While the term financial literacy might seem self-explanatory, it encompasses an array of aspects that need to be considered by every individual residing in a country. According to the textbook definition, financial literacy literally stands for an understanding of how the concept of money works in an economy. From the ‘what’ and ‘how’ of earning it, to the various approaches that a person takes to manage his income, to ensure adequate savings and investments and the fraction of it that he donates for a social cause. In other words, financial literacy can be defined as the knowledge and skills required by an individual for making informed decisions for managing his financial resources effectively. But what significance does the concept of financial literacy hold within the volatile economy of our country Canada? Let’s have a look.
The history of financial literacy in Canada
During the 1990s, a majority of economies in the world awakened to the concept of financial literacy and began treating it as a nationwide priority. With globalization becoming the order of the day, various countries including Canada started realizing the repercussions and economic implications of their citizens possessing inadequate knowledge and flawed decision making attributes that would eventually lead to a countrywide setback on their economies. With financial literacy becoming the urgent need of the hour, the government of Canada took a series of major steps in reforming its financial strategies and creating the Financial Consumer Agency of Canada.
FCAC and financial literacy
With the formation of the FCAC back in the year 2001, Canada outlined its priorities in educating and protecting its financial service consumers. Apart from making a host of regulatory reforms for strengthening the operational strategies and frameworks of its financial institutions, the FCAC was largely associated with imparting comprehensive information and knowledge to the citizens of Canada with regard to the finical sector and its various products and services.
The first and foremost strategy of FCAC was to survey the Canadian citizens regarding their existing knowledge about the financial sector, and then provide easy accessibility to accurate financial information to those who were largely unaware of the same. In a bid to further strengthen the financial knowledge of its citizens, FCAC organized a nationwide conference called the Canadian and Their Money: A National Symposium on Financial Capability in the year 2005.
Finally in 2007, the government realized the importance of incorporating a separate mandate for financial literacy in the FCAC and provided extensive funding to the agency for organizing and promoting financial literacy programs for the nation’s youth. As an extension to this program, the government further extended its support to the FCAC a year later in a bid to spread out the financial literacy program to all the other sections of the society as well.
Another conference Reaching Higher: Canadian Conference on Financial Literacy held the same year, discussed cutting edge strategies and tactics for further measuring and improving the progress of financial literacy in the country, followed by two other conferences being held in 2011 and 2014 respectively.
What does financial literacy involve?
The special Task Force on financial literacy created by the Canadian government in 2009 described the concept of financial literacy as having the required skills, confidence and knowledge in order to make informed and responsible financial decisions. In other words, a financially literate citizen must possess a thorough understanding of both personal and global financial matters, the ability to incorporate his understanding in his regular life and the confidence of making important decisions that are most suitable for his personal financial health and requirements.
Why is financial literacy important for the current volatile economic situation in Canada?
Given the ever changing economic situations in not only Canada, but also the entire world as a whole, it is absolutely imperative for our citizens to be able to:
- Make well thought of an informed decision about their regular expenditures in order to take care of all their financial obligations without hitting any roadblock.
- Ensure that they sign up for the most lifestyle appropriate plans and services from the ever changing financial market.
- Indulge in proper planning of the future such as investing in a home, while taking care of all present day needs.
- Put their financial resources (workplace benefits, tax credits, home equity, investments and so on) to good use without being affected by the external financial forces.
In a bid to further its efforts in promoting financial literacy in the country, the government of Canada declared ‘November’ as the official financial literacy month in March 2012, and continues to work relentlessly for improving the financial health and lifestyle of its citizens, notwithstanding the global economic situation.