Essential Skills and Financial Literacy Report

ESSENTIAL SKILLS AND FINANCIAL LITERACY:
EXPLORING THE CORRELATIONS, COMPATIBILITY, AND

SUCCESS FACTORS
Research Report Prepared for: The Office of Literacy and Essential Skills
Human Resources and Skills Development Canada
Research Report Prepared by: The Canadian Foundation for Economic Education
Contact: Gary Rabbior, President

110 Eglinton Avenue West, Suite 201
Toronto, Ontario
Phone: (416) 968-2236
Fax: (416) 968-0488
Email: gary.rabbior@rogers.com
Contents
Executive Summary..4
A. Introduction and Background: Project Goals and Methodology.7
CFEE and Project Background ............................................................................................ 7
Goals and Project Methodology .......................................................................................... 8
B. Financial Literacy: Setting the Stage for Analysis .............................................................. 9
C. Literacy and Essential Skills in Canada ..............................................................................19
D. Links between Financial Literacy and Essential Skills in Literature..................................... 22
Overall Relationship between Financial Literacy and Essential Skills ............................22
Financial Literacy and Numeracy .......................................................................................25
Financial Literacy and Reading and Document Use .........................................................26
Financial Literacy and Thinking Skills ...............................................................................27
Financial Literacy and Continuous Learning ....................................................................28
Financial Literacy and Computer Use ................................................................................29
Financial Literacy and Working with Others .....................................................................29
Financial Literacy and Oral Communication .....................................................................30
Financial Literacy and Writing ............................................................................................30
E. Links between Financial Literacy and Essential Skills: Expert Opinion............................... 30
Overall Relationship between Financial Literacy and Essential Skills ............................30
Financial Literacy and Numeracy .......................................................................................31
Financial Literacy and Reading and Document Use .........................................................32
Financial Literacy and Thinking Skills ...............................................................................33
Financial Literacy and Continuous Learning ....................................................................33
Financial Literacy and Computer Use ................................................................................33
Financial Literacy and Working with Others .....................................................................34
Financial Literacy and Oral Communication .....................................................................35
Financial Literacy and Writing ............................................................................................36
F. Designing Financial Literacy Programs to Incorporate Essential Skills ...........................36
Summary and Conclusions ................................................................................................41
Exploring the Link Between Financial Literacy and the Essential Skills CFEE 2
G. Essential Skill Links and Recommendations for Policy and Program Design ...........42
1. Essential Skills Assessment ....................................................................................42
2. Shared Content .........................................................................................................43
3. Accessible and Tailored Programming ...................................................................43
4. Follow Adult Learning Principles ............................................................................44
H. Key Features Associated with Success in Improving Essential Skills and Financial
Literacy ............................................................................................................................................. 46
Beyond Adult Education Programs .......................................................................................... 47
1. Youth and Young Adults ...................................................................................................... 48
2. Government Regulations ..................................................................................................... 48
3. Accessible information......................................................................................................... 48
I. Conclusion...53
References.................................................................................................................................................. 54
Appendix A ................................................................................................................................................. 58
Appendix B ................................................................................................................................................. 59
Appendix C ................................................................................................................................................. 60
Appendix D ................................................................................................................................................. 60
List of Tables
Table 1 Evidence of financial literacy-Essential Skill links from the literature review........5
Table 2 Evidence of financial literacy-Essential Skill links from the expert interviews......5
Table 3 Summary of experts feedback from the interviews............................................37
Table 4 Summary of implications and recommendations................................................45
Table 5 Summary of personal and program features associated with success...............47
Executive Summary
Exploring the link between Financial Literacy and the Essential Skills
In todays society, there is a growing concern about financial literacy and the ability of
individuals to make financial decisions. Simultaneously, some evidence suggests that
Essential Skills likely contribute to personal financial success (IALSS - Statistics
Canada, 2005) and may serve as a foundation for the development of financial literacy
and financial management skills. The present project was commissioned by the Office
of Literacy and Essential Skills within Human Resources and Skills Development
Canada to further explore the links between financial literacy and Essential Skills; an
additional aim of the project was to examine the implications of financial literacy-
Essential Skill links for policy and program design, as well as to provide
recommendations for improving financial literacy and Essential Skills.
CFEE worked in collaboration with the Human Resource Systems Group, the Georgian
Consulting Group, and Creative Consulting and Research Services to undertake the research
and implement the project.
Contacting experts and reviewing the literature to formulate recommendations
In the first phase of the project, we reviewed the national and international literature
exploring the relationships between financial literacy and Essential Skills. Based on
that, a preliminary report was generated mapping out the above-mentioned links and
their implications for program design. In the second phase of the project, we
conducted key informant interviews with adult literacy/financial literacy experts in order
to further explore the financial literacy-Essential Skill links and their implications for
policy and program design. The present report was generated to describe the findings
from the literature review and expert interviews regarding Essential Skill-financial
literacy links; the second aim of this report was to discuss the implications of these
links and the recommendations for the effective design of programs for development of
Essential Skills and financial literacy.
Anecdotal research and evidence still dominates formal and empirical research
In the literature, we found some scant empirical and more extensive anecdotal
evidence supporting the links between financial literacy and Essential Skills. The most
well-supported links were those between financial literacy and the Essential Skills of
numeracy, thinking skills, reading text, and document use; we found both empirical and
anecdotal evidence in support of these links. The remaining links between financial
literacy and the Essential Skills of continuous learning, computer use, working with
others, oral communication and writing were supported by the anecdotal evidence and
theorizing from the literature.
Table 1. Evidence of financial literacy-Essential Skill links from the literature review
Essential Numeracy Read. Document Oral Writing Thinking Computer Contin Work
Skill: Text Use Comm. Skills Use Learn. with
Other
Empirical X X X X x
Support
for Link
Anecdotal X X X X X X X X X
Evidence
for Link
Consistency in the evidence and the views some links are more important than others
Evidence from expert interviews was mostly consistent with the evidence from the literature.
Specifically, the interviewed experts argued that all Essential Skills are related to financial
literacy; nonetheless, the majority of the experts ranked numeracy, document use, reading text,
and thinking skills as the most important skills (in relation to financial literacy).
Table 2. Evidence of financial literacy-Essential Skill links from the expert interviews
Essential Numerac Read. Document Oral Writing Thinking Computer Contin Work
Skill: y Text Use Comm. Skills Use Learn. with
Other
Skill X X X X
Ranked by
Majority in
Top 4
Skill Said X X X X X X X X X
to be
Relevant
Overall conclusion: Financial Literacy is very important but not an Essential Skill
Overall it is concluded that there is not sufficient support for financial literacy as a new
Essential Skill. The recommendation of many of the experts interviewed, and of CFEE,
is that the Essential Skills are a critical and necessary foundation for the acquisition of
financial literacy. However, the acquisition of financial literacy requires a depth and
breadth of financial knowledge which would be additional to a basic skill.
The experts also provided a number of practical suggestions for the design of effective
programs for simultaneously improving financial literacy and Essential Skills. These
recommendations included:
1. Before starting a program in financial literacy, participants should undergo
an Essential Skills assessment to evaluate their skill levels
2. Financial literacy programs should incorporate development of the Essential Skills
and Essential Skills development programs should teach financial literacy
3. Financial literacy programs should be customized for learners of lower and higher
level abilities in the Essential Skills
4. All financial literacy programs beyond public school should be based on key
principles of effective Adult Learning
In addition, we offer additional recommendations for the improvement of financial literacy

beyond changes to adult education programs and policy which include the following. Each of
these is elaborated on in the body of the Report and, in most cases, would apply to efforts to
improve and develop the Essential Skills.
1. Start young (e.g. age 8/grade 3 or age 9/grade 4)

