Thank you, Mr. Chair.
First of all, I would like to thank you for the invitation to appear before the committee today.
The Financial Literacy Leader, Jane Rooney, is unable to be here as we are hosting our first research symposium in Moncton, New Brunswick. Today Ms. Rooney sends her regrets and her salutations to committee members.
Your committee's work is important, and we appreciate the opportunity to contribute to this discussion on poverty reduction. Financial literacy is a critical skill and one of key importance when talking about poverty reduction.
Every day, low-income Canadians are faced with difficult financial decisions, and have difficulty making ends meet. They are struggling to keep up with bills and other payments. We know many Canadians are living paycheque to paycheque. As well, precarious and part-time employment are on the rise in some cities. Across all income brackets, Canadians have too much debt and are not saving enough. We should care about this for many reasons. Debt and unstable income lead to financial stress, which impacts mental and physical health. Financial literacy plays a vital role in improving the financial well-being of all Canadians, including those with low incomes.
Established in 2001, the Financial Consumer Agency of Canada is a regulatory agency that works to protect Canadian consumers. We do this by supervising federally regulated financial institutions to ensure that they comply with federal consumer protection measures and that they comply with voluntary codes of conduct and respect the public commitments they have made. We also work to promote consumer awareness of the obligations of financial institutions to consumers of financial products and services.
In 2007, the Government of Canada expanded FCAC's mandate to include financial literacy.
In 2014, the government appointed Canada's first Financial Literacy Leader, Jane Rooney, to coordinate national efforts and collaborate with organizations across the country to deliver concrete initiatives that strengthen the financial knowledge, skills, and confidence of all Canadians. Within the first year of her appointment, we held three rounds of consultations. We met with hundreds of organizations, as well as individual Canadians.
Our first phase of consultations focused on the needs of seniors; the second phase looked at issues affecting newcomers to Canada, people living with disabilities, low-income earners, and indigenous peoples; and the third phase examined the needs of young Canadians and adults more broadly.
We heard that many people lacked access to affordable financial services and products, such as no-cost and low-cost accounts. We heard how some people have difficulty obtaining the identification required to open bank accounts and how people with low incomes may have limited access to short-term credit products at an affordable cost. These hurdles can lead people to high-cost cheque-cashing services and payday loans.
We also heard about the importance of accessing government benefits and programs, such as RESPs, the Canada learning bond, old age security, and GIS, and the importance of filing one's income tax through the community volunteer income tax program so that Canadians can access government benefits they are entitled to.
We took this information from the consultations and developed a national strategy for financial literacy called “Count me in, Canada”. It's a call to action for all Canadians and those organizations that work with them to strengthen their financial literacy.
The strategy was developed with the help of a national steering committee made up of 15 experts from across Canada. It aims to help people manage their money and debt wisely, to plan and save for their financial future, and to prevent and protect themselves from fraud and financial abuse.
Financial literacy is a shared responsibility. Everyone has a role to play. In order to implement our strategy, we work with a number of stakeholders, including 11 regional financial literacy networks, of which many work on poverty reduction. We consult regularly and work with the provinces and territories, and we collaborate with many private and non-profit organizations across the country as well.
We work with our federal counterparts on an interdepartmental committee on financial literacy. The committee is working to integrate financial literacy concepts into the various federal government programs. To date, we have coordinated a national campaign to promote direct deposit for tax refunds.
We are also looking at the possibility of including a money management training program in student loan programs. In addition, we are developing a strategy to reach out to indigenous people and increase their financial literacy.
We are working with the Canada Revenue Agency to promote the community volunteer income tax program, which provides information sessions to eligible individuals with a modest income and a straightforward tax situation to help them prepare their tax returns.
We collaborate with groups such as Prosper Canada, a non-profit organization that promotes financial literacy, in part through the financial empowerment champions project for vulnerable Canadians.
It is timely that we are meeting today. November is Financial Literacy Month. Since it was first held in 2011, community-based organizations, volunteer groups, agencies from all levels of government, employers, and private companies have been involved in FLM, a nationwide initiative that promotes financial literacy events, resources, and activities for all Canadians.
We have accomplished a lot over the last couple of years, but there is still much work to do to help Canadians budget, save, manage their money, and ease their debt loads. Research plays a key role in understanding the financial literacy needs of Canadians. Statistics Canada carries out the Canadian financial capability survey for the FCAC. We have benchmark data from 2009 and 2014. Our most recent data shows that 34% of newcomers, 37% of low-income Canadians, and 50% of indigenous peoples living off reserve struggle to pay or are not keeping up with bills and payments.
One concern we have is the increased reliance on payday loans. The proportion of Canadians using payday loans is small, but it has more than doubled, from 1.9% in 2009, to 4.3% in 2014. Payday loans are used primarily by low-income Canadians.
Last month, the FCAC published a study showing that many payday loan users are unaware of the costs compared to the costs for alternatives. Also, most are using them for necessary expenses, such as paying for rent and groceries. We know that giving consumers the knowledge, skills, and confidence to manage their money gives them more control. Our research tells us that confidence in particular plays a key role. If people are more confident, they are more likely to shop around, ask questions, negotiate, and use products and services that can help them manage their money and save, such as RESPs and TFSAs.
We know that a budget is a powerful tool and is key. Our research tells us that 46% of Canadians budget, and among those who do, 93% say that they usually or always stay within their budget. When they had the information about the importance of budgeting and how to do it, they began budgeting and sticking to it. However, while budgets can help, they are only part of the solution.
This committee's poverty reduction strategy will bring out ideas to help Canadians with low incomes enter the workforce and post-secondary programs so they can support themselves and their families. Poverty reduction should be about helping people gain employment, housing, financial, and overall well-being.
We see a strong link between poverty reduction and financial literacy. We believe our strategy aligns with your goals, because it focuses on giving Canadians knowledge, skills, and confidence as they enter the workforce, upgrade their education and skills, and plan for unforeseen circumstances that they will face throughout their lives. Financial literacy can help people access benefits, gain new opportunities, and hope for a better life.