With a spirit of great anticipation and enthusiasm, the staff and directors of the Edmonton Financial Literacy Society (EFLS) are appreciative of this unique opportunity to share its expertise, experience and to provide
feedback and recommendations with respect to the Task Force on Financial Literacy’s public consultation document entitled; Leveraging Excellence, Charting a course of action to strengthen financial literacy in Canada.
As a leading pioneer in delivering financial literacy education in Canada for the past seven years, EFLS is in a very unique position as it offers its insight, thoughts and recommendations to the task force. EFLS is a registered nonprofit charitable organization that has to date, delivered impartial financial literacy education to over 1,400 people, predominantly focusing on low income clients, including Aboriginals, Recent Immigrants, Youth and other low income segments via partnerships with over 45 different organizations.
EFLS is the only non-profit organization in Edmonton specializing in financial literacy and was among the first organizations in Canada to deliver financial literacy education with a matched savings component. Furthermore, EFLS dedicates 100% of its resources to developing and teaching financial literacy and its success is largely the result of it having developed and utilizing its own unique learning materials and approach to education. Unlike other money management approaches, EFLS utilizes a comprehensive holistic approach as its financial literacy courses do not just teach budgeting skills and tracking one’s expenses; the curriculum looks in depth at the human emotions that drive spending and money management and help people to have a healthier relationship with their personal finances. Furthermore, EFLS’ courses emphasize the use of interactive learning materials to ensure greater knowledge retention.
EFLS takes a unique approach in development and delivery with its partnership model, which builds on the strengths of other local agencies to provide its services. Flexibility and adaptability are key strengths of EFLS as it is open to custom tailoring learning materials to more effectively suit the different needs of the groups it delivers to and draws from a pool of specialized contract facilitators with different skill sets to effectively deliver its courses or provide “train the trainer” courses to other agencies they have partnered with. EFLS recognizes that simply possessing knowledge does not necessarily induce a positive change in a person. To address this issue, EFLS accesses and utilizes resources from the field of Behavioural Economics in its programming. EFLS strives to ensure that individuals who receive its programming not only enhance their level of financial knowledge but will also apply that new found knowledge in their daily lives on a long term basis. EFLS courses are designed not just to educate, but to positively change behaviours and thus increases the success of each project it manages. EFLS is grateful to have the availability of this forum to offer their perspective and recommendations to improve the state of financial literacy in Canada.
Defining Financial Literacy:
EFLS’ opinion is that the Task Force’s definition of Financial Literacy is largely accurate but is missing a critical component, that of an individual’s emotional relationship to money. It is EFLS’ experience, that without exploring this facet of financial literacy first, most financial literacy education opportunities are far less effective. EFLS strongly believes that there is a direct correlation between How one views money and its role in their life and How well that individual will be able to manage their money.
While some money management courses take the approach that individuals should identify and distinguish between personal needs and wants and then only direct their financial resources to needs; EFLS also recognizes
that a balanced life needs to be enjoyable and that it is acceptable to also spend money on wants, providing that the wants are affordable, within one’s budget, doesn’t compromise on the money designated for needs and
meets the individual’s desired goals, happiness…etc. Unless an individual has some psychological insight as to Why one tends to spend money frivolously, or Why one accumulates unmanageable levels of credit card debt, or Why one has a deep seeded need to impress others with their material possessions; simply instructing an individual on how to prepare a budget and to cut back on their spending will have little impact on their financial circumstances. Therefore, EFLS would modify the Task Force’s
definition to read:
Task Force questions answered:
In response to the Task Force’s request for feedback on this topic, EFLS’ viewpoint is outlined below:
I. Personal Insight into one’s “Money Mindset”
o The ability to distinguish between personal needs and personal wants and making wiser choices
o Being aware of the seductive power of Consumerism (i.e. marketing materialistic attitudes) and not
allowing it to manipulate one into over spending and accumulating unmanageable debt.
o The ability to recognize peer pressure (otherwise known as “keeping up with the Jones” in the adult
world) and not to succumb to it.
