Bringing financial literacy into your world

Read this Q&A with CPA Canada’s Doretta Thompson to learn more about the organization’s growing role in bringing financial literacy to Canadians.

In a complex world that increasingly relies on individuals to take care of their own affairs, financial literacy has never been more important. CPA Canada stands at the forefront of a movement to boost financial literacy across Canada, and Doretta Thompson, director, Corporate Citizenship, is leading that charge—along with more than 5,000 CPAs who volunteer their time to help Canadians improve their money management skills. We sat down with the Queen Elizabeth II Diamond Jubilee Medal winner to discuss the growing imperative to improve financial literacy and build capacity in diverse communities, from coast to coast.

Why does financial literacy matter—not just for those who work with numbers for a living, but more broadly among Canadians?

I think it matters to every Canadian because financial literacy is core to securing their own futures. Financial matters have become more and more complex—and, at the moment, it’s not widely taught in school. There are financial basics that we're finding a lot of Canadians don't have and they're a little bit afraid of the topic. And, I think that the basics are really, really important if people are going to set their own goals meaningfully, and know how to work and save toward them. Ultimately, I think it improves the quality of life.

How bad do you feel the situation is, in terms of what your average Canadian understands about some of the basics of financial and money management?

This isn't Canadian specific, but there was a really interesting survey done by one of the U.S. universities, and they asked three questions to objectively determine financial literacy. The first one was: You have $100 and you put it in the bank and the interest rate is two per cent—how much money do you have at the end of five years? And then they were given four options: $102, more than $102, less than $102, and I don't know. And that, of course, is a question about compound interest. The next question was: You put $100 in a savings account at one per cent, inflation is two per cent—what's your buying power at the end of the year? More than $100, less than $100, $100, or I don't know. And that's a basic question about inflation. The third question was about diversification: would you be better off to invest your money all in one stock, in a variety of stocks, or I don't know. And the interesting thing they found was that 70 per cent of the population could not answer all three questions correctly.

Do you see a difference with younger generations not having the financial skills that maybe boomers do? Have there been any shifts over time?

I think we certainly see that millennials have a great need for more financial literacy. It's quite a diverse group—probably more diverse than any generation before, in terms of the debt they're graduating with and the lack of access to good career jobs. We're seeing lots of people that are still basically in contract work—the gig economy—and then, of course, there are the sociological and technological factors that really divide that group. The edge of the millennial group is a little bit different from people even 10 years younger; based on our research, we're seeing a really high need but a significant difference in their openness to financial literacy.

Even people at a later life stage must be struggling to keep up with all the changes in their financial picture…

One of the biggest shifts, in terms of the long-term financial well-being of Canadians, is the move from defined benefits to defined contribution pensions. And that's what a lot of people really don't understand. And it really has put all the risk onto the individual to manage their financial future. The percentage of Canadians who have access to defined pensions is decreasing dramatically.

How has CPA Canada’s literacy program grown over the years?

We've doubled the number of programs we deliver each year. We work with about 900 different community groups, schools, libraries and other organizations; we also have a workplace program now, which is proving to be really popular, where we can take our programs into workplaces as lunch-and-learn events. We have a publishing program, with books and ebooks—some of them are free to download, some are available at a modest cost. We have a book on babies that's coming out early next year—it’s about what babies really cost, which should be lots of fun.

What is the overarching goal of all these literacy efforts?

Our first priority is providing basic objective information that is in the public interest and is purely about education. Right now, we have about 35 or 36 different sessions that we do. We have another nine under development and they're really targeted at different age groups, different financial needs, etc. We have them for adults, we have children's programs that we deliver through schools; we have programs about taxes, RRSPs, and one that we developed in response to the oil industry collapse. CPAs have enormous training in finance, so this is a way for us to give back.

KEEP THE CONVERSATION GOING

What area would you like to learn more about when it comes to your finances? Post a comment below.

About the Author

CPA Canada