We need a focused financial literacy strategy

The following is from a report called Toward a National Strategy For Financial Literacy

Phase 1: Strengthening Seniors’ Financial Literacy, published in 2014. Following a review of input based on this report, the Financial Consumer Agency of Canada (FCAC) finalized the financial literacy strategy for Canada’s seniors and published it in June 2015

Canada is one of the first countries working to create a focused financial literacy strategy for its older citizens. While some countries have developed general financial education materials for seniors, much of the focus to date in Canada and internationally has been on prevention of financial abuse and fraud targeting seniors.

• In Australia, the National Information Centre on Retirement Investments, an independent body funded by the national government, provides tools on its website to help people plan for retirement and access objective information related to retiring, investing and financial planning.

• In the U.S., the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corporation have developed the Money Smart for Older Adults—Prevent Financial Exploitation curriculum, including a participant guide and training module for instructors. The U.S. government has also created a website on retirement.

• In the U.K., the Alzheimer’s Society has published a report entitled Short changed: Protecting people with dementia from financial abuse, based on research conducted with people with dementia, caregivers and Alzheimer’s Society staff

With Canadians living longer and having greater responsibility for funding their retirement, saving and building a personal “nest egg” for the future are more important than ever. Yet Canada’s personal savings rate is at a record low. Just less than one quarter of eligible Canadians, for example, contributed to Registered Retirement Savings Plans (RRSPs) in 2011, and total contributions represented less than six percent of the total amount allowed

Achieving significant progress in boosting all Canadians’ financial literacy will require collaborative action by many individuals and organizations over several years. Because different segments of the population have different financial literacy needs, a national strategy will need to take a phased approach, each phase focusing action on the specific needs of each group. While the first group will be seniors, financial literacy programs and initiatives for other groups will not be put on hold. Instead, the national strategy will put special emphasis on collaborating and coordinating efforts according to an action plan to achieve greater results, for each segment of the population in turn.

Middle-income Canadians, particularly those without workplace pensions, are most likely to have a significant gap between their retirement savings and the amount they will need to maintain their standard of living.

Older Canadians face difficult financial decisions and unique challenges related to managing their money, including transitioning from work to full or partial retirement. Seniors who have accumulated savings must decide how best to turn those savings into income and make retirement finances last their lifetime.

In addition to day-to-day money management, older Canadians must prepare for life transitions with financial implications, such as changing housing and care needs, the onset of chronic disease or disability, and loss of independence. They may also face age discrimination and faulty assumptions that they have limited ability to deal with personal finances.

Recent research by the Canadian Centre for Financial Literacy suggests that general financial information is often not relevant to the retirement needs of low-income seniors. Some older Canadians, including Aboriginal and immigrant seniors, may face language and/or cultural barriers that can make understanding the financial marketplace difficult. Inabilities to access and/or afford relevant financial advice also interfere with the development of financial literacy. Some may face the potential of diminishing mental abilities as they age, which may affect their ability to make good financial choices.

Financial literacy resources and support to help seniors manage their money and make sound financial decisions are emerging as the seniors’ population grows, but gaps remain. We must better understand the specific financial knowledge and skills that older Canadians need so that we can better target our efforts. It is also important that we better understand the barriers to financial literacy so that we can minimize them and engage seniors. We must focus on providing more financial education programs and services that are accessible, unbiased, understandable, and relevant to seniors.

Government, and others must also work to understand better the financial literacy needs of specific groups of seniors, including low-income, immigrant and Aboriginal seniors, and tailor programs to address their need

Financial abuse of seniors, which often involves the misuse of their money or belongings by a person the senior trusts, is one of the most common forms of elder abuse in Canada and has serious consequences for their security and well-being. As seniors age, the challenges they face due to lack of financial literacy, or physical or mental challenges, may cause them to rely on others, which can increase their vulnerability to financial abuse.

Powers of Attorney and joint bank accounts are instruments available to assist seniors and others in financial management and protection when they need it; however, these tools have been used to take financial advantage of older adults.

There is a clear need for increased education and action to help seniors identify, report and protect themselves against this problem, and to help prevent financial abuse. It may be possible to expand many already existing activities to reach more seniors