Employers have a critical role to play in improving the financial literacy of Canadians, according to a new report by the federal minister of finance’s Task Force on Financial Literacy. The report cites 30 comprehensive recommendations to strengthen the country’s understanding of personal finances through a government-sponsored national strategy.
“There’s no doubt that people’s financial difficulties stem from a lack of knowledge and understanding of the financial system — how to use credit cards, manage money and how to make sound financial decisions,” said Laurie Campbell, a task force member and executive director at Credit Canada in Toronto. “A national strategy will allow individuals to have information available to them in these areas.”
The recommendations fall into five priority areas: shared responsibility, leadership and collaboration, lifelong learning, delivery and promotion, and accountability. The lifelong learning component is of particular interest to employers.
“The workplace is an opportune environment to help individuals though many financial decisions,” said Campbell. “It’s an effective channel for reaching a large number of Canadians.”
The task force, made up of 13 individuals from business and education sectors, community organizations and academia, recommends employers offer automatic savings programs and tools to facilitate increased lifelong saving by Canadians.
Employers can do this by helping individuals understand how to better manage their money at various life stages, said Carole Presseault, vice-president of government and regulatory affairs at the Certified General Accountants Association of Canada in Ottawa. During the onboarding process, new employees should receive adequate information to fully understand registered retirement savings plans (RRSPs) and other savings vehicles, and financial advisors or counsellors should be available when employees are taking parental leave or approaching retirement, she said.
“Work is where many people spend 40 hours a week — what better venue to provide some education?” said Presseault. “There’s a natural affinity between employers and people’s finances because employers are the source of salaries and various financial benefits for working Canadians and their families.”
The task force also recommends employers incorporate financial literacy training into workplace training and communications.
As of right now, an employer doesn’t have any legal obligation to provide financial literacy training, but some employers are paying attention to this, said Jim Yih, a financial education expert, based in Edmonton.
“There are some employers who have a very maternal perspective where they really do care about the employee and want to make sure they are fiscally responsible,” said Yih.
These employers go beyond the standard education where a representative for the group RRSP comes to the workplace to teach employees about the options for an hour or so — they tackle the problems surrounding debt, line of credit, credit cards, mortgages and bank accounts, he said.
An HR department can offer a wide range of training to employees to help them understand their finances. One option is web-based tools to access financial information, said Campbell.
One recommendation of the task force is to establish a national one-stop-shop website for this information and employers would be expected to use this tool and encourage employees to use it as well, she said.
The danger with web-based training is “websites don’t necessarily foster engagement” and it is often difficult to turn web information into concrete action, said Yih.
Another option for employer training is educational workshops, he said.
“These are extremely engaging, with face-to-face contact and employees who are actually participating,” said Yih.
Communication about financial literacy through bulletins, newsletters and emails is another way employers can educate employees, said Campbell. The communications must use clear, plain and understandable language so the information is educational, said Gary Rabbior, president of the Canadian Foundation for Economic Education, based in Toronto.
It is in the best interest of employers to help employees learn more about their finances, said Rabbior.
“The employer will likely gain from lower levels of employee stress, less distractions due to financial problems, less absenteeism, higher productivity and a better work environment with, one would hope, happier employees,” he said.
Offering financial education in the workplace can also help an organization with retention, said Yih. Instead of seeking another employer for a pay raise or other cash incentives, a fiscally responsible employee is more likely to stay with his current company because he can focus on other aspects of work that are important, said Yih.
The task force is hoping to see the recommendations from the report implemented within the next couple of months, said Campbell.
But, for this initiative to really take off, there needs to be a few leading employers that commit to helping employees improve their financial literacy, said Rabbior.
“It may provide an opportunity to simply show employees that they care — care about the financial well-being of their employees and families,” said Rabbior. “And that, even if there is no ultimate net business benefit to the company, is something worth doing.”
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