Community Financial Counselling Services (CFCS)
Presentation to: Task Force on Financial Literacy: Public Hearing
Winnipeg, Mb
Presentation by: Sally Massey Wiebe, Financial Counsellor
John Silver, Executive Director
Registration ID: #161
Date: April 9, 2010 10:40-11:00
From Knowledge to Application: Strengthening Financial Literacy
Introduction
Community Financial Counselling Services, Inc. (CFCS) established in 1974 as a non-profit corporation, is a registered charity governed by a volunteer board of directors. CFCS receives funding from and is a member agency of the United Way of Winnipeg and a charter member of Credit Counselling Canada, the national association of not for profit credit counselling agencies. CFCS programs are funded through service agreements with Consumer and Corporate Affairs Manitoba, Manitoba Lotteries, The Winnipeg Foundation and the Workers Compensation Board of Manitoba. More details on CFCS programs and services are contained in the addendum to the written script of this presentation.
CFCS will address the Task Force panel today concerning two points:
1. Understanding the Dynamics of Financial Behaviour – An Integrated Approach
In 2009 CFCS served nearly 3,500 clients through counselling, educational sessions, workshops, and debt repayment alternatives. CFCS saw 971 clients for first time orientation or counselling sessions, an increase of 18% over the previous year. We conducted over 100 sessions/workshops on topics that included use of credit, basic money management, dealing with debt, gambling issues, income assistance, and advocacy for community groups, service organizations, and professionals.
For many of the consumers we see, there is an evident disconnect between comprehension and application of financial literacy. Personal and extenuating circumstances as well as behavioural factors often contribute to their failure to act in financially capable ways. It has been our experience at CFCS that the resolution of financial issues and the acquisition of improved financial literacy is most successful when it is seen as part of the larger dynamic of an individual’s circumstances. This includes everything from a client’s Socio-economic status, their physical and mental health, addictions/dependencies, their relationships as well as non-economic, non-demographic influences such as their willingness to seek help and their sense of control over their economic behaviour/competencies. This particular factor was termed “economic efficacy” in the research conducted by Wentworth (1976) and was recognized by this researcher as central to determining the effectiveness of any economic education program.
Through CFCS’s many decades of program delivery we can attest to the fact that creating an optimal environment for clients’ fiscal success requires not just information about solutions or strategies, but also provision of structure to encourage skill development and the application of sound financial practices as well as support for the multi-faceted aspects of clients’ financial pictures.
2. Financial Literacy as a ‘Household Name’: Communicating the Concept
National public information campaigns such as those for exercise and smoking cessation, even heritage moments have proven successful in creating public awareness, interest and changes in behaviour. The key to those campaigns was that they were: continuous for significant periods of time, varied in their message, and in the case of “Participaction “ included longer vignettes that provided simple but effective ideas to increase exercise and fitness. Moreover the messages were numerous and spread across all the media alternatives available. Their pervasiveness was successful not only in getting their message across to Canadians but in initiating a change in attitude which is central to bringing about a change in behaviour.
A research study by Dessart and Kuylen (1986) found an interesting relationship between a consumer’s perceived and actual levels of knowledge and the development of problematic debt situations:
“It appears from the investigation that people who claim little knowledge, regardless of whether the actually level of knowledge is high or low, are far more cautious in their decisions and have a lower probability for a problematic debt situation. On the other hand, people who have a low to moderate level of knowledge about forms of credit and financial institutions but who are not aware of their lack of knowledge, run a far greater risk of a problematic debt situation. People who have little actual knowledge and who recognize this are found to have been very cautious in their decision about credit” (p 323)
We see that this recognition of the relationship between level of knowledge and the development of problematic debt situations has implications for the proposed National Public Information campaign on Financial literacy.
The Task Force has defined financial literacy as “having the knowledge, skills and confidence to make responsible financial decisions”. A National Campaign to communicate the concept of financial literacy will serve to:
1. Provide Knowledge - by creating awareness of any disparity between consumers’ perceived knowledge and their actual competency levels. It might be speculated that a new awareness that “I don’t know as much as I thought I knew” could generate caution in financial decision making practices until such a time as they are able to bring about equity in perceived and actual knowledge.
2. Provide Skills – through a pervasive information and education campaign those consumers who do recognize they have limited actual knowledge can become equipped as informed consumers with the skills necessary to follow through on appropriate credit and financial decision-making.
3. Foster confidence among consumers who do have an actual knowledge level that is adequate so they are thus empowered to follow through on positive financial decision making.
More details concerning “communicating the concept” of financial literacy are included in the addendum to this written script and we would encourage you to peruse it at your convenience.
This concludes the formal presentation by CFCS. We thank you for the opportunity to present to this Task Force and would like to commend the Task Force on the comprehensiveness of the public consultation document. CFCS recognizes the value of and need for an integrated financial literacy strategy and looks forward to seeing the results of your deliberations. CFCS is actively involved in financial literacy and will be very interested in the role that we may continue to play in a national strategy.
