budgeting. Our research tells us most people don’t know where to start with budgeting. It’s as easy as giving everyone a budget tool.
This is something financial institutions, insurance companies, employers, investment advisors, education institutions can all do.
We want Canadians to feel in control of their money and to have confidence in their decisions. Please use our website to help.
As you know, there are also numerous benefits Canadians can access but don’t know about and often money is left on the table.
That’s where those of you, who are working with Canadians directly, can help by raising awareness of savings options available such as Registered Education Savings Plans, Tax-Free Savings Accounts, Registered Retirement Savings Plans, and government benefits.
You may be interested in the following example about how filing taxes can help lower income families access the benefits they are entitled to. The Manitoba Centre for Health Policy looked at the difference it can make in a family’s life.
The centre helped a low-income mother with two young children.
By filing her taxes and accessing different credits and benefits, this person doubled her income.
Financial literacy is a shared responsibility and we must all work together. That can be in our workplace, our schools, own homes, and through different organizations.
I was fortunate in that my parents taught me about personal finances. I talk to my teenage sons about money. But it is not a conversation everyone is comfortable having at home.
Helping people in the workplace is a great way to teach financial literacy. And you can extend that by encouraging employees to bring that discussion home to the dinner table.
Financial literacy is in everyone’s interest – it helps the economy, makes people better consumers, helps Canadians stay healthier by reducing stress, and enables them to achieve their financial goals.
Between the efforts at FCAC, all the great work you do, we are making progress.
But we still have work to do to help Canadians manage their own money and debt wisely, budget, save, and protect themselves from fraud and financial abuse.
Thank you very much.
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