II. Saving habits and Budgeting
o The ability to develop and stay within a realistic household budget.
o Developing an effective and habitual system for tracking one’s expenses and appreciating the importance
of doing so as personal circumstances dictate.
o Identifying “spending leaks” that negatively affect household budgets and exploring as well as
implementing creative ways to stop the spending leaks.
III. Using Credit Wisely
o Possessing the knowledge and proper mental attitude to establish or re-establish a good credit rating.
o The ability and willingness to resist greed and temptation and to live within one’s means.
o The ability to decipher credit / loan agreements in terms of what interest rate is being charged, how
interest charges and late payment penalties are calculated and the consequences of late / non-payment.
IV. Preservation of Capital
o Taking measures to protecting oneself from Identity theft.
o Taking measures to protecting oneself from fraudulent investment schemes.
o Having insight into one’s risk tolerance level and matching their savings and investment choices
o The ability to open and efficiently manage a bank savings account.
o The ability to choose the right company and type of bank account to match one’s banking needs and
o Being aware of and not falling victim to; the pitfalls of conducting business with pay day loan companies
and non – traditional cheque cashing businesses (e.g. Money Marts).
VI. Smart Shopping Skills
o Understanding the intrinsic value of comparison shopping and incorporating comparison shopping into
one’s shopping habits.
o Understanding the concept that; the more convenient a product or service is, the more costly it will be and
taking measures to adjust one’s shopping habits to become more cost efficient.
EFLS attests to the philosophies and teachings of world renowned bestselling author, Stephen R. Covey, whose book entitled Principle-Centered Leadership states the following in its opening chapter:
“I have long advocated a natural, gradual, day-by-day, step-by-step sequential approach to personal development.
My feeling is that any product or program – whether it deals with losing weight or mastering skills – that promises ‘quick, free, instant and easy’ results is probably not based on correct principles. And yet virtually all advertising uses one or more of these words to entice us to buy. Small wonder many of us are addicted to ‘quick fix’
approaches to personal development.
In this section, I suggest that real character and skill development is irrevocably related to natural laws governing principles; when we observe this, we gain the strength to break with the past, to overcome old habits, to change our paradigms and to achieve primary greatness.”
The government agency would need to develop and make available greater Behavioural Economics resources to assist in the development and implementation of the national strategy.
#4 The National Strategy needs to be Diverse and Accessible to all Canadians. EFLS is in agreement with the Task Force that a one size fits all approach to financially educating the public would
not be effective. EFLS believes that financial literacy education is important for all population segments, not just for the poor and the marginalized. EFLS cites 3 recent real life examples that support this perspective:
Travelers stranded as volcanic ash disrupts air travel to / from and within Europe: In April 2010, up to a million people were affected by this event as many were left stranded in airports all over the world
(especially within Europe) because of the volcanic eruption in Iceland resulting in unsafe air travel. No one anticipated this happening and most likely, very few (if any) of the stranded have emergency financial
resources in place that were specifically designated to deal with this type of scenario. People in this situation faced challenges such as additional travel costs, loss of income from employment, insurance claims and stress.
This event reinforces the importance of having emergency savings and a preparedness plan to tackle unforeseen circumstances.
Alberta goes quickly from boom to bust: Alberta is reputed for its boom or bust economies due to its reliance on the oil industry. Just prior to the most recent economic downturn, jobs were abundant and consumer spending and the liberal use of credit widespread. Some employers were practically begging for workers as “help wanted” signs were a common sight in business districts and employers needed to find innovative ways to recruit employees by offering unorthodox incentives to potential job applicants.
When the economy went sour, the change was sudden and many Albertans were not prepared for it. They had the misconception that the good times were going to last forever. The help wanted signs disappeared
quickly and many of those that lost their jobs did not have a financial cushion to fall back on (other than EI) and facing bills that they had no idea how they were going to be able to pay. Usage of the province’s
food banks skyrocketed as did the personal bankruptcy rate and average household debt to income ratios. Again, this shows that poor spending choices in times of plenty can seriously affect lifestyles when the
economy faces challenges. We can also see that interest rates have changes, but unless Albertans possess the skills to review and renegotiate their interest rates, they could pay considerably more than a fair
market price for any loans they were responsible for.