Canadians and Their Money

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3. Learning and BehaviourEven when they have the right information and education, people sometimes makepoor financial decisions, or in fact no decisions at all. People routinely say that theywant to build savings, spend less and plan for retirement, but“Financial literacy is far more than anissue of teaching people how to budget. research shows that, for a variety of reasons, actions areMost of the low-income people we work often inconsistent with intentions.with know how to budget – their problemis how to survive with competingTo better understand this disconnect, the Task Force haspriorities (e.g., rent vs. food vs. having aphone to do job search) and confusing taken a close look at “behavioural economics,” a field ofand misleading information.… So the study that looks at factors influencing financial behaviour toimportance of looking at the behavioralside of this financial literacy pieceunderstand how people make decisions about their money.is extremely important to us and Under standard economic thinking, people use all theI hope it will be to you in your finalinformation available to them to make rational financialrecommendations on the strategy.”– St. Christopher’s House choices. The behavioural approach, in contrast, recognizesthat individual financial decisions are shaped not only bypeople’s knowledge but also by a range of psychological, social and institutionalinfluences. For instance:• The availability of too many options can be overwhelming and, in turn, biasdecision making; and• Choices that do not have immediate relevance (e.g., saving for retirement)may be delayed to a future time, despite their importance.Recognizing the limits of a purely education-driven approach, financial literacyinitiatives cannot be fully effective if they are developed and delivered in isolationfrom considerations that play an important role in framing the decision-makingprocess of consumers. We believe that behavioural economics can be a powerfultool to aid policy-makers and financial educators: it sheds light on consumer actionsand helps to identify mechanisms and incentives that can encourage appropriatefinancial decision making. Indeed, these insights have already demonstrated theirutility through practical “nudging” strategies such as auto-enrolment and autoescalationfeatures for workplace retirement savings plans.54TASK FORCE ON FINANCIAL LITERACY – III. Lifelong Learning
Take-up of Government BenefitsEarlier in this report, we discussed how government benefitprograms for Canadians could be used as channels for thedistribution of financial literacy materials. Here, we focus onhow the actual design of these programs can be improved toexert a positive influence on Canadians’ financial behaviours.“…the government also has an obligationto make it easy for individuals to applytheir knowledge, skills and confidence.For example, the “knowledge”component of financial literacydepends not only on citizens informingthemselves about governmentprograms, but also on governmentoutreach activities that inform the public.Similarly, the “skill” and “confidence”components of financial literacy requirean application process that is relativelyclear and simple.”– Tristat Resources 29The findings of our public consultations and research suggestthat some government programs designed to financially assistCanadians are not being fully utilized. Several factors impedethe take-up of benefits: some eligibility criteria and applicationprocesses are unnecessarily complicated, and many Canadians are unawareof the level of benefits to which they are entitled, or even that a specific programexists for them.As a result, eligible Canadians are missing out on substantial financial support.To illustrate: 29• Roughly 160,000 eligible seniors do not receive the Old Age Security benefit(representing almost $1 billion in pre-tax benefits);• About 150,000 eligible seniors do not receive the Guaranteed IncomeSupplement;• Approximately 55,000 eligible Canadians are not receiving Canada PensionPlan benefits;• The take-up rate for the Canada Education Savings Grant is just 40 percent; and• The median Registered Retirement Savings Plan (RRSP) contribution representsonly six percent of the total eligible room available (see Figure 11 on page 56).To better connect Canadians to their financial benefits, we believe that policy-makersshould be sensitive to the need for simplicity in program structure and documentation.A study commissioned by the Task Force suggests that the uptake and impact ofpublic benefits could be improved through measures to simplify application processes29 Shillington, R. (2010). “Financial Literacy and the Take-up of Government Benefits.” Tristat Resources. Researchpaper prepared for the Task Force on Financial Literacy. Available from www.financialliteracyincanada.comTASK FORCE ON FINANCIAL LITERACY – III. Lifelong Learning 55
Page 1 and 2:
Report of Recommendations on Financ
Page 3 and 4:
Table of ContentsAcknowledgements..
Page 5 and 6:
AcknowledgementsContributions of ma
Page 7 and 8: www.financialliteracyincanada.comTh
Page 9 and 10: touches all residents, our recommen
Page 11 and 12: 3. Lifelong LearningWe believe that
Page 13 and 14: ensure, at the highest level, accou
Page 15 and 16: • Navigate the ever-changing fina
Page 17 and 18: Figure 1: National Average Scores,
Page 19 and 20: Figure 3: Ratio of Household Debt t
Page 21 and 22: Figure 4: Key Results from the 2003
Page 23 and 24: Figure 6: National Strategy on Fina
Page 25 and 26: GovernmentsGovernments are uniquely
Page 27 and 28: play a crucial role in providing fi
Page 29 and 30: Figure 7: Shared Responsibility - M
Page 31 and 32: term. Further, the mandate should n
Page 33 and 34: • Enable stakeholders to be activ
Page 35 and 36: Figure 9: Life EventsReceivingunexp
Page 37 and 38: Figure 10: Essential Skills - Money
Page 39 and 40: We commend those authorities who ar
Page 41 and 42: Governments may consider leveraging
Page 43 and 44: considering the purchase of a finan
Page 45 and 46: “lunch and learn” seminars and
Page 47 and 48: The Role of Professional AdviceThe
Page 49 and 50: In some cases, programs reach many
Page 51 and 52: Student Loans Directorate at the De
Page 53 and 54: The UAS is also “designed to incr
Page 55 and 56: Throughout the public consultation
Page 57: since 1982. His report, entitled
Page 61 and 62: Programs for SavingIn our deliberat
Page 63 and 64: programs. We encourage, as a supple
Page 65 and 66: When it comes to online learning, h
Page 67 and 68: Public Awareness CampaignCreative a
Page 69 and 70: Fraud Prevention and EducationWe pr
Page 71 and 72: Self-Assessment ToolStudies and sur
Page 73 and 74: contests could also be used to fost
Page 75 and 76: ear a responsibility to communicate
Page 77 and 78: The federal, provincial and territo
Page 79 and 80: 4.5.Planning ahead (thinking about
Page 81 and 82: students have acquired some of the
Page 83 and 84: and offer funding and professional
Page 85 and 86: To that end, the Government should
Page 87 and 88: Important research gaps remain, how
Page 89 and 90: Conclusion: The Way ForwardSuccess
Page 91 and 92: AppendicesAppendix A: Summary of Re
Page 93 and 94: 19. The Task Force recommends that
Page 95 and 96: Appendix B: Members of the Task For
Page 97 and 98: 2520151050Most Canadians are making
Page 99 and 100: 2520151050Few Canadians keep themse
Page 101 and 102: Appendix E: Selected BibliographyTh
Page 103 and 104: Ipsos Reid. (2009). CSA Investor In
Page 105 and 106: Standing Senate Committee on Bankin
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Canadians and Their Money

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