2. Target behavioural change since simply transferring knowledge often does not result
in desired behavioural change
3. Incentives are extremely important and affect behaviour.
4. Targeting less is likely to achieve more.
5. Simulation and participatory learning are the best strategies for retention and impact.
6. Video is a very effective resource especially for young learners.
7. Instruction, help, and assistance must come from a trusted source.
8. Provide access to credible filters of the mass of material and sources available.
9. Integrate financial education into the schools to build a foundation and learning
framework for lifelong learning
10. Understand that quick hits dont work.
11. Building confidence is key.
12. Improving economic literacy is important too.
13. Meta-cognition is very important.
14. Encourage people to consider the trade-offs and opportunity costs of their decisions.
15. Train teachers to build their confidence in providing financial instruction.
16. Dont abandon hard copy.
17. Reach people where they are or where they go.
18. Utilize opportunities that the government has to help Canadians via the current
connections that the government has with Canadians.
19. Develop and implement appropriate government regulations.
20. Promote the free sharing of high quality information, tools, and resources.
Overall, the Report demonstrates that there are strong connections between the Essential Skills
and the ability to develop financial literacy skills and that, going forward, additional effort should
be placed on integrating these two areas of learning so that Canadians have the skills and
knowledge required to effectively navigate todays financial environment.
A. INTRODUCTION AND BACKGROUND: THE PROJECT GOALS AND METHODOLOGY
CFEE worked in collaboration with the Human Resource Systems Group, the Georgian
Consulting Group, and Creative Consulting and Research Services to undertake the
research and implement the project.
The next section of the Report presents a quick overview of CFEE and the steps we
have taken to explore the relationship between financial literacy and the Essential
Skills. Next, the importance of financial literacy is discussed, followed by the
descriptions of the concept of financial literacy and its outcomes.
In the section that follows, a brief introduction to Essential Skills will be presented and
their importance and current state of affairs will be discussed. We will then proceed to
present the empirical and anecdotal evidence from the literature linking Essential Skills
and financial literacy, followed by the evidence from expert interviews. After that, we
will provide a summary of synthesized findings (from both the interviews and the
literature review) and some conclusions regarding the relationship between Essential
Skills and financial capability. The report will conclude with the discussions of
implications of the financial literacy-Essential Skills links and recommendations for
policy and program design.
CFEE and Project Background
The Canadian Foundation for Economic Education (CFEE) is a nationwide, not-for-

profit organization established in 1974 to promote enhanced economic, financial, and
entrepreneurship capability in Canada. CFEE is involved in various activities designed
to assist Canadians in their efforts to increase their financial competence and
confidence, as well as to assume their economic roles and make effective financial
decisions; these activities include producing resources, conducting research,
developing school curriculum, providing advisory services, and organizing seminars,
workshops, conferences related to economic and financial literacy and capability.
The project was carried out over a seven month period
In August of 2011, CFEE commenced its efforts to conduct research into relationships
between financial literacy and the nine Essential Skills (i.e., Numeracy, Thinking Skills,
Reading Text, Document Use, Oral Communication, Writing, Computer Use,
Continuous Learning, and Working with Others). The research activities related to this
effort were conducted over a seven-month period during which key areas of
compatibility between financial literacy and Essential skills were identified and
methods/strategies for developing Essential Skills and financial literacy were explored.
Goals of the project
The project had multiple aims:
to review the national and international literature exploring the relationships

between individual Essential Skills and financial literacy
to interview experts in the area including program managers, adult literacy

practitioners, and academics in order to further explore the above-mentioned
links and their implications for policy and program design
to prepare a report on the links and their implications and recommendations for
policy and program design.
Project Methodology
In the first phase of this project, we conducted secondary research on the linkages between the
nine essential skills and financial literacy. In preparation to conduct this research, an initial list
of key search words were developed to use during literature searches (see Appendix A).
Next, we conducted searches of the international literature on the connection between financial
literacy and essential skills. This Internet research focused on the policy setting organizations
such as governments and key stakeholders (e.g. HRSDC, provincial education
ministries/departments, international skills departments), on relevant International bodies (e.g.,
IALS), as well as on the research networks and databases (e.g., think tanks, ERIC, PsychINFO,
business and education publications, Google Scholar, etc.).
Following the literature searches, we reviewed and synthesized the empirical and anecdotal
evidence supporting the links of individual Essential Skills with financial literacy and its
outcomes. Next, we prepared a preliminary report on the links between financial literacy and
Essential Skills and initial implications and recommendations for program design.
In the next phase of the project, we conducted primary research to further investigate the
above-mentioned links and their implications for policy and program design. As a part of this
phase, we first contacted several researchers as well as program managers and adult literacy
educators. We booked interviews with several of the contacted experts, whereas others
referred us to their colleagues or contacts with more knowledge on the topic. Aside from these
initial e-mails, we also called a number of Canadian literacy and financial literacy organizations
to recruit additional experts for interview. Finally, we also contacted a number of international
experts (e.g., from the US, the UK, and New Zealand).
In the end, we recruited 10 experts in the areas of financial literacy and/or Essential Skills to
participate in key informant interviews (see Appendix B for the complete list of participants).
Nine of these experts were interviewed over the phone, whereas one expert preferred to
complete the questions and submit them to us via e-mail.
The interviews with experts/key informants focused on gaining more in-depth information on
several questions/issues. First, the interviewed experts were asked which of the nine Essential
Skills they think are most closely associated with financial literacy; they were also asked to
elaborate on the nature of these links. The second part of the interviews focused on the
experts thoughts on the implications of the financial literacy-Essential Skill links for policy and
program design. Finally, the experts were asked how financial literacy programs should be
designed to incorporate Essential Skills (see Appendix C for the complete list of questions).
Following the interviews, the experts feedback and responses were analyzed and synthesized
into coherent themes. These themes were incorporated into this report. The report also
incorporates a summary of findings from both the literature review and the interviews, in addition
to implications and recommendations for policy and programs that seek to develop financial
literacy and Essential Skills in tandem.
B. FINANCIAL LITERACY: SETTING THE STAGE FOR ANALYSIS
Greater financial complexity
Today, Canadians must make an ever-increasing number of financial decisions and navigate an
ever-changing financial marketplace at a younger age than ever before (Buckland, 2010; The
Task Force on Financial Literacy, 2011). Financial products and services have not only
increased in number, variety and complexity, but they have also become more available than
ever before (Orton, 2007). With developments in information technology and
telecommunications, consumers are able to choose their fees, interest rates, maturity dates, etc.
Also, the number of financial service providers has increased drastically (Orton, 2007).
Changing demographics
At the same time, demographics are changing. With the Baby Boom generation approaching
retirement, more Canadians will be retiring (Schellenberg & Ostrovsky, 2008). With increased
life expectancy, people will be spending more time in retirement and will thus require better
savings and retirement plans to cover their living expenses.
More personal responsibility for retirement planning and readiness
Moreover, employment and pension systems are changing (Orton, 2007). More people are
working part-time and on contract and are thus without any employer benefits. At the same
time, there are fewer employers contributing to pension plans thus leaving it to the individuals
to secure their own retirement savings (Orton, 2007). With the trend toward privatization of
pensions and social security, individual responsibility for financial planning has increased
(Lusardi et al., 2007). As Lusardi, Mitchell, and Curto (2010) summarized it aptly, consumers
must confront complicated financial decisions at a young age in todays demanding financial
environment (p. 3).
Financial mistakes often have considerable consequences
Unfortunately, the consequences of poor financial decision making are becoming

