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.
\u201cDebt is a growing problem in Canada,\u201d Campbell said, speaking at the Financial Planners Standards Council\u2019s 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.
\u201cEveryone blames this on the recession,\u201d she said. \u201cHowever\u2026it would have happened anyway.\u201d
Added Campbell: \u201cWe know that this problem is not going to go away soon.\u201d
Campbell said greater financial literacy efforts are crucial to educate Canadians on how to manage debt and engage in financial planning.
\u201cFinancial literacy has to take place,\u201d she said. \u201cPeople have to manage their debt better; people have to plan better.\u201d
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.
\u201cIt is very encouraging,\u201d she said. \u201cWe are going to see some great things come out of this task force.\u201d
She said it\u2019s 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\u2019s 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\u2019t actively seek help until they\u2019re in trouble financially.
\u201cThe people we\u2019re trying to get to are the real challenge,\u201d 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.
\u201cToo many Canadians still think they have a financial plan simply because they have an RRSP,\u201d he said. \u201cToo few even have articulated life goals, and very few have those goals supported by sound financial planning strategies.\u201d
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.
\u201cIt needs to be about understanding how today\u2019s decisions and behaviours may impact one\u2019s future,\u201d said List. \u201cFinancial literacy \u2013 done right \u2013 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.\u201d
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