Financial literacy was only recognized as an issue recently; for most, it didn’t feel relevant nor did they have any interest. Most articles calling for more financial education only surfaced around 2013-2014. The rising need for financial literacy in the general public, in my view, is due to two main factors.
The cost of living is increasing, and wages are not keeping up. Statistics Canada tracks the Consumer Price Index of Canada on a monthly basis. The purpose of this index is to indicate how much the cost of living has increased from a reference year to the current point in time. According to their data, the CPI has increased to 130.4 in July 2017 from the 100 reference point in 2002. It has increased by over 30% in 15 years! In another study, Statistics Canada has indicated that between the years 2000 and 2013, the average increase in income was 1.2% annually. When calculated, that’s an average income increase of only 19.6% in 15 years! I understand that the statistics may not be perfectly comparable. However, the bottom line is, we are spending more but earning less as time progresses.
The other reason for the urgency to be more financially literate is the increase in Financial Technologies (FinTech). There are more ways than ever to connect to your finances. This includes phone apps for banking, online self-directed stock brokerage (Questrade), robo-investor (Wealthsimple), primary bond issuance platform (Overbond), pay-per-mile car insurance (Metromile), real estate investment platform (Cadre) just to name a few. These services are delivered to your fingertips at the touch of a button (or screen). Companies are spending millions if not billions of dollars on new technologies to better their financial services, and to market their services. These technologies are rapidly integrating what was once the exclusive territory of “business people” into the lives of every person on the street.
Suddenly, in a world where budgets, money, banking, investing are discussed everywhere, governments realize that most of their population have no idea what is going on. If you search “Financial Literacy” on any search engine, you will see articles of panicked governments frantically trying to address the problem. They are going to great lengths to ensure the future of their population is financially literate. In fact, the Ontario government is now piloting the integration of financial literacy into their school curriculum.
The unfortunate part of this story is, there is an entire generation who did not benefit from government or school board training who are just beginning to enter the workforce. That is us; Millennials. While, for previous generations, this is also an important issue, the greatest impact is on Millennials. We have our entire professional lives and careers ahead of us and in about 10 years, we will have to compete with our younger counterparts who will have Financial Literacy training.
Becoming financially literate is no longer a matter of interest, but a matter of relevancy and to some degree, survival.