With the recent financial crisis underscoring the wide-reaching impact of the international financial system on all aspects of society, the federal government is pledging to improve financial literacy among Canadians.

The 2009 federal budget features a $5-million plan to establish an independent task force that will make recommendations to the minister of finance on a cohesive national strategy on financial literacy.

“Financial literacy is an important life skill that empowers consumers to make the best financial decisions in their particular circumstances,” the budget states. “While a number of initiatives are currently underway to improve financial literacy for Canadians, it is time to organize efforts better.”

The government defines financial literacy as the ability to understand personal and broader financial matters, to apply that knowledge and to assume responsibility for one’s financial decisions.

The task force, which is expected to be launched this spring, will include representatives of the business and education sectors, volunteer organizations and academics, and will be supported by a federal secretariat.

It will require collaboration among the provinces, the private sector and community organizations, according to the federal government.

To implement the national strategy on financial literacy, the government has allocated $2 million for 2009-2010 and $3 million for 2010-2011, for a total of $5 million over two years.

The measure is one of several budget initiatives intended to help consumers of financial products by ensuring they have access to clearly communicated information.

“A strong and stable financial system,” the budget states, “depends on the ability of its users to make informed decisions when managing the risk associated with using credit.”

Other consumer protection measures include strengthening disclosure requirements on federally regulated financial institutions that issue credit cards. In particular, by providing clear and simple summary information on credit card application forms and contracts, and clear and timely advance notice of changes in rates and fees, the government says consumers will be better equipped to make informed decisions.

The budget also proposes the implementation of a minimum grace period on new purchases made with a credit card, so that credit card purchases would not begin to incur interest for a certain number of days.

The government also calls for the improvement of debt-collection practices of federally regulated financial institutions.

Furthermore, the budget includes a pledge to more forward on measures to make mortgage insurance more transparent, understandable and affordable. Specifically, following up on an announcement from August, the government says it will pursue enhanced disclosure to consumers about the characteristics of mortgage insurance. In addition, it will propose new measures to ensure that consumers are charged no more for mortgage insurance than the true cost of obtaining that insurance.

IE