Learn, budget, save: the ABC’s of financial literacy

“Canada’s youth are living beyond their means,” said Joseph Iannicelli, president and CEO, Standard Life, speaking at the Canadian Club of Toronto on Monday. “Sixty-percent of Canadians are in debt and a third of them hold more than $10,000 in debt. Just because someone offers me a credit card or a line of credit, does not mean that I am obliged to accept it, and I am certainly not obliged to use it.”

Governments and financial industry have not done a good job of educating consumers, he said, but Canadians also have themselves to blame.

“Canadians have to care more about their financial situation, by budgeting and spending more reasonably, using debt more intelligently, and accumulating savings more diligently.”

He said it is an individual responsibility to govern their financial affairs properly, which requires more effort in understanding the impact of his or her own spending and savings habits.

Iannicelli stressed the need for the inclusion of financial education as a vital part of school curriculum. “Sex education is (imparted) at grade six or seven now, why can’t financial literacy be on there too. It is critical,” he said.

The idea of shaping financial behaviour in youth has found resonance in the Financial Planning Standards Council (FPSC), a not for profit organization dedicated to Canadians’ financial planning needs.

“FPSC supports the advancement of financial literacy for all Canadians,” says Cary List, president and CEO, FPSC. “The past year underscored that the status quo is insufficient in ensuring the economic, financial and social wellbeing of individuals and of our country.”

FPSC recommended the need to go beyond increasing knowledge to focusing on behavioural change. Some of the submission highlights include:

• recognize the importance of starting financial literacy early in life, beginning in grade school;
• retirement planning should not displace the need for planning for all of life’s priorities. Financial planning should balance today’s needs with tomorrow’s demands; and
• consumers should be educated on the questions to ask before investing or hiring a financial advisor to protect against fraud.

“Learn, budget and save,” reads the submission. Individuals who do that are taking responsibility and are being empowered.

He brought focus on another key component of financial responsibility: retirement planning, explaining that saving for the future is an important issue and action is urgently required.

He asked government to do more to educate and motivate Canadians to think about retirement planning. “Maybe governments should even consider a scare campaign to get Canadians’ attention. It’s that serious,” he said.

Iannicelli offered strong views on pension programmes. “(Private sector) could do [pension planning] that is more efficient [than government-run plans], because that’s what we do.”

He assured those concerned about the cost of private pension plans that the competition will drive cost down and increase value to the consumer. “That’s our business. If we don’t do it well and [in a] cost-efficient (manner), we won’t sell anything,” he said.

He believes government should leave pension planning to private players.

“It’s not their business. I have a real difficult time understanding how they can do nearly as good (a job) as the private sector.”

Vikram Barhat is senior writer with Advisor.ca.

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