The decisions we make about money on a daily basis shape our ability to reach personal goals, our quality of life, and Canada's competitiveness. Increasing the knowledge, skills and confidence of Canadians to make responsible financial decisions is critical to the prosperity of individual Canadians and the country as a whole.
In June, 2009, Minister of Finance Jim Flaherty established the Task Force on Financial Literacy with a mandate to develop a national strategy to strengthen financial literacy in Canada. He commented at the time that, "Our economy is built on millions of everyday financial decisions by Canadians." The minister's words underscored both the importance of the task force's work and the challenges involved in a project of this size and scope.
Informed financial decision-making gives individuals and families more control of their present and future circumstances. Rolled out to the entire population, it reduces strain on social programs and pension plans, and fosters an economy that is more resilient to financial downturns.
While these benefits are self-evident, the concept of improving financial literacy as a national project has been gradually building. Financial decisions have become increasingly complex and each individual has assumed greater responsibility for managing their lifetime financial risks.
Forty years ago, credit cards were rare, few Canadians invested in the stock market, mortgages were simple, many jobs were lifelong and pension plans were prevalent and predictable. Today, credit options are myriad, millions of Canadians own stocks, mortgages are complex, job change is the norm and private sector pension plans are structured differently. Add to this a looming demographic crunch as baby boomers retire, and a severe global recession that highlighted the interdependence and increasing volatility of the world's financial markets, and it becomes clear why financial literacy has come into sharp focus in Canada and elsewhere.
After a comprehensive review of existing research here and abroad, our own studies, and a round of public consultations in every region of the country, the task force has now submitted its recommendations on a national strategy to the minister. One of our main challenges was that the issue spans every age and income group, and every type of financial decision. Financial literacy - and how to acquire it - is quite different for a 10-year-old learning to save her allowance than for a senior seeking a lifetime income stream.
We narrowed the field down to five themes and organized our recommendations around them.
The first theme is shared responsibility. Strengthening financial literacy will require all hands on deck: federal, provincial and territorial governments, educators, financial institutions and financial advisers, the business community, voluntary service agencies and individual Canadians. The effort will need to be broad and intensive. No one stakeholder can do it all.
Second, this initiative will require a national champion. While education is a provincial responsibility, lifelong learning knows no boundaries. We've recommended that the Government of Canada appoint a leader, dedicated to implementation of the national strategy. We've also called for an advisory council on financial literacy representing all regions of Canada and diverse disciplines to provide guidance to that individual.
Third, there is no magic bullet that will produce a financially literate individual. Financial literacy is an essential life skill that is acquired through lifelong learning and practice. Learning must occur at home, at school, in the workplace, through community organizations and at those moments in life (such as starting a new job) when we are most receptive to advice and learning.
Fourth, we need to deliver and promote financial literacy effectively. Part of the solution will be to identify and leverage touch points in the financial lives of citizens, such as preparing a tax return or applying for a loan. In addition, a single-source website will provide reliable financial information and planning tools, and refer people to other trusted sources. And we need to promote these resources, so people know where to turn.
Finally, accountability must be built in, especially in light of the broad scope of this strategy. We must not only be able to gauge the effectiveness of all the moving parts, but also be able to measure progress over time.
Work must now begin to foster a more financially literate population. Despite the enormous challenge, we are greatly encouraged by the enthusiasm and commitment of the many stakeholders who joined in our consultations and provided valuable input on many aspects of the issue. Now is the time to marshal their support and involvement in the work that lies ahead.
Donald A. Stewart is the CEO of Sun Life Financial and chair of the Task Force on Financial Literacy. Jacques Ménard is chairman of BMO Nesbitt Burns and vice-chair of the task force.