increasingly more serious (Lusardi et al., 2010; Orton, 2007). With the economic
downturn and increased financial insecurity, there is greater risk and fewer resources
to protect individuals and families from poor financial decisions. In addition, young
people have access to more money and credit at younger ages. They face financial
decisions early in life decisions that, if poorly made, can have significant and long-
term consequences.
Evidence shows most Canadians are not well prepared for the financial
challenges they face
Adding to this situation, there is growing evidence to suggest that the financial literacy
of Canadians and other individuals from around the world are not sufficient to cope in
todays demanding financial environment. For example, evidence from multiple U.S.
studies and a Dutch household survey suggests that financial illiteracy is widespread
among in women, youth, and people with low education (Lusardi et al., 2007).
Evidence from the Canadian Financial Capability Survey conducted by Statistics
Canada (2009) indicates that as many as 31% of Canadians are struggling with their
bill payments. Moreover, a 2007 survey by Credit Canada suggests that 92% of
Canadians report that they had more debt than they did 5 years previous.
Given the above-mentioned trends and economic instability, it is more important than
ever before to possess well-rounded financial knowledge/understanding and ability to
make sound financial decisions. However, according to the Task Force on Financial
Literacy (2011), Canadian and international studies indicate that many people of all
ages and income levels experience difficulties and challenges with financial literacy
as evidenced by their difficulties with everyday financial activities including reading
financial statements, managing their credit cards, and planning for retirement.
Many believe they are better prepared than they are
Several surveys commissioned by the Financial Consumer Agency of Canada suggest

that Canadians are not as well-informed about the financial world as they believe
themselves to be (Financial Consumer Agency of Canada, 2008). While many
Canadians saw themselves as quite able, the statistics do not seem to back that up for
the population as a whole. For example, one indicator of Canadians poor
understanding of financial management is their high average debt-to-income ratio
(Rabbior, 2011) and, while the personal savings rate for Canadians was approximately
20% in 1980s, by 2005 it had fallen to less than zero. Over a similar period, Canadians
overall debt-to-income ratio rose from 55% in 1983 to 105% in 2003 (Rabbior, 2011).
This seems to contradict the survey answers of many Canadians.
Task Force on Financial Literacy cited benefits of financial literacy
The Task Force on Financial Literacy in Canada (2011) asserted that the enhancement
of Canadians financial literacy (including their financial knowledge, skills and
confidence) would result in better preparedness for staying on top of financial
obligations, better navigation of the ever-changing financial marketplace, better selection
of products/services which best meet their needs, better planning for the future (e.g.,
retirement, home purchase, etc.), better ability to evaluate financial information and
advice that they receive from professionals, media, and friends, as well as better ability
to make use of resources like tax credits, pensions, workplace benefits, public benefits,
investments, home equity and access to credit.
Therefore, in todays society, there is a growing concern about financial literacy and the
ability of individuals to make financial decisions. One of the greatest reasons for
concern are the many possible consequences that can arise from poor financial
decisions or management.
The following are some of the possible consequences of a lack of economic and
financial knowledge and skills. Those lacking economic and financial skills and
knowledge are more likely to find that they are:
Spending beyond their means

Saving less than they need
Misusing and/or abusing credit and debt and paying excessive interest and fees
Less able to establish a credit rating and to access credit when needed
Spending, saving, borrowing, and investing without guidance from a budget
Building up a high debt to income relationship
Using large portions of income to carry debt
Drawing down assets, targeted for the future, to cover current costs
Disconnected from the main banking system and using high cost alternative financial services
Struggling to pay the costs associated with post-secondary education for children
Struggling to save effectively and sufficiently for retirement
More vulnerable to scams and frauds and misleading advertising
Less able to prepare for job search and to make informed career choice ANA D A1
Inadequately protecting/insuring assets
Less able to understand investment options and find, access, and benefit from advice
Less able to understand, access, and benefit from various government programs
More likely to experience financial stress, which can affect their home life and work situation
Make mistakes that can have lasting consequences
Statistics also show the reasons for growing concern
Overall, some additional statistics over the last decade help to show how many people got into
financial stress and why governments and policymakers are assigning it more attention and
priority.
- Canadians have been spending virtually all of their income since 1996. By 2005, for each
dollar of disposable income that Canadians had, they owed $1.16. (Statistics Canada)
- The savings rate for Canadians peaked in 1982 at 20.2%. By 1990, the savings rate was
1.9%. Today it is less than 0 meaning that, overall, we are spending more than our
income. (Statistics Canada)
- The per capita debt of Canadians has risen 5.2 times over the last 25 years from $5,470
in 1980 to $23,390 in 2005. (Statistics Canada)
- Between 1982 and 2001, the total amount owed by Canadian households rose by 152%,
whereas disposable income grew by 42%. (Statistics Canada)
- Canadas household debt-to-income ratio went from 55% in 1983 to 105.2% in 2003.
(Statistics Canada)
- The outstanding VISA and Mastercard balances at the end of 2004 were $49.8 billion.
(CBC Marketplace)
- The increase in credit card debt between 1997 and 2001 (just four years) was 90%. (CBC
Marketplace)
- A survey by Credit Canada and Capital One in 2007 showed that 37% of Canadians paid
the minimum amount each month on their credit cards.
- The same report by Credit Canada and Capital One showed that almost 70% of Canadian
households operated without a guiding budget.
- According to the International Real Estate Digest, almost 20% of baby boomers say they
will never be able to retire and about 33% say that they are unprepared financially for
retirement.
- According to the Canadian Institute of Actuaries, only one in three Canadians expecting to
retire in 2030 is saving at levels that will be required to meet basic household expenses.
- The proportion of Canadians covered by company pensions had fallen to 39% in 2003 a
decline from 45% in 1991 and the shift continues from defined benefit to defined
contribution plans.
- According to a Canadian Securities Institute study in 2006, 49% of investors did not
research their most recent investments and the same number indicated that they did not
feel confident with their investment decisions.
What knowledge, skills, and abilities are needed to be financially literate?
Before we can consider financial literacy in relation to the Essential Skills, it is important to
understand what is meant by financial literacy. The Task Force on Financial Literacy in Canada
(from here on referred to as the Task Force) (2011) has defined financial literacy as having the
knowledge, skills and confidence to make responsible financial decisions.
According to the Task Force, the knowledge refers to an understanding of personal and
broader financial matters, whereas the skills refer to the ability to apply the financial
knowledge in everyday life (p. 10). The confidence is defined as the self-assurance to make
important decisions, whereas the responsible financial decisions refer to the ability of
individuals to use the knowledge, skills and confidence they have gained to make choices
appropriate to their own circumstances (p. 10).
The following are some of the other definitions in use around the world:
Financial Capability means being able to manage money, keep track of your finances, plan
ahead, choose financial products and stay informed about financial matters. Financial
Services Authority, United Kingdom
Financial literacy is the ability to use knowledge and skills to manage financial resources
effectively for a life-time of financial well-being. Jump$tart Coalition (United States)
National Standards in K-12 Personal Financial Education 2007; also used by the U.S.
Treasury
Financial literacy is the ability to make informed judgments and to take effective
decisions regarding the use and management of money. Used by Australia; it is a U.K.
definition developed by S. Schagen and A. Lines, in Financial Literacy in Adult Life, for the
National Foundation for Educational Research, Slough, United Kingdom, 1996, p. ii
Financial capability is a broad concept encompassing peoples knowledge and skills to

