Ellen Roseman: Let's strengthen financial literacy
- January 30, 2009 8:40 AM |
- By Ellen Roseman
Money Talks is a daily business column from CBC radio.
Ellen Roseman is a business writer at the Toronto Star.
(Listen to the original audio of this column.)
Here are some interesting proposals in the recent federal budget that affect consumers. They didn’t attract much publicity, so you may not have heard about them.
One, the government thinks Canadians are not getting a fair deal on credit cards. It has a long list of what it wants credit card issuers to do, based on complaints received by the Financial Consumer Agency of Canada.
Federally regulated institutions that issue credit cards need to beef up their disclosure of terms and conditions, the budget says. They should set a minimum grace period on new purchases made with a credit card, provide clear and timely advance notice of changes in rates and fees and improve their debt collection practices.
Two, the government thinks Canadians aren’t getting a fair deal on mortgage insurance. You’re required to take out insurance, which protects the lender from default, if your downpayment is less than 20 per cent of the value of your house. It’s underwritten by Canada Mortgage and Housing Corp., as well as private sector insurers Genworth and AIG.
Mortgage insurance needs to be more transparent, understandable and affordable, the budget says. Also, consumers should not be charged more for mortgage insurance than the true cost of obtaining that insurance. This refers to commissions and referral fees paid by mortgage insurers to financial institutions.
Three, the government wants to raise the level of financial literacy among consumers. This means improving the ability to understand financial issues, applying that knowledge and assuming responsibility for one’s own financial decisions. Financial literacy is an important life skill. It’s not taught in schools and it’s often provided by the companies that get people into trouble with credit cards and mortgage insurance.
This spring, an independent task force will be established to make recommendations to the Finance Minister on a cohesive national strategy on financial literacy. The task force will include representatives of business, education, volunteer groups and academics and will be supported by a federal secretariat.
Hear, hear. I really like this idea of strengthening Canadians’ financial literacy. It’s hard to tell people to look after their best interests when they’re confronted constantly with advertising messages that send them in the other direction.
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Comments (7)
I think that teaching financial literacy sounds a bit like blame: You got into debt because you are not financially literate. The truth is that many loans and mortgages may not have been made in good faith. Where is the trust between the lender and the borrower when the bank has all this fiat currency to lend and the borrower has no means to ever pay it back? Meanwhile it seems that the government is getting into more debt to bail out private Canadian banks whose only interest seems to be in profit.
Do you want some financial literacy? You won't get it from a financial adviser. The best teacher is you. Look into how private banks create money virtually out of thin air. Money is created as debt backed up by a shell game between lenders. Rather than play this vicious game that makes people into debt slaves by default, instead look into what you may be investing your money in, look into not using money at all, look into bartering, look into local currencies, look into how much is enough and then some. Beneath the mainstream news are alternative economies and compassionate communities of people that do not rely on government, private lenders and debt. This may be why banks are failing, and the so-called "economy" which has no basis in reality is failing too. Read the book "Your Money or Your Life" and watch the movie "Money As Debt" and empower yourself. Stop buying into the ideology that anyone needs to go into debt.
It's a start. Financial Literacy should be a core course starting in public school.
The credit card companies many of them run by banks are getting a huge helping hand from our government. They should be passing a portion of that along to consumers by reducing the high interest rate they charge. They could do this easily by cutting back the waste they mail out each month i.e. enclosed return envelopes that peopl seldom use.
Mortgage insurance should also have a section that covers the mortgage payment for up to 12 months if a person becomes sick or lose their job.
It's about time people woke up and noticed they are being exploited!
Better financial literacy among Canadians is a great idea. There should definitely required courses in highschools, colleges, etc. However, it's hard for me to believe the our government, who has previously preyed upon the ignorance of the public regarding Canadian politics (the possibility of a coalition government) and climate change science, and purposely spread misinformation on these issues, now suddenly supports the idea that the public should be given accurate information. I don't believe that our government really cares that we are properly educated on such matters, just as long as they maintain their control.
Caveat emptor.
This is the first lesson of financial literacy. If you get effed financially the responsibility is 100% yours. After this has been hammered into people's heads then you can get to the technical stuff.
Right now we as Canadians are obsessed with having other people "bail us out" of our financial mistakes.
Live a cash based lifestyle. That's lesson 2.
Lesson 3 is live within your means.
Without any math, knowledge of "The Economy" or the black magic of investing you can get through life wealthy, just like grandma did.
Take responsibility and you take control.
Having good courses in financial literacy starting at the middle to junior high levels would be a big help to everyone. Learning by hit or miss is much more costly.
Also, make courses available by governments on their web sites for free or by correspondence at a nominal fee.
Disallow "buy now pay later" advertising by stores. Kind of like cigarettes. You can sell them but you can't advertise them.
Set a maximum interest rate on credit cards. Say 15% or less. Also limit annual fees to "extras" such as travel insurance offered by credit card companies. A basic credit card must be "no fee".
What can the federal government do when education is a provincial responsibility?
Years ago (in the 70s) I wrote a series for the Royal Bank entitled "Your Money Matters". It was targetted at school age children. The Bank had to ensure that its name was not on the literature; we developed an advisory council of independent teachers and educators, we got every provincial ministry of education onside with the committment to make room in the curriculum for financial literacy. The Bank was committed to the project and it was very successful -- more than a million kits were distributed, printed at the expense of the Bank. Nothing less will be successful, and the federal government was not involved because it's not their responsibility in Canada. The Canadian Federation of University Women is looking at this issueas well.