Innovative approaches to educating consumers
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Innovative approaches to educating consumers


Thank you and good afternoon. I’d just like to begin by echoing the thanks that have already been given today to our hosts at BEAR and FCAC and particularly the research symposium team that provided such great support to the panel. Thank you Becky and Marcie. The nice thing I think about an afternoon session is I don’t have to go through all the gory details of the statistics because we already have heard them this morning. Thank you Brenda for the debt statistics in particular. Our context in going into this session on innovative approaches to education in Canada we’re dealing with record high levels of debt concomitant with persistent low levels of savings. That hasn’t really changed for quite a while. What is changing though is that our interest rates are starting to tick upward and indications are they will continue to tick upward. We’re going to have people who have no memory of higher interest rates now dealing with higher interest rates as mortgages come up for renewal and for the first time we’ll have home owners coming up dealing with renewal at higher interest rates. That’s an area of some concern. We’ve had lots of evidence this morning in terms of levels of financial stress and that’s happening in this kind of steady state environment, so again the question of what’s going to happen as things start changing. One of the things that we are seeing changing is our financial landscape. We’re doing things financially in a different way than we have in the past. We’re living our financial lives differently and it can be difficult not just to keep up with the changes but to figure out which of the changes make sense for me and then how do I adopt them or when change is thrust upon me and I don’t want to change, how do I deal with that. There’s a lot more we’re expected to know that we might not necessarily know and have to deal with. The part of the context I want to take a few minutes to talk about is because we haven’t hit on it too much today is this idea of intergenerational financial support. Families are complex and they share resources. It’s not just the socio emotional resources that they share across generations. They also share financial support across generations. From a research perspective we don’t necessarily have a great handle on that. Just anecdotally one of the past presidents of my university as part of a convocation address would always say thank you to the parents. Thank you to the parents. Congratulations. Your young person has now come out of here with a diploma and coming off the family payroll. Parents in the audience were like thank God, right? Not necessarily because it used to be the case. We used to think they hit 18, we’re done. No. There’s that higher education piece or technical training or whatever. Then we’re done. No, we’re not done because there’s the weddings, there’s the first house, there’s increasing cost of childcare for my grandchildren. There’s that continuing financial support over a life course and it’s happening. Again we don’t really know a lot about how that plays out for people but we know it’s important. The other thing is people are supporting the older generations of their families in their senior years. Some work that I’ve done with colleagues using data from the general social survey took a look at people who are providing care, are paying out of pocket costs for their care, paying some direct costs of care. We found out that of Canadians who are providing care to family members who are older, about 42% were paying financially as well and of those people that were paying financially 18% told us they were in financial hardship. What were they doing if they were in financial hardship? Most of them, 90% of them were doing something with their spending, modifying their spending in some way to cover that care related expense. 73% were dipping into their savings. Another third were borrowing from their friends and families, again showing us the importance of that friend and family network. Another third were taking out loans. 20% were selling assets and 8% we really didn’t know what they were doing. Some people were taking multiple approaches too handling those financial costs. Some other evidence we have in terms of our context that I wanted to remind those of us who’ve looked at the Canadian financial capability survey, those results today that are relevant to what we’re going to be talking about, the glass half full, glass half empty, do you have a household budget question. 43% of respondents said yes, I did and the good news about that is that people who said yes I have a household budget, however that household budget was for them whether it was written down or whatever, almost all of them usually or always stayed within their budget. Once you had a budget you were pretty likely to follow it. Interesting question in terms of how were people paying for an unexpected expense of $500 or $5,000. The blue bars there are the results for $500 of an unexpected expense and the orange are for $5,000. By and large if the unexpected expense was $500 we had just shy of 60% would use their savings. If the unexpected expense was $5,000 though it was 36% who were going to use savings. If that unexpected expense was $5,000, people were now going to be using their personal line of credit. 18% would use the personal line of credit and 12% said I’m going to borrow from a financial institution to cover that debt. About 2% said I have to sell a financial asset. We’re seeing quite a difference in terms of that ability to handle unexpected financial expenses depending on the size of them. With these various things that are playing out, this context that we’re operating in our panel today is going to address questions such as how do we encourage people to save. How do we teach our children to save particularly as the context is changing? How do we encourage saving? How do we encourage people who aren’t budgeting to budget? How do we help people make sense of long term savings choices? How do we evaluate success? I’d like to introduce all our panelists now so we can just move from one to the next as we go along. Our panelists are Nicole Rivest who is a research and policy assistant with the Research and Policy team with the Financial Consumer Agency of Canada and the research that Nicole does is in the area of consumer behaviour as it relates to financial literacy and financial wellbeing. Nick Watkins is joining us from Money Advice Service in the United Kingdom. Nick has spent almost his entire career researching consumer financial behaviour so he’ll be sharing some of his insights from his career with us with Money Advice Service in a few minutes. Our third speaker is Pierre-Carl Michaud who is a professor in the applied economics department of HEC Montreal. He holds the Industrial Alliance research chair on the economics of demographic change and is the director of the Retirement and Savings Institute. I welcome all three of you to the panel. We’re going to start with Nicole.

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