understand their own financial circumstances, along with the motivation to take action.
Financially capable consumers plan ahead, find and use information, know when to seek
advice and can understand and act on this advice, leading to greater participation in the
financial services market. H.M. Treasury, United Kingdom
Financial literacy refers to ones ability to be aware of financial risks and opportunities and
to make informed decisions in their choices of financial services.
European Union Commission
Although the terms financial literacy, financial capability, and financial capacity are all in use
in various countries and by different organizations, those engaged in efforts to make
improvements all appear to be working towards very similar target outcomes. There appears to
be consensus that financial literacy entails more than the acquisition of knowledge.
In addition, research in the United Kingdom showed that imparting knowledge and skill is not
sufficient to ensure that people act on their acquired knowledge and skill. Action requires
confidence and belief in oneself to make a good decision, to affect outcomes, and to achieve
personal goals. Increasing self-confidence, self-esteem, and self-efficacy will be as important as
improving knowledge, skills, and attitudes if we want to achieve the vision and goals associated
with improvements to financial capability.
Therefore, CFEE shares held by those in many countries around the world that financial
capability is a broader and more appropriate term than financial literacy since it better
captures the notion of the combination of skills, attitudes, abilities, and behaviours in addition
to knowledge. CFEE therefore is an advocate for the use of the term financial capability and
we base our definition on this set of beliefs and assumptions. Our definition of financial
capability is:
Financial capability is achieved when one has the requisite knowledge, skills, and
abilities to act in such a way that they are able to undertake economic and financial
decisions and actions with confidence and competence.
At the same time, we recognize the widespread use of the term financial literacy in Canada,
largely as a result of the name of the federal Task Force, and so we will use that term
throughout this report.
Defining Financial Literacy
Thus, a natural question that arises is what knowledge, skills, and abilities should
exist or be developed as a foundation for acquiring financial literacy and financial
management skills? One answer to this question seems to be that Essential Skills
are likely to be linked to and serve as a foundation for the acquisition of financial
literacy and financial management skills.
A logical link to the Essential Skills as a foundation for improving financial literacy
A logical argument can be made as to how Essential Skills can be related to financial
literacy. For instance, in order to review, comprehend and use the information
appearing on ones bank statement, one must first be able to read text and use
documents. Next, one must have a certain level of numeracy to check credit card
statements and understand interest rates. Additionally, in this age of online banking,
investments and other financial services, although in-person banking is an option, for
online services one must possess a certain degree of computer use skills in order to
effectively make use of information- technology-facilitated services and products.
People must also employ their thinking skills when making decisions to adopt or
decline various financial products and services, and they also need to be dedicated to
continuous upgrading of their financial knowledge/understanding if they are to
maintain their financial literacy.
The Financially Capable and Responsible Person
To facilitate the correlation between the Essential Skills and financial literacy, CFEE
has undertaken consultations with other experts in the field around the world in an
effort to identify the knowledge, skills, and behaviours of a Financially Literate and
Responsible Person. Note that the responsibility dimension has been added since
we believe that Canadians have certain responsibilities as citizens that fall into the
financial category.
A Financially Capable Person is one who:
KNOWS
- The Basics of Money and Financial Matters: That is, acquires and sustains a
basic financial education and takes an on-going interest in, and understanding
of, life-relevant financial matters and issues.
- How to Access Reliable Information and Assistance: Knows of, and is able to
access, reliable sources of information and uses them appropriately
including, if affordable and relevant, the services of professional advisers.
- How to Choose Products Effectively: Knows how to choose products effectively giving
consideration to quality, price, affordability, alternatives, and options.
- How to Save Effectively: Knows how to save effectively to meet future needs,
and those of dependent family members, to achieve goals, be prepared for the
unexpected, and work toward financial independence (i.e. able to retire from
required work).
- How to Invest Wisely: Knows how to invest funds (if available) wisely, develop a
financial plan, and use professional services (if desired and affordable) to
achieve a reasonable return on investments without incurring unreasonable risk
- How to Protect Income and Dependents: Knows how to protect income (in the
present and future - including potential for longer life expectancy) and
dependents, if applicable and desired, against sudden loss of earning capability
due to illness, disability, or death.
- How to Protect Assets: Knows how it is possible to protect acquired assets from
loss or damage.
IS ABLE TO
- Ask Informed Questions: Ask informed and relevant questions prior to making
key economic and financial decisions and seek answers from reliable sources
including, when appropriate and possible, paid professional advice.
- Track Expenses and Keeps Up With Payments: Track expenses and pay bills
on time to (a) know where money is going and be able to budget and alter
expenses if the current situation is not sustainable or if not working to achieve
goals and (b) keeps up with payment so as not to incur unnecessary late fees,
penalties, and interest charges.
- Assume Debt Responsibly and Manage It Effectively: Assume debt responsibly
and as it can be afforded, comparing interest rate options, and manage debt
effectively (e.g. debts do not entail unreasonable trade-offs re other life options;
debt payments are made on time to avoid higher or unnecessary costs; highest
cost debt is paid off first)
- Generate Income If Desired or Required: Participate effectively, as desired, in
the economy to secure employment, or pursue self-employment, and apply
enterprising and employable skills to generate income and acquire financial
resources.
- Use Financial Services Effectively: Understand the potential value of financial
services and knows how to access and use the products, resources, and
services available to them from financial institutions, and other financial service
providers, effectively and at reasonable or minimum cost.
UNDERTAKES ACTIONS TO .
- Consider Needs Versus Wants and the Trade-offs of Decisions: Consider
whether a potential purchase is needed or wanted and the trade-offs (what is
being given up) that are relevant, both in the present and the future, when
making economic and financial decisions and choices
- Live Within Ones Means: Handle on-going expenses and debts without
unreasonable stress, risk to good credit standing, or risk of being unable to fulfill
financial obligations.
- Consider Costs and Sustainability: Undertake major decisions in life (e.g. having
children, buying a home) after careful consideration of the costs, consequences, and
sustainability of personal and societal well-being into the future
- Pay Required Taxes: Pay ones fair share of taxes but no more than is required
- Consider Needs of Others: Consider the circumstances of others less fortunate and
determine if there is a willingness and ability to assist others and know of ways to do
so if desired
- Consider the Possible Implications of Decisions: Consider the possible implications of
their actions and decisions on the lives of others and the conditions and circumstances
of their community including the environment
- Set Goals and Develop a Plan to Seek Balance in Life: Assess various factors that are
important in life and set goals and develop a plan to achieve a balance between financial
and material well-being and other non-material factors that will affect quality of life and
happiness.
If one assumes that the above describes many if not all of the desirable target outcomes for a
Financially literate and responsible person, what are the associated areas of learning that
might constitute a program to achieve such a set of target outcomes?
The UK FSA (2005) discussed four learning domains related to developing financial capability:
1) Managing money,
2) Planning ahead (e.g., budgeting, retirement planning, insurance),
3) Making choices (e.g., comparing costs, identifying risky products), and;
4) Getting help (self-reliance, using third parties).
McKay (2011) discussed a similar set of behavioural domains of financial capability in Canadian
context; specifically, the Canadian dimensions included Making ends meet, Keeping track of
money, Planning ahead, Choosing products, and Staying informed.
In his review of international literature for the Task Force, Rabbior (2011) presented five case
studies of international financial education initiatives (in the U.S., the UK, Ireland, Australia, and
New Zealand). Among other aspects of these initiatives, he discussed the financial literacy
outcomes considered by the various countries.
Amongst the sets of possible outcomes were those identified by the U.S. and cited in the
research undertaken for the Task Force (Rabbior, 2011). This grouping of financial outcomes
included various knowledge and behaviours regarding:
Earnings/Income (e.g., gross vs. net pay, learning about benefits and taxes)
Spending (e.g., setting financial goals, tracking spending habits)
Saving and Investing (e.g., understanding of how compounding helps save money,
saving early),
Borrowing (e.g., cost of borrowing, meeting payment obligations), as well as
Protecting (e.g., managing risks from potential losses, fraud/scam/identity theft, choosing
appropriate insurance).
CFEE undertook widespread consultations with representatives from all stakeholder groups to
reach consensus on a body of knowledge, skills, and behaviour that would constitute financial
literacy. These areas of knowledge, skill, and abilities were organized under 10 components or
topics for learning as well as three levels of development. The various levels denoted efforts
that could begin early in life (e.g. ages 8-13), those in the teen years (e.g. ages 14-17), and
those for adult learners. This Learning Framework outlining a detailed program for developing
the knowledge, skills, and behaviours associated with financial literacy is provided in the
Appendix to this report.
The primary aim of this report is to explore the relationships between financial literacy and the
nine Essential Skills, as well as examine implications of these links and recommendations for
future policies and programs for developing financial literacy and Essential Skills. We have set
the stage for this analysis with a look at financial literacy. We now turn our attention to the
Essential Skills.
C. LITERACY AND ESSENTIAL SKILLS IN CANADA
Before proceeding to examine the links between Essential Skills and financial literacy, it
is important to understand what Essential Skills are and why they are relevant to all
areas of life. Essential Skills are general, non-technical skills that are required for people
to carry out various life and work-related tasks. They provide a foundation for acquiring
other skills and knowledge. They are also said to enhance peoples ability to adapt to
changing circumstances at work and in life in general (Human Resources and Skills
Development Canada, 2007).
Nine Essential Skills
Human Resources and Skills Development Canada (HRSDC) has identified and
validated nine key literacy and Essential Skills through extensive research and
collaboration with various national and international agencies. The nine essential skills
and their definitions can be found in the table below. The complexity of each Essential
Skill is rated on a scale from 1 (basic tasks) to 4 or 5 (advanced tasks).
Essential Skills
Reading Text - Reading materials in the form of sentences or paragraphs
Document Use - Tasks that involve a variety of information displays in which words,
numbers, symbols and other visual characteristics (e.g., lines, colours or shapes) are
given meaning by their spatial arrangement
Numeracy - Using numbers and thinking in quantitative terms to complete tasks
Writing - Writing text and writing in documents, such as filling in forms, and nonpaper-
based writing such as typing on a computer
Oral Communication - Using speech to give and exchange thoughts and information
Working with Others - Employees working with others to carry out their tasks
Thinking Skills - The process of evaluating ideas or information to reach a rational
decision. There are 6 Thinking Skills and they include Problem Solving, Decision Making,
Critical Thinking, Job Task Planning and Organizing, Significant Use of Memory, and
Finding Information.
Computer Use - Using different kinds of computer applications and other related
technical tools
Continuous Learning - Workers participating in an ongoing process of acquiring skills
and knowledge
Similar to financial literacy, Essential Skills are increasingly important
Similar to financial literacy, Essential Skills are important now more than ever before.
According to a 2007 Employment Ontario guide (generated by Durham Region Local
Training Board, Literacy Network of Durham Region, and Durham College), Canadians
must refine their Essential Skills in order to be able to compete in the global
marketplace and knowledge-based economy. In fact, a 2004 study by Statistics
Canada found that a 1% increase in average literacy and Essential Skills are
associated with 2.5% increase in labour productivity and a 1.5% increase in gross
domestic product. Unfortunately, findings from The International Adult Literacy and
Skills Survey (Statistics Canada, 2005) have indicated that millions of Canadians are
still struggling with literacy challenges. Specifically, IALSS (Statistics Canada, 2005)
indicated that four out of 10 Canadians of working age demonstrated literacy levels that
are below what is considered necessary in todays society.
Essential Skills contribute to personal economic success
Moreover, evidence from The International Adult Literacy and Skills Survey suggests
that Essential Skills contribute to personal economic success (International Adult
Literacy Survey; Statistics Canada, 1997). First, some evidence from research
supports the link between income and literacy levels. For instance in Canada, those
with higher rates of literacy were found to have higher wages (Statistics Canada,
2005). There is also some evidence to suggest that peoples employment prospects
are better when they have strong (vs. poor) essential skills. A research paper by the
Canadian Council on Learning (2007) found that those who had higher Essential Skill
levels were likely to be employed for longer periods of time. Another Canadian study
suggested that those with lower skill levels were less likely to be labour market
