Financial Literacy Info
The Importance of Financial Literacy for Young Canadians

Financial literacy equips young people with knowledge and skills to understand and apply basic financial concepts that enable them to make informed decisions. Financial literacy can help manage and get rid of debt, cut unnecessary expenses, choose the right investment products, and develop a balanced budget.

Understanding Main Concepts

Financially literate people have good understanding of key concepts such as debt, credit, saving, insurance, and budgeting. They know how to file tax returns, compare loan interest rates and terms, avoid impulse purchases, and set short-, medium, and long-term financial goals. Understanding basic concepts also helps avoid financial trouble as banks and credit card companies advertise loans and other credit opportunities. Without knowledge of basic loan terms such as co-signer, down payment, deferred payment, and principal, it is easy to fall into a debt spiral. In essence, financial literacy means having knowledge and understanding of topics related to borrowing, saving, and personal finance.

Why Is Literacy Important

The National Report Card on Youth Financial Literacy survey was conducted in 2016 to examine how prepared young Canadians are to manage their personal finances, and other balances. The study found that some 73 percent of Canadians believe they would own a home in just 10 years. At the same time, data by Statistics Canada shows that just 42 percent of people in the age group 25 – 29 own a home. The average salary that respondents expect to be paid in 10 years is about $90,700. Census data by Statistics Canada shows that the average salary stands at about $31,600 for this age group. While young Canadians have unrealistic expectations when it comes to home ownership and earnings, 69 percent of respondents have a student loan to repay. Almost half of the students believe that they will repay their debts in 5 years. However, figures tell a different story and only in Ontario, about 17.6 percent of insolvencies were due to student debt in 2018 compared to 15.1 percent in 2017 and 12.3 percent in 2013. Figures also show that 45 percent of insolvent student debtors had one or more payday loans in 2018 compared to 27 percent in 2014 and 19 percent in 2011. What is more, student loans made only 32 percent of all unsecured debt that students carried. Unsecured debt that young people carry includes student and personal loans, taxes, secured credit card, and other balances.

The fact that young Canadians have unrealistic expectations and multiple debts shows that many lack the skills and knowledge to manage their personal finances. Programs and courses that teach financial literacy can teach young people how to allocate their income toward short- and long-term goals. Such goals are, for example, starting an emergency fund, paying off debt, and investing. Financially literate people comparison shop when looking for loans and borrow at competitive rates. They also check their credit reports for omissions and errors that can affect their score. Planning for retirement is also important as it helps prepare for old age. There are different ways to save for retirement such as opening a tax-free savings account or registered retirement savings plan. It also pays to inquire about payouts, including children of deceased and disabled CPP contributors, survivor’s pension, disability benefit, and retirement pension.

To save for retirement, it is important to develop a realistic budget that includes all income and expenses, including variable and fixed ones. Many banks offer online tools that allow you to track your spending. Using a budget worksheet is also a good idea as it includes items such as amount spent, type of spending, and type of income – financial support, disability benefits, government programs, salary or wage, profits, etc. List spending categories such as debt payments, transportation, health expenses, and housing and amounts spent to see where you stand and whether you can afford to save toward your long- and short-term goals.

Financial Literacy Programs in Canada

Financial literacy helps people to make sound money decisions, manage debt, reduce expenses, stick to a budget, and save for retirement. There are many financial literacy programs in Canada that help adults and adolescents to improve their financial skills.

Prosper Canada

The Centre for Financial Literacy run by Prosper Canada offers free counseling, education, and information to non-for-profit organizations, government bodies, and businesses. The main goal is to develop resources and establish education programs in cooperation with the TD Financial Literacy Grant Fund, Financial Literacy Resource Centre, and Financial Literacy Facilitator Training Program. The centre also works to develop counseling programs and tools targeting low-income Canadians. Prosper Canada also offers the Financial Empowerment and Problem Solving Program together with The Working Centre, West Neighborhood House, and other partners. Under this program, low-income Ontarians have access to community outreach events, workshops, free tax clinics, and one-on-one problem solving sessions. The First Nations Financial Wellness Project is a joint initiative of community partners, Prosper Canada, and AFOA Canada, aiming to offer coaching and financial literacy programs to First Nations communities. Community members are offered access to free online resources, tools, and program designs. Finally, the centre also offers training to facilitators and covers areas such as consumerism, debt, credit reporting and basics, and saving. Participants also learn more about financial services and banking, budgeting, taxes and income, and their relationship with money.

ABC Life Literacy Canada

Money Matters is a program developed by ABC Life Literacy Canada in cooperation with TD Bank Group and the Canadian Government. Several programs are now available, including Money Matters for Indigenous People, Money Matters for Newcomers and New Canadians, and Money Matters Core. The latter focuses on key areas such as borrowing, money, spending plans, and RESPs. Money Matters for Newcomers and New Canadians is another program that teachers participants how to build credit and save and bank. There is also a program that targets persons with disabilities and teaches them about money safety, spending plans, ways to pay, and other financial topics. The workshops can be offered by diverse establishments such as workplaces, high schools, health and employment centres, settlement agencies, and universities and colleges. They can also be organized at senior centres, libraries, community and learning centres and as part of disability support, youth support, parenting, and ESL programs. Program organizers welcome volunteers who are offered online training to lead workshops. In addition, ABC Life Literacy Canada offers free learning resources such as a spending plans workbook, money safety workbook, borrowing money workbook.

CPA Canada

CPA Canada also runs a financial literacy program and sessions and hosts the Mastering Money Conference. The program is available through the CPA member network, and participants have access to publications, research, and online resources, tools, and information. Other components are volunteer sessions and sessions organized in local communities. Resources include major publications such as A Canadian’s Guide to Money-Smart Living and A Parent’s Guide to Raising Money-Smart Kids. In addition, CPA Canada offers a wide array of helpful resources, including podcasts, guides, newsletters, factsheets, tips, and money management surveys. The Canadian government also offers an online learning program with a focus on setting goals, creating a budget, tracking expenses, dealing with debt, types of credit, credit reports, and a lot more.