Kim Moody: Not much has been done to ensure the average Canadian is well-informed and educated about financial matters
Reviews and recommendations are unbiased and products are independently selected. Postmedia may earn an affiliate commission from purchases made through links on this page.
Article content
One of the most important bodies of knowledge and skills that people need to make basic life decisions is the material that encompasses financial literacy.
What is financial literacy? The Government of Canada states it is having the knowledge, skills and confidence to make responsible financial decisions — a decent general definition. The government, as well as others around the world, believes financial literacy is critical to the prosperity and financial well-being of its citizens, but not much has been done in practice to ensure that the average Canadian is well-informed and educated about financial matters.
Advertisement 2
Article content
For example, our primary K-12 schooling pays lip service to helping youngsters improve their basic financial knowledge and skills. My four sons, now adults, all went through grade 12 in the past 10 years. Not one of them was required to take a legitimate financial literacy course that taught them the basics of economics, finance, taxation, the power of savings, the Rule of 72, how governments create spending laws that directly affect their pocketbooks, what inflation is and the causes of it, etc.
Post-secondary education is also poor at providing such education. I’ve often stated that many professional programs outside of accounting and finance (which do provide decent courses and training), such as medicine, law, engineering, nursing and all the trades, should have mandatory financial literacy training as part of their programs.
Before some eager readers write to disagree and say their children took such courses, I’m not talking about the lame “career and life management” courses that are offered in Alberta and other provinces.
I’m talking about rigorous courses that provide hands-on tools and skills that can last a lifetime to assist people to make good and informed financial choices, and to assist them with assessing how their governments (federal, provincial and municipal) are spending the taxation dollars taken out of their paycheques in order to help them make better and more informed choices at the ballot box, instead of simply relying on feelings or what the media is shoving down their throats.
Advertisement 3
Article content
For example, our current federal government has been running deficits ever since it took office. It sees no issue in doing so. During the COVID-19 years, such spending and deficits dramatically increased. Questioned about how that might affect future carrying costs on the increased debt, Prime Minister Justin Trudeau responded by saying “… interest rates are at a historic low.” That’s a shallow and poor response, but many Canadians cheered it on.
Article content
Advertisement 4
Article content
Well, four years later, that concern proved to be very well founded, since it has translated into a dramatic cost-of-living increase felt by most, with many struggling mightily to make ends meet.
Advertisement 5
Article content
Examples of poor financial literacy show up in our elected officials’ statements almost daily. Famous examples from Trudeau include saying “budgets balance themselves” and “you’ll forgive me if I don’t think about monetary policy.” Reasonable Canadians should be offended and shocked by these comments by our head of state.
Advertisement 6
Article content
Financial literacy should include a basic understanding of taxation since taxes are the largest annual expense we pay by far. The average Canadian family spends more of its annual income on taxes — 45.3 per cent — than they do on basic necessities such as food, clothing and shelter combined (35.6 per cent), according to a recent Fraser Institute study.
Last week, Minister of Justice and Attorney General of Canada Arif Virani released a video about the capital gains inclusion rate. The minister displayed a shocking misunderstanding of his government’s policy by stating that there are no capital gains realized if cottage properties are transferred within a person’s family. That is simply false. There were a number of other errors in the video, such as miscalculations and inappropriate comparisons to how certain U.S. states tax capital gains.
Advertisement 7
Article content
While I’m sure there were no ill intentions with the video, it is downright embarrassing that one of the most senior members of our federal government — who has had three full months to absorb the capital gains proposal since its release — would produce a video with such falsehoods.
There was a day and age when displaying such a lack of knowledge may have even led to a resignation, but such videos today are simply taken down — which this one was — in the hopes that they will soon be forgotten.
Unfortunately, the average person cannot simply forget about how to pay for basic necessities when those costs continue to escalate. Instead, a good path forward for all Canadians and institutions is to improve their financial literacy.
As the early 20th-century economist and entrepreneur Roger Babson once stated, “More people should learn to tell their dollars where to go instead of asking them where they went.”
Recommended from Editorial
-
Time to stem the tide of successful people leaving Canada
-
Home equity tax latest proposal in bogeyman housing approach
Improved financial literacy is a key to improving Canada’s future. It starts with every single Canadian — young and old. It would lead to better overall choices, including our country’s taxation and economic policies, since the average person will be in a much better position to assess the appropriateness of the policies being put forward and how they will ultimately impact them and their children’s futures.
Advertisement 8
Article content
Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.
_____________________________________________________________
If you like this story, sign up for the FP Investor Newsletter.
_____________________________________________________________
Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.
Article content
Discussion about this post