participants (ONeill and Sharpe, 1991 in CBoC).
Improved Essential Skills are important for employers too
Moreover, additional evidence suggests that the improvement of essential skills can
also impact organizations and industries positively. For example, a study by the
Canadian Council on Social Development found that workplace literacy initiatives
resulted in improvements in employee training, interpersonal skills productivity, health
and safety, development of a learning culture, improved problem solving, improved
morale, decreased barriers and improved labour relations (CCSD, 2006b). Literacy
and Essential Skills have also been said to be important to success in a globalized
economy (IALSS - Statistics Canada, 2005). Unfortunately, the IALSS suggests that
Canadian literacy/Essential Skills are not sufficiently developed at this time to fully
match the requirements of the globalized economy.
Linking Essential Skills and financial literacy
Since Essential Skills provide the foundation for personal financial success, it is logical
then that they should be necessary for the development of financial literacy. Indeed,
according to ABC Life Literacy Canada (2010), people with low education and low
literacy levels face the greatest difficulties with financial literacy (presumably due to
lack of good basis for the acquisition of financial knowledge/ understanding). The ABC
Life Literacys submission to the Task Force on Financial Literacy suggests that low
literacy and numeracy skills likely extend to poor financial literacy, and that before
attempting to enhance the levels of financial literacy, we must address the problems
with literacy and numeracy. For example, for the 49.8% of Canadians who struggle
with numeracy (International Adult Literacy Skills Survey IALSS; Statistics Canada,
2005), their basic numeracy skills should be upgraded before attempting to improve
their financial understanding.
In the next section, we will examine the empirical and anecdotal evidence from the
literature on the links between financial literacy and Essential Skills both overall and
individually.
D. LINKS BETWEEN FINANCIAL LITERACY AND ESSENTIAL SKILLS IN LITERATURE
The overall relationship between financial literacy and the Essential Skills
The link between Financial Literacy and Essential Skills has increasingly been given
consideration in the past decade. Although the literature demonstrating this link is by
no means extensive, researchers, program developers, and policy makers are
increasingly discussing Financial Literacy in relation to the basic literacy and Essential
Skills. For example, ABC Life Literacy Canadas 2010 submission to the Task Force
on Financial Literacy indicates that Essential Skills provide the basis necessary to
develop financial literacy. Specifically, according to the ABCs submission, if we aim to
increase peoples ability to make complex financial decisions successfully, it is
important to first focus our attention on improving peoples basic literacy and essential
skills.
Low literacy levels have been associated with negative financial outcomes
Additionally, low literacy skills have been associated with negative financial outcomes
such as economic dependency. Specifically, Maxwell and Teplova (2007) found that
low levels of literacy and Essential Skills are associated with individuals inability to
cope with employment and income-related setbacks. This leads these individuals to
depend more on government for social support and income replacement.
Research by NRDC in the U.K. is noteworthy
Although there are relatively few research papers and reports that have examined the
links between financial literacy and basic/essential skills, one noteworthy report on this
topic has been generated by the UK National Research and Development Centre for
Adult Literacy and Numeracy (NRDC) in 2005. The report described findings of a study
on existing financial education programs including the financial literacy teaching that is
a part of adult basic skills programs (where basic skills include literacy, language and
numeracy). Coben and colleagues (2005) first summarized the existing literature on
the topic including the relevant policy publications. This literature seemed to suggest
that there is a relationship between financial literacy and basic literacy skills. For
example, research by the Advisory Group on Financial Literacy (AdFLAG)
demonstrated a strong link between poor financial understanding and low levels of
basic literacy and numeracy; moreover, AdFLAG also found that there is a close link
between basic literacy skills and the use of financial products and services. Similarly,
the Basic Skills Agency (2001) found there was a link between poor basic skills and
financial exclusion.
Financial literacy to support teaching basic skills or vice versa?
Coben and colleagues (2005) also conducted their own primary research using survey
and interview methods of data collection. Specifically, they administered a
questionnaire to a range of institutions and individuals in the education and community
sectors; additionally, they conducted in-depth interviews with individuals from the
private/commercial sector. From their primary research, Coben and colleagues found
that the existing financial literacy education in the education and community sectors
was often linked to programs for improving the basic skills (i.e., literacy, language,
numeracy). In some cases, financial literacy education was used to support basic
skills, and in other cases, it was supported by basic skills.
Overall, links between basic skills and financial literacy have not been well researched
Nonetheless, Coben and colleagues (2005) maintained that the links between basic
literacy skills and financial literacy are still poorly understood. Moreover, these authors
argue that levels of financial literacy are not necessarily completely aligned with literacy
and numeracy; this is because it is possible for a person to have well-developed
literacy and numeracy and still have poor financial knowledge and limited financial
management skills. In fact, according to the Basic Skills Agency 2001 report, although
those with poor basic literacy skills tend to use fewer financial products and services,
they do still own financial products and hence are in need of financial knowledge.
Links have been made by the FSA in the U.K.
One of the only efforts to consider basic literacy skills within a conceptual framework of
financial capability was made by the UK Financial Services Authority (FSA, 2005).
According to this framework, financial capability consists of the interrelated elements of
knowledge/ understanding, skills as well as confidence and attitudes. Within the FSA
framework on financial capability, basic literacy skills were said to be one of eleven
factors that influence individuals financial capability and ultimately their financial
decision-making. More specifically, when discussing the skills portion of financial
capability, FSA (2005) argued that the specific skills required to manage money and
make appropriate financial decisions need to be underpinned by basic levels of
literacy and numeracy (p. 18). Further, according to the framework, the financial
knowledge, skills and attitudes are influenced by peoples experience/circumstances
and personality; the knowledge, skills and attitudes, in turn, determine peoples
financial behaviour. The framework/model has since gone through a number of testing
and evaluation efforts.
Acquisition of basic skills appears to be a prerequisite for developing financial literacy
Thus, overall, it can be concluded that the acquisition of basic skills seems to be a
requirement to the attainment of financial literacy skills. Moreover, it can be said that
basic literacy and Essential Skills likely provide the foundation on which financial
knowledge and skills can be built, and that without this foundation, it would be difficult
for individuals to build their financial literacy. Nonetheless, literacy and Essential Skills
are likely best viewed as a necessary but insufficient condition for building financial
literacy.
In the next sections, we will consider each of the relevant Essential Skills separately (in relation
to financial literacy). Before proceeding, it is important to note that only certain Essential Skills
have been examined empirically in relation to financial literacy. While the remaining Essential
Skills have no empirical evidence supporting their links with financial literacy, there were varying
degrees of anecdotal evidence that did link these skills with financial capability. More is said
about this below.
Financial Literacy and the Nine Essential Skills Literature Review
a. Financial Literacy and Numeracy
Out of the nine Essential Skills, the one that was considered most frequently in relation
to financial literacy is numeracy.
Low levels of literacy and numeracy are linked to problems with financial literacy
In their submission to Task Force on Financial Literacy, ABC Life Literacy Canada
discussed the importance of general literacy and numeracy in particular for financial
literacy in Canada. As outlined in their report/submission to the Task Force, the ABC
Life Literacy Canada team maintains that Canadians low (overall/average) levels of
basic literacy and numeracy skills extend to problems with financial literacy. Hence,
they argue that without addressing problems with basic literacy and numeracy skills,
we cannot hope to enhance financial literacy. Or as they summarized it aptly: If one
has challenges understanding and grappling with basic reading and numerical skills, as
do 9 million adult Canadians, their ability to make good financial decisions is limited
(ABC Life Literacy Canada, 2010, p. 1).
Numeracy is a critical component of financial literacy
In the UK NRDC report, Coben, Dawes and Lee (2005) examined existing financial
literacy education in the context of the programs for developing basic literacy and
numeracy. Their research indicated that numeracy is perceived to be a critical
component of financial literacy, thus suggesting that people require numeracy in order
to be financially literate.
Levels of numeracy correlated with retirement savings
In a study of older adults in England (which is a part of the English Longitudinal Study
of Ageing ELSA), Banks and Oldfield (2007) examined the extent to which numerical
ability is correlated with several outcomes of financial literacy; specifically, they looked
at how numerical ability relates to financial asset holdings (including savings and
investments minus debt) and retirement savings or pension wealth. Findings from
this study indicated that individuals levels of numeracy were strongly correlated with
their retirement savings and investment portfolios. For example, it was found that
among men between 50 and 60 years of age, those with the highest numeracy were
about 2.5 times more likely to be found in the highest wealth quintile than in the lowest;
conversely, those with the lowest numerical ability scores were 6 times more likely to
be found in the lowest wealth quintile than in the highest.
Increased wealth associated with increased levels of numeracy
As a part of the US longitudinal Health and Retirement Study (HRS), Smith, McArdle
and Willis (2010) examined how numeracy in both spouses relates to the financial
outcomes of the family; specifically, the focus of this study was on the household
wealth as measured by housing equity, other real estate, stocks or mutual funds,
checking/savings or other money market funds, government saving bonds or treasury
bills, other assets, as well as debt. The authors found a relationship between financial
outcomes (i.e., total wealth holdings, investments in stocks, savings, income, etc.) and
numeracy of both husbands and wives; the relationship was especially pronounced
between numeracy of the familys primary financial decision maker and the households
combined wealth/financial outcomes. Smith and colleagues found that numeracy in
both spouses was related to household financial assets (although the effect was
stronger for the financial decision maker in the family). Specifically, it was found that
various wealth outcomes of the family increased sharply with increasing numeracy of
both spouses.
Hence, the existing research suggests that the link between numeracy and financial
literacy (and its outcomes) may be quite strong. In other words, it is likely that ones
development of financial literacy may heavily depend on the extent of the persons
numeracy.
b. Financial Literacy and Reading and Document Use
According to the U.S. Government Accountability Office (US GAO; 2010), proficiency
in reading, writing, speaking and understanding the English language seems to be
related to multiple dimensions of adult life (in English-speaking countries) including
financial literacy the ability to make informed judgments and take effective actions
regarding the current and future use and management of money (pg. 2). In spite of
this seemingly logical assertion, the literature search yielded very little in terms of
formal research on the link between financial literacy and language skills of native
English speakers. Corben and colleagues (2005) found that financial literacy programs
are often coupled with basic literacy and language programs, thus suggesting an
assumed link. However, very few studies actually examined this link. Nonetheless, it
has been recognized that the documents and information related the financial products
and services tend to be quite complex and use language that is confusing even to
native English speakers (U.S. GAO, 2010). For this reason, efforts are being made in
Canada and elsewhere to simplify the language of financial documents.
Aside from that, several North American projects/studies have examined the link
between language skills and financial literacy of newcomers. For example, a study
was conducted by SEDI (2008) to examine the existing financial literacy programs
directed at newcomers (in various countries including the U.K. and the U.S.). The
report suggested that low language skills constitute the greatest barrier to accessing
financial services. Thus, new immigrants with inadequate language skills were said to
be at a particular disadvantage in terms of financial literacy. In fact, the SEDI report
suggested that understanding financial literature and services sometimes requires quite
high language and literacy skills in general (i.e., in both native English speakers as well
as newcomers).
Similarly, a 2010 report by the U.S. Government Accountability Office (GAO) also
suggests that lack of proficiency in English can create significant barriers to financial
literacy. The report suggests that individuals with low English proficiency have
difficulties with relatively basic everyday financial activities such as completing
account applications, understanding contracts, managing bank accounts, resolving
problems (e.g., with erroneous bills), accessing financial education, etc. Unfortunately,
given that about 12 million adults in the United States reported poor English language
skills (U.S. GAO, 2010), it appears that a significant portion of the U.S. population is
likely to have difficulties with the most basic of financial activities and decisions.
Based on the reviewed literature, it seems that language skills may indeed be linked
with financial literacy. However, the research is lacking in empirical data to adequately
draw this connection.
c. Financial Literacy and Thinking Skills
Given the above-mentioned definitions of financial literacy and financial capability,

