11/02/2015 03:27 EST | Updated 11/02/2016 05:12 EDT

Canada Needs A Seismic Shift In Financial Literacy

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Woman looking at bills and receipts on floor

The Financial Consumer Agency of Canada's (FCAC) Count Me In strategy is about to take centre stage in November during Financial Literacy Month.

Jane Rooney, federal Financial Literacy Leader, said in June that the strategy is "a call to action for every Canadian to make financial literacy a matter of lifelong learning." It focuses on three areas of financial literacy: managing money and debt wisely, planning and saving for the future, and reducing financial fraud and abuse.

"Lifelong learning" is key in this initiative. In 30 years, I want my children to look back at our generation and cringe at the idea of unfettered, spendthrift credit card use in the same way that we shudder when we think back to smoking sections in restaurants. A paradigm shift is needed.

Let's take a look at the three pillars of the strategy and where we are lacking in our daily lives:

Managing money and debt wisely

Canadians are a world leader at something terrible: household debt growth. According to a report released in February by the McKinsey Global Institute, Canada is second only to Greece in terms of growth of household debt, relative to income, since the Great Recession. Our debt-to-income soared to record heights in September to a debt-to-income ratio of 164.6 per cent. We owe $1.65 for every dollar we earn. Simply put, we're stretched incredibly thin.

This leaves us vulnerable to even slight shifts in the marketplace. If (when) interest rates rise, an increase of just three per cent could make mortgage payments unaffordable for nearly one in six Canadians, according to a recent survey by BMO.

Planning and saving for the future

Saving a portion of your pay cheque is not just a nice-to-have; it should be an essential part of your budget. Unfortunately, savings rates are hovering around historical lows and a recent survey from Pollara shows that 44 per cent of us are just getting by, saving nothing at all. This is a serious problem because without savings to inoculate us against financial uncertainty, credit cards and Payday loans become the expensive fallback.

And if debt levels among senior citizens are any indication, our ability to financially plan for the future could use a boost. It's no coincidence that we are seeing record-high senior debt levels at the same time that we are seeing a sharp increase in bankruptcies among retirees. There certainly seems to be a gap between conventional retirement plans and the financial demands on senior citizens -- a gap that requires lifelong financial literacy.

Reducing financial fraud and abuse

Technology is a funny thing, it gives us new and innovative ways to conveniently pay for products, just as it gives criminals new and innovative ways to steal from us. The Canadian Anti-Fraud Centre (CAFC) received more than 5,300 complaints of identity theft in 2014, a staggering 30 per cent increase over the previous year. As we use less and less cash, our digital world becomes a treasure trove for tech-savvy criminals.

But not all financial fraud is done by mysterious people on the internet. Financial abuse is the most common form of abuse against the elderly and the perpetrators are usually known to the victim. With an aging population, we need to be aware of the types of financial abuse and how to spot the signs. Often times the solutions to our great financial problems are painfully simple -- like making a budget, sticking to it and limiting discretionary spending. But it is often easier said than done, which is why FCAC's Count Me In campaign so critical.

To do our part, Consolidated Credit Counseling Services of Canada will be sharing free financial resources every day throughout Financial Literacy Month -- follow us on Twitter or like us on Facebook to get the tools you need to stay on top of your finances!


Consumer Debt Per Person (2014)