Evan Siddall is the chief executive of Alberta Investment Management Corporation, home of the AIMCo Foundation for Financial Education.
Canadian equity markets have lost 8 per cent since the beginning of the year, and two-year bond yields have increased about 3.5 per cent.
If you got through that first sentence easily and fully understand what it means, you are likely ahead of more than half of Canadians – almost 60 per cent of Canadian adults rate their financial knowledge as “fair” or “poor.”
I firmly believe financial literacy is a key component of a thriving economy and society. Financially literate individuals make better financial decisions, increase their economic security and, as such, can create thriving communities and countries.
But recently, increased social mistrust of major institutions, including governments and financial institutions such as AIMCo, seems to correlate with a gap in financial literacy.
Canada boasts an admirable history of expertly managed public defined-benefit pension plans that invest current and future pensioners’ contributions over the long term. The likes of the universal Canada Pension Plan, managed by Canada Pension Plan Investment Board (CPPIB) and La Caisse de dépôt et placement du Québec, are viewed as the gold standard globally. Yet they are sometimes misunderstood and even mistrusted here at home.
This type of mistrust is part of a larger alarming trend of the division we are seeing in Alberta, and across Canada, and its affect on financial literacy ripples across the economy.
Financial literacy support from quality, trusted sources gives people the ability and self-confidence to make informed decisions, see past self-interested promoters, live within their means and save for retirement. It is very empowering, and the long-term positive impacts for society cannot be discounted.
Yet financial literacy has not been a large part or, in some instances, any part of our educational curriculum, with only recent moves being made to change this systemic issue. In 2019, Ontario Education Minister Stephen Lecce announced that high schools across the province would include financial literacy education as part of the revised and mandatory Grade 10 career studies course. Earlier this year, Alberta announced that it is investing $5-million in basic financial literacy education programs for students in grades 3 to 12 over the next three years.
But is it enough? Last year, Albertans led the country for having the highest non-mortgage debt and delinquency rates. For a province that boasts the highest wages and the lowest cost of living in the country, the situation isn’t improving.
These are statistics about adults who therefore may not be equipped to support children’s formal education simply because they lack the knowledge themselves, turning this inadequacy into a stubborn and insidious intergenerational issue.
Consider those Canadians looking to buy their first home. Government mortgage insurance allows these buyers to have down payments of just 5 per cent. After deducting a 4-per-cent mortgage insurance premium, legal costs, etc., they are buying houses with almost no – or even negative – equity. That exposes them to a very high risk of foreclosure when interest rates increase and house prices fall, as is happening now.
Among other things, financial literacy can protect us from other people’s ignorance, or in the worst cases, greed and opportunism. Indeed, we should take care to ensure that this education comes from trusted sources who don’t have conflicts of interest such as products to sell or commissions to earn.
But who are those trusted voices and how do people access them? There are many across the country who are doing this work. I’ve come to learn about some through the efforts of the AIMCo Foundation for Financial Education, a not-for-profit started by AIMCo employees in 2018. To date, the foundation has raised more than $1.2-million and has funded an Indigenous financial coach at a postsecondary institution and a 10-week personal finance program specifically for women.
These efforts offer a glimmer of hope. But the organizations doing the work need support. Donation dollars go a long way, as do volunteer hours from Canadians with financial acumen.
Simply put, while our focus remains Alberta, we believe in a better financial future for every Canadian, and Canada’s long-term economic prosperity relies on a better financial education for all.
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