By Larry Bull

 In the 2009 federal budget, Canada’s finance minister announced his intention to establish a national task force dedicated to providing advice and recommendations on a strategy to strengthen Canadians’ financial literacy.

Appointed in June 2009, the Task Force on Financial Literacy was comprised of 13 members drawn from the business and education sectors, community organizations and academia. The task force released its final report – Canadians and Their Money: Building a brighter financial future – in February. This report suggests the need for urgent action on a national strategy to strengthen Canadians’ financial literacy. (The report can be found at: www.financialliteracyincanada.com.)

The 30-point recommended plan of action reflects the views and priorities of Canadians. It’s concrete, practical and affordable, and falls into five priority areas: shared responsibility; leadership and collaboration; lifelong learning; delivery and promotion; and accountability.

The task force defines financial literacy as having the knowledge, skills and confidence to make responsible financial decisions, where:

• Knowledge means understanding personal and broader financial matters.
• Skills are the ability to apply that knowledge in everyday life.
• Confidence means feeling self-assured enough to make important decisions. This is often a key factor in galvanizing people into action.
• Responsible financial decisions means that people will be able to use the knowledge, skills and confidence they have gained to make choices that are appropriate to their own circumstances.

The recommendations are tailored to meet the diverse needs of Canadians by enhancing formal education, integrating with federal government programs, creating a single-source website, delivering clear communications and building awareness. The task force strongly believes that financial literacy is critical to the prosperity of Canadians and the nation. Increasing the knowledge, skills and confidence of Canadians to make responsible financial decisions will help them meet their personal goals, enhance their quality of life and make Canada more competitive.

The task force’s main message is that Canadians need to become increasingly knowledgeable and sophisticated with respect to their finances – from personal spending habits to recognition of the need to save and invest.

The fact that the timing of the task force’s creation and its subsequent report is coincident with the global financial crisis should not be missed. While Canada weathered this crisis better than most other industrialized economies, it shook our confidence and awakened us from our erstwhile complacency concerning the soundness of the global financial system’s sustainability.

A major cause of the world-wide financial meltdown was (and remains) the unsustainable size of government budget deficits and national debts. Despite Canada’s limited hit this time around, we too carry an enormous debt load (estimated in the $1 trillion range), which will take an entirely different approach than we have taken up until now to pay off. Ironic, isn’t it? On one hand, we have a federal government advocating the need for increased individual financial literacy and, on the other, we have an outstanding public debt, the percentage to GDP of which would force an individual into bankruptcy.

Global central banks, spearheaded by the Federal Reserve Board in the U.S., have expended enormous effort to keep interest rates artificially low since the dawning of the current economic crisis in an attempt to do two things. The first is to encourage borrowing and spending in an effort to jumpstart a moribund economy. The second is to keep the cost of government borrowing from escalating beyond its ability to service interest charges. These are the economic realities overshadowing the question of whether our government has either the interest or the intention of reining in its profligate spending and deficit financing habits.

While the debate rages on concerning the government’s willingness – and ability – to adopt more prudent fiscal policies and practices, individual Canadians should focus on two of the task force’s recommendations: shared responsibility and lifelong learning.

It’s not that Canadians need to start fresh on the journey towards financial self-sufficiency. We have a long history of saving and investing, as well as receiving advice and guidance from the likes of financial planners and accountants. More recently, we have turned to the advice and help offered by mortgage originators (independent, licensed mortgage brokers/agents) in our quest to consolidate high-interest consumer debt into lower-interest mortgage debt.

But while lowering debt is a worthwhile enterprise, it’s only half the solution necessary to achieve financial independence. What seems to be lacking is an educational package addressing both the need to reduce and control personal spending, while at the same time giving direction with respect to safe, effective and affordable long-term investment strategies.

Larry Bull is a licensed mortgage agent with Dominion Lending Centres Bankfighter based in Thornton, Ont., and creator of The “Know Bull” Wealth Creation Seminar. He can be reached at 416-414-1484; [email protected]; www.larrybull.ca.