The importance of budgeting and debt management

Studies show that great strides have been made in improving Canadians’ financial knowledge, skills and confidence and we are now among the most financially literate countries in the world. This is clearly encouraging news. However, we also know that too few Canadians have a budget, we carry among the highest household debts in the world, and many of us are not doing enough to save for retirement.

Why?  Because at its core, managing money is hard. We were pleased that the recent federal budget included a number of initiatives aimed at supporting financial wellness for Canadians. Increased withdrawal limits under the Home Buyers’ Plan, automatic government RESP contributions for eligible children, and a recommitment to a consumer-driven banking system has the potential to improve financial security for millions of Canadians. This is great news. However, navigating the complexities of our Canadian banking system and government programs can seem like an impossible task for even the most financially savvy among us. Add to that the challenges of budgeting and managing debt and it’s not too difficult to understand why Canadians’ are burdened with massive household debt and woefully inadequate retirement savings.

The Financial Consumer Agency of Canada (FCAC) does an excellent job of identifying why these basic skills are so important to financial wellness:

In the case study below, we show you how one plan sponsor went back to basics to support financial well-being for their plan members.

Ontario based union in the trades

• Apprentices needed education on the fundamentals of personal financial planning to take charge of their financial situation and to be prepared for potential downturns in available working hours.
• Help apprentices gain the skills and confidence needed to manage their money and be resilient to financial shocks.

• Developed a half-day workshop that focuses on the fundamental elements of personal finance and managing money.
• The workshop was delivered to apprentice members during their regular classroom time.
• Attendees received a workbook for pre-course reading and exercises. The workbook is designed for household level planning so attendees can discuss and review with their spouses and partners.
• Attendees completed a financial wellness survey to self-report on their level of financial stress and knowledge before each workshop and the same survey is completed at the end of the workshop to measure any changes that attendees might ascribe to the impact of the workshop.

• Responses to the post-survey suggest that the workshop substantially increased financial wellness for attendees.
• Survey questions that focused on financial stress saw an average score improvement of 12% which suggests that attendees felt less stressed about their finances at the end of the workshop compared to the beginning.
• Questions that focused on knowledge saw an average score improvement of 24% which suggests that attendees felt that they had a better understanding of personal finance concepts by the end of the workshop.
• Attendees gave the workshop high marks for overall satisfaction and provided suggestions for improvement which included building in more breakout exercises and more review on topics such as investing and tax planning.

• The program has expanded to include an additional level in financial wellness education for apprentices who have progressed beyond their basic level training.
• The Level 2 workshop includes more breakout exercises and dives deeper into investing and tax planning topics.
• We are currently reviewing the program for expansion to include those who are now considered masters in their respective trades.