financial literacy appears to entail significant use of Thinking Skills. Specifically, first, it
can be argued that the building of financial knowledge and understanding entails
Significant Use of Memory. It is also likely to entail Finding Information and using
Critical Thinking to judge quality and appropriateness of various financial
products/services to ones own needs. Lastly, financial behaviour primarily entails
Decision Making with regards to the appropriateness and the subsequent purchase of
financial products and services.
Nonetheless, little empirical work has been done to examine the thinking skills in
relationship to financial literacy and its outcomes. Some work has been done,
however, to delineate the relationships between cognitive ability and financial literacy
and outcomes.
For example, within the context of the U.S. Health and Retirement Survey (HRS),
Smith and colleagues (2010) examined how the cognitive traits of both spouses relate
to the financial outcomes of the family. The cognitive traits that Smith and colleagues
examined include numeracy (discussed before), memory recall, episodic memory and
intact mental status. Memory recall and episodic memory are of interest to us here as
they are closely related to the Essential Skill of Significant Use of Memory. Smith and
colleagues found that there was some evidence that financial decision makers (for
each family) had higher cognitive scores than the spouses who were not primary
financial decision makers. More importantly, findings of the study indicated that the
cognitive trait of memory recall (measured using word recall) was related to household
financial wealth holdings (although this relationship was not as strong as that between
financial outcomes and numeracy).
Within the context of a Wisconsin longitudinal study, Herd and Holden (2010) examined
links between early life cognition, school experiences and late life financial literacy.
Herd and Holden found some evidence of a relationship between years of schooling
and financial literacy, as well as between cognitive functioning and financial literacy.
For example, these authors found that years of schooling were associated with the
participants knowledge of their retirement accounts, whereas the cognitive ability
scores were associated with greater probability of correctly reporting checking account
values. These authors concluded that those with lower levels of cognitive functioning
may fare poorly with regard to managing finances and creating a retirement savings
fund; about 20% of the participants of this study were in this category. Therefore, in
so far as the education and cognitive functioning in related to the Thinking Skills, this
study lends some indirect support for the link between Financial Literacy and Thinking
Skills.
The reviewed research, therefore, suggests a possibility of the link between various
Thinking Skills and Financial Literacy. Our logical deduction also suggests
understanding a wide variety of financial options and making personal financial
decisions involves collecting information, drawing on ones memory, critical thinking,
problem solving and finally decision making. Nonetheless, further research is likely
warranted to support these links.
d. Financial Literacy and Continuous Learning
We found virtually no research examining the link between Financial Literacy and
Continuous Learning. Yet, the connection between these two variables has been
mentioned by the experts in the area of Financial Literacy. For example, The Task
Force on Financial Literacy (2011) argues that, in order to develop financial literacy,
Canadians must demonstrate commitment to continuous learning. Similarly, in their
2010 submission to the Task Force on Financial Literacy, a number of organizations
and submissions argued that financial literacy is acquired through a gradual learning
process that takes place over time. These assertions imply that the best way to
develop Financial Literacy is through Continuous Learning about financial products,
services and other financial and money management matters. Perhaps further
examination of this may be warranted.
e. Financial Literacy and Computer Use
Much like with Thinking Skills and Continuous Learning, little formal work has been
done to examine the link between Financial Literacy and Computer Use. Nonetheless,
with the rise in the use of information technology for various financial services, some
experts have recognized that developing ones financial knowledge and understanding
may be tied to proficiency in computer use. For example, SEDI (2006) examined the
existing financial capability information, advice and financial education in Canada.
They found that a lot of financial information was contained in online materials. Given
this finding, they noted that in order to make use of the online financial resources, one
must have a certain degree of digital literacy and proficiency that may or may not be
shared by all consumers (SEDI, 2006, p. 10). Unfortunately, individuals with limited
access to computers and low proficiency in operating computers are thus likely to be
disadvantaged in terms of their financial literacy.
Professionals from Credit.org (2011) a non-profit consumer credit management

organization based in the U.S. - also noted that computers are fast becoming
indispensible for personal money management. Computers allow people to compare
prices when shopping, manage their bank accounts, pay bills (online), budget, and
even invest their money. With regards to investment activities, a computer is a great
tool to help one analyze and pick stocks and securities (Financial Spread Betting A
Traders Guide, 2011).
Thus, Computer Use is likely to be linked to Financial Literacy as a means of acquiring,

and keep up-to-date on, financial information, tools, and resources.
f. Financial Literacy and Working with Others
Although no specific projects that have examined working with others in connection to
financial literacy were located for this research study, this Essential Skill has been
mentioned in connection to working with financial specialists to acquire understanding
of financial products/services. Specifically, according to Literacy Coalition of New
Brunswick, working with others is useful when one is establishing a relationship with a
personal banker or financial advisor. Moreover, this skill is important when one is
collaborating with ones spouse, partner, family member or roommate to plan saving,
budgeting, covering expenses, etc. Thus, this link between financial literacy and
working with others may warrant further exploration.
g. Financial Literacy and Oral Communication
Oral communication has not been widely examined in relation to financial literacy.
Nonetheless, the Literacy Coalition of New Brunswick suggested that oral
communication is important when talking to a banker or financial advisor regarding
ones goals and plans. Therefore, this link between oral communication and financial
literacy should be further explored in the future.
h. Financial Literacy and Writing
Although no empirical evidence exists to support a relationship between financial

literacy and writing skills, there is some anecdotal evidence in favour of this link.
Specifically, according to the Literacy Coalition of New Brunswick, writing is useful
when one needs to apply for loans or other financing, as well as when one must make
payments by cheque. This anecdotal evidence suggests that the relationship between
financial literacy and writing may well warrant further exploration in the future.
E. Links between Financial Literacy and Essential Skills: Expert Opinion
Overall Relationship between Financial Literacy and Essential Skills
All of the interviewed subject matter experts agreed that Essential Skills (overall) are
indeed related to financial literacy. Many of the experts indicated that all nine Essential
Skills have relationships with financial literacy, though some are more relevant than
others. One of the experts quoted a personal financial literacy definition which
supports the relationships of most of the Essential Skills with financial literacy:
Personal financial literacy is the ability to read, analyze, manage and

communicate about the personal financial conditions that affect material
well-being. It includes the ability to discern financial choices, discuss money
and financial issues without (or despite) discomfort, plan for the future, and
respond competently to the life events that affect everyday financial
decisions, including events in the general economy (Vitt et al., 2000, p. 2).
Another definition from the same publication provides further (indirect) support for the
links between many Essential Skills and financial literacy:
A financially literate individual understands his/her relationship to money

(e.g., the need for financial security, tolerance for risk) and can read about,
discuss and communicate regarding personal financial issues. She
possesses knowledge of banking and credit, practices money
management, understands the need for protection against unforeseen
emergencies, plans for major life events, and saves and invests for the
future. A financially literate individual is a lifelong learner who applies that
learning to new financial situations. The distinguishing characteristic of
such a person is self-efficacythe sense that I can do this! and I want to
do this!in pursuit of what he or she believes are attainable goals (Vitt et
al., 2000, p. 29).
Aside from commonly indicating that all Essential Skills are related to financial literacy,
the interviewed experts also agreed that the Essential Skills are best thought of as a
foundation for the financial literacy education. Specifically, the Essential Skills were
referred to as a toolbox that would make it possible for people to acquire other
knowledge/skills such as financial knowledge and skills.
Nonetheless, several experts cautioned that just because one might have high levels of
Essential Skills, it does not necessarily mean that he or she would also have well-
developed financial understanding and skills. One financial program trainer/facilitator
indicated that she encountered people with quite high Essential Skills and high
earnings who did not have a good financial understanding and had made some less
desirable financial decisions (e.g., incurring significant debts).
Thus, it is clear that Essential Skills would best be viewed as necessary but insufficient
conditions for developing financial literacy. In other words, Essential Skills provide the
basis or the foundation on which to build financial literacy because without certain
basic levels of Essential Skills, it is difficult to develop good financial understanding.
Aside from that, high levels of Essential Skills alone cannot guarantee that a person will
be financially literate.
a. Financial Literacy and Numeracy
All Subject Matter Experts unanimously agreed that numeracy is crucial to and closely
linked with financial literacy. As one expert explained it, numeracy is important for
financial literacy because financial literacy is about understanding numbers e.g.,
understanding ones pay cheque, understanding credit, budgeting and saving, and
managing money (in general). Two experts also remarked that without a basic
understanding of arithmetic (adding, subtracting, etc.), it is difficult for people to be
successful with financial management and planning.
In the U.K., this link between numeracy and financial literacy is recognized perhaps
more explicitly than anywhere else; specifically, several major financial education
systems in U.K. are focusing primarily on mathematics and numeracy (and are being
taught primarily by math teachers). An expert remarked that this is perhaps a bit of a
concern because numeracy may, in this case, be overemphasized at the expense of
other important Essential Skills, such as thinking skills.
In spite of the importance of numeracy for financial literacy, the experts agreed that
numeracy is not the only Essential Skills that is crucial for the development of financial
literacy. Reading and Document Use, as well as the Thinking Skills have been
identified as the other Essential Skills that are crucial to financial literacy. These skills
are considered in turn.
b. Financial Literacy and Reading and Document Use
Once again, Reading Text and Document Use were put together in a single category
because the interviewed experts generally categorized and discussed these two
Essential Skills together. Along with numeracy, reading text and document use were
most commonly identified among the top four Essential Skills in terms of their
importance for financial literacy. Experts agreed that reading text and document use
are linked to financial literacy because money management often involves reviewing
various documents (e.g., bank statements, pay statements, RRSP statements,
mortgage papers, documents describing financial services, etc.), as well as reading
and understanding the information provided in the financial documents (e.g.,
comprehending information about financial products and services). Basically, in order
to be able to comprehend financial materials, one must be able to review documents
and read text.
Unfortunately, several experts noted that financial materials are often written in
Banklish or technical financial language that is geared toward lawyers rather than
toward average individuals with no specialist financial knowledge. In fact, one expert
argued that 90% of financial documents are unfathomable to an average person; this
expert added that sometimes lawyers even rolled their eyes upon reviewing such
documents, and that those who are capable of reading and understanding something
as complex as Shakespeares works may not be able to understand many of todays
financial documents.
This use of financial jargon coupled with the fact that many people are still struggling
with reading and document use skills, has been noted to present a major barrier to
average individuals development of financial literacy. This is the reason why in several
countries, including Canada, the U.S., and the U.K., efforts are being made to simplify
financial documents and use plain language when communicating about financial
products and services to non-experts (or lay individuals). Indeed, one expert
suggested that this problem warrants government policies which would mandate the
use of plain language in financial documents and materials.
c. Financial Literacy and Thinking Skills
Almost all the interviewed experts identified thinking skills to be among the top four
Essential Skills in relation to financial literacy. As one of the experts explained it,
financial literacy is about ultimately being able to make effective and personally
appropriate financial decisions; in order to do this, one must employ his/her memory,
critical thinking, problem solving and ultimately decision-making. As one expert pointed
out, critical thinking is important for a variety of financial activities from shopping and
comparing prices to absorbing financial advice and distinguishing appropriate/helpful
from unsuitable/unnecessary financial products and services.
Interestingly, one of the interviewed experts pointed out that the level of thinking skills
required for various financial management activities would depend on the type of
activity. While some more basic activities (e.g., reading credit card statements) may
not require a high level of thinking skills, more developed thinking skills would likely be
required when an individual is making more complex financial decisions (e.g., decisions
regarding loans, mortgages, RRSPs, investments, etc.). Certainly, when one is
analyzing and prioritizing the available financial information and determining what
information is relevant for his/her finances, then thinking skills are among the most
important skills to employ.
d. Financial Literacy and Continuous Learning
Although continuous learning was not said to be among the top four Essential Skills in
terms of its importance for financial literacy, it was still widely recognized as a skill that
is important for financial literacy development. As one expert explained it, financial
literacy is about lifelong learning. This is not only true for those who have inadequate
financial knowledge, but also for those who have good understanding of this area.
With the continuous changes of financial products and services, individuals must
update their knowledge and be dedicated to learning continuously.
Similarly, several other experts pointed out that financial literacy is not about any one
type of knowledge or skill, but rather about a body of knowledge, understanding, skills
and behaviours that are developed over time. Thus, in order to build this body of
knowledge, skills and behaviours, a dedication to continuous learning in required.
e. Financial Literacy and Computer Use
Virtually all of the interviewed Subject Matter Experts identified computer skills as
useful but not necessarily crucial for the development of financial literacy. The experts
recognized that today, computers are used increasingly for a variety of financial
activities and to communicate a variety of financial information. For example,
customers can view their bank account statements online, pay their bills online,
manage their credit card transactions online, check their investments online, review
current interest rates online, and access a variety of other financial information online.
They can also use their computers to put together budgets, generate financial plans,
put together financial goals, etc. One expert also pointed out that an increasing
number of financial education programs are provided over the Internet (e.g., through
web sites, etc). Thus, it can be said that computers are fast becoming important tools
for developing and maintaining financial literacy.
In spite of the increasing importance of computer use, experts recognized that most
financial activities can still be done without a computer or access to the Internet. For
example, it is possible for a person to manage their bank accounts and pay bills by
going to the bank and getting help from a bank teller. A number of the interviewed
experts noted that individuals who are often in most dire need of financial education are
indeed the ones who are living below the poverty line; these individuals tend not to
have access to the Internet and many of them do not even own computers. Therefore,
it was said to be important to have non-computer-oriented financial literacy programs
that target these individuals who may not have a chance to use computers extensively.
e. Financial Literacy and Working with Others
The majority of the interviewed experts did not rank working with others among the top
four Essential Skills in related to financial literacy. Nonetheless, they recognized that
working with others is, in fact, relevant to the development of financial literacy. The
one expert who did rank working with others among the top three Essential Skills
argued that much of what we do as a part of money management involves working with
other people. Thus, as he suggested, if one does not have confidence working with
others, this individual will find it difficult to successfully manage his/her money. Other
experts also recognized that financial planning, budgeting and similar activities often
take place within family context and in collaboration in ones partner and/or family
members. Moreover, one expert noted that people also need to know who to turn to for
help with banking, financial advice, investments, etc.
Interestingly, however, one expert cautioned that working with others may be a double-
edged sword because in certain circumstances it may be helpful and in other
circumstances it may create problems. Specifically, this expert discussed the
instances when people consult with friends or perhaps acquaintances who may be
misinformed regarding financial products and services. In this case, peer effects may
create problems in that people may be misinformed and may thus make inappropriate
financial decisions. So, this expert maintained that working with others may expose a
person to both good/helpful information as well as misinformation about personal
finances. For that reason, one must employ his/her thinking skills and critical judgment
to distinguish helpful information and advice from misinformation.
f. Financial Literacy and Oral Communication
Similar to working with others, oral communication was not often ranked among the top
four Essential Skills in relation to financial literacy. Nonetheless, oral communication
was widely recognized as relevant for the development of financial