The Case for Financial Literacy

 The Canadian Centre for Financial Literacy (CCFL), a division of Social and Enterprise Development innovations (SEDI), today launched The Case for Financial Literacy, a research report providing evidence that financial literacy education is a critical support for low-income and vulnerable Canadians and can make an important contribution to their well-being.

“Low-income Canadians are not necessarily less financially literate than other people, but they face real challenges in accessing accurate and appropriate financial information and advice suited to their life circumstances and financial needs,” explained Elizabeth Mulholland, CEO of SEDI. “This groundbreaking report provides evidence that when financial literacy programs are tailored to respond to the life circumstances of vulnerable groups and done well, they can make a real difference in people’s lives and help them to participate more actively in the financial mainstream.”

Commissioned by the CCFL to help inform and stimulate a dialogue about community-based financial literacy programming as a meaningful support for vulnerable Canadians, Jennifer Robson, a Carleton University faculty member and the author of The Case for Financial Literacy, reviewed and assessed current knowledge on financial literacy programs for vulnerable groups, focusing on their effects with respect to key life transitions, the financial learning and advice needs of diverse groups, and psycho-social benefits. Her review also examined emerging best practices. According to the report, “there is substantial, if not yet extensive, evidence that these interventions can make an important contribution to the well-being of vulnerable groups, in the context of the multiple factors that shape financial outcomes.”

By best estimates, 40% of the Canadian adult population lacks the basic and essential skills needed to function in today’s economy and society. The report indicates that there is an irreducible need for financial literacy for all Canadians, regardless of income or wealth, and a clear need for distinct financial literacy supports for vulnerable Canadians. Mainstream financial information, tools, and advice, while useful for middle or higher income Canadians, are often less so for low-income Canadians and can even be detrimental. Community financial literacy programs, therefore, play a critical role in translating basic financial information and advice and adapting it to respond more directly to the real lives and needs of vulnerable Canadians.

While the report found promising evidence for a range of effects from financial literacy interventions for vulnerable groups, it emphasizes that financial literacy is not a panacea and should not be seen as an alternative to effective regulation, adequate financial resources, and other public policies to promote social and economic inclusion. The report was launched at a CCFL event sponsored by the TD Bank Group and featuring the Honourable Ted Menzies, Minister of State (Finance), who addressed a capacity audience of financial literacy stakeholders.