References
Dessart, W.C.A.M, & Kylen, A.A.A. (1986). The nature, extent, causes and consequences of
problematic debt situations. Journal of Consumer Policy, 9(1), 311-334.
Wentworth, D. R. (1976). Economic literacy and efficacy: suggestions for research. Paper
presented at the NCSS meetings.
Addendum
CFCS Service Provisions – Additional Details:
In addition to its role as a free financial counselling service open to all Manitobans and as a publically funded, community governed agency, Community Financial Counselling Services is uniquely positioned to address the needs of our more vulnerable and high risk populations such as youth, seniors, lower income, those with mental health challenges, and problem gamblers. CFCS also works in partnership with the Addictions Foundation of Manitoba to address financial issues related to problem gambling. We are able to take the time to provide comprehensive financial counselling that considers the dynamics of the individual’s or families’ other concerns that are factors in the development and resolution of problematic debt situations. In seeking to provide a comprehensive, holistic approach to financial counselling, we partner with other organizations in order to provide more integrated service delivery; and to focus some attention on community education and professional cross training that increases the preventive and access to service aspects of financial counselling and debt management.
CFCS also works in partnership with the Canada Revenue Agency to provide the Community Volunteer Income Tax Program (CVITP). This program engages some 300 volunteers who prepare 28,000 tax returns for low income Manitobans each year. Clients utilizing this service are often wholly dependent on federal tax benefits such as the Canada Child Tax Benefit, GST/HST Credit, Child Disability Benefit, Working Income Tax Benefit and Old Age Security Supplemental Benefits – which are realized only after filing a tax return. In addition, the service allows clients to file their Provincial tax information and become eligible for the Provincial tax credits and benefits.
CFCS’s United Way funding includes support for our Community EIA Education and Advocacy Program that provides information and advocacy to individuals and families struggling with Income Assistance programs as well as training/mentoring in EIA advocacy for workers in other agencies. CFCS takes a leadership role in the development of committees, networks and conferences on advocacy with respect to poverty and social justice.
Further considerations re: Communications and Technology as it relates to Financial Literacy:
A. Communicating the Concept – A National Marketing Strategy for Financial Literacy
Following on the premise that literacy levels have significant impact upon Canadian’s ability to effectively manage their finances, as the Task Force’s public consultation document has pointed out, there is an important role for communication and technology in assisting our population to increase their knowledge and understanding of financial matters. We are certain the task force recognizes and will hear of the importance of integrating financial literacy in to our education curriculums from the earliest grade levels. However it is essential that attention be paid to those out of school, who need to be better informed immediately on financial matters if we are to prevent the escalation of the financial problems being experienced by Canadians.
As the consultation document points out it is important that language, delivery methods, reflect Canada’s diversity of cultures, ages and geographic regions. Moreover, it is important that an overriding, relatively simple message be communicated on a national level across Canada that can point to more specific resources available for specific age groups, regions, cultures. Also, as the consultation document points out, this message must utilize all the current information technology trends available.
B. Marketing - Stopping the Solicitation by Creditors
While we are not sure if this falls within the purview of the task force, we would like to take the topic of marketing and technology with regard to financial literacy a step further. Representing an agency that provides financial counselling and debt management, and in particular for gambling addiction, we are aware that one of the areas where financial literacy and financial behaviour adversely effect Canadians is unsecured credit. As a society we have become wholly dependant upon credit as evidenced by all the recent studies that have shown that 75% of Canadians have no savings, household debt has increased to 140% of household income and the staggering 1.3 trillion dollars in our household debt. We carry 74 million credit cards. There are an estimated 184 million unsolicited credit card applications mailed out in Canada each year. Payroll loans, retail consumer credit, buy now pay later all contribute to debt problems. Increased financial literacy and knowledge will be helpful in reducing our overwhelming debt problems but as with anything that creates a dependency such as alcohol, cigarettes and perhaps a more pertinent example gambling, a significant percentage of the population is going to become “addicted”. A significant portion of the population is going to abuse credit substantially creating financial hardship for themselves and their families, along with the economic consequences to government and financial institutions that affect us all. We suggest that the ease of access to and availability of credit be curtailed in the same way that tobacco and alcohol use have been treated in order take a preventive approach to the serious issues created by our dependency on and addiction to credit
We suggest that consideration be given to:
- Advertising of credit cards and other forms of credit in popular media be prohibited or strongly regulated
- Distribution of unsolicited pre-approved or otherwise credit applications be prohibited
- Credit (cards or alternatives) can only be approved after a face to face meeting with the creditor where the borrowing details and the cost of credit are carefully explained.
- Creditors be required to complete (with the client) financial capacity assessments prior to granting credit- similar to those they require when negotiating debt management proposals for those with credit problems
- Retailers offering any form of buy now pay later incentive be required to disclose, in writing and in type at least as large as the offer, the total cost of the item if the customer is unable to pay by or on the “pay later date”.