Debt levels and bankruptcies among Canadians are surging, and more financial literacy is crucial to address this problem, speakers at a financial planning conference said on Monday.

Laurie Campbell, executive director of non-profit credit counseling organization Credit Canada, said the average outstanding debt among Credit Canada clients surged from $17,727 in 2007 to more than $27,000 in 2008.

“Debt is a growing problem in Canada,” Campbell said, speaking at the Financial Planners Standards Council’s Vision 2020 conference in Toronto. She added that debt is becoming particularly problematic among younger Canadians. A growing number of young individuals are approaching the organization with levels of student debt and credit card debt that are out of control, she said.

In addition, Campbell pointed out that consumer bankruptcies have soared 54.3% in the past year. While the recession has contributed to the problem, Campbell said high levels of debt represent an ongoing issue that has simply become more evident in the wake of the economic turmoil.

“Everyone blames this on the recession,” she said. “However…it would have happened anyway.”

Added Campbell: “We know that this problem is not going to go away soon.”

Campbell said greater financial literacy efforts are crucial to educate Canadians on how to manage debt and engage in financial planning.

“Financial literacy has to take place,” she said. “People have to manage their debt better; people have to plan better.”

Campbell is part of the Task Force on Financial Literacy, established by the federal government to help create a cohesive national strategy to support initiatives across Canada aimed at improving financial education. She is optimistic that the task force will lead to significant improvements in the level of financial literacy in Canada.

“It is very encouraging,” she said. “We are going to see some great things come out of this task force.”

She said it’s especially crucial for provincial ministers of education to get involved in the financial literacy movement in order for the subject to be incorporated into school board curriculum.

Gerry Matier, executive director of the Insurance Council of British Columbia, agreed that it’s important for literacy efforts to target school-aged children in order to educate them before spending habits form.

But he noted that many adults lack financial knowledge as well. He said it is challenging to reach the bulk of Canadians in need of education, since consumers often don’t actively seek help until they’re in trouble financially.

“The people we’re trying to get to are the real challenge,” he said.

Financial literacy also represents an important way to increase the prominence of financial planning in Canada, speakers at the conference said.

Cary List, president and CEO of the FPSC, said many Canadians do not even understand the concept of holistic financial planning.

“Too many Canadians still think they have a financial plan simply because they have an RRSP,” he said. “Too few even have articulated life goals, and very few have those goals supported by sound financial planning strategies.”

He said financial literacy efforts must focus on much more than basic financial knowledge: they must involve educating the public on the importance of having a financial plan, on how to prudently hire financial advisors, and on how to translate knowledge into prudent decision-making.

“It needs to be about understanding how today’s decisions and behaviours may impact one’s future,” said List. “Financial literacy – done right – can empower Canadians to be more discerning and informed in their decisions to be more engaged in the process, to prompt appropriate actions and to change behaviours to avoid the traps that so many of us fall into every day.”

IE