Financial Capability: an idea whose time has finally come

“Financial Capability: is a relatively new term that was chosen in 2005 by the participants of the first Canadian national symposium on “Canadians and their Money” (www.fcac-acfc.gc.ca/eng/Publications/SurveyStudy/Misc/PDFs/SEDI-FCAC_FinCapability_e.pdf)
to encompass the notion that we, as independent adults, should not only be knowledgeable about the basic areas of personal finance but we should also feel competent in making independent decisions as well as be able to take responsibility for our financial well-being.

A generation ago, “financial capability” for most Canadians meant knowing how to balance a chequebook, paying off one’s mortgage and, if one was fortunate, to collect a guaranteed pension at the age of 65. Within the last two decades, with increased job insecurity, the complexity of family life, and an explosion of financial products and services in the marketplace, many people feel overwhelmed by the overload of decisions to be made on a daily basis and rely, often to their detriment, on the often self-serving advice of members of the financial services industry.

It is true that there are numerous public, para-public and private financial institutions that profess to provide Canadians with financial information. Given our 24/7 access to the internet in particular, one would think Canadians had all the information they needed to acquire knowledge and make informed decisions.

Unfortunately, that information is often biased to sell a specific product or focus on one area of personal finance without taking into consideration the individual’s overall personal objectives and other concerns. Independent professional advice is available to those who can afford to hire an expert, but many Canadians cannot afford nor find the help appropriate to their needs. In fact, most adults should be able to understand and apply the basic concepts of financial planning to their situation, and armed with this knowledge, be in a better position to make informed choices and avoid either making costly mistakes or dealing with outright fraudsters.

The Federal government has already established the Financial Consumer Agency of Canada (www.fcac-acfc.gc.ca) which has begun conducting surveys on consumer financial knowledge in Canada and supporting web-based financial education for young people but I think the FCAC should be much more proactive, in providing direct assistance to adults of all ages in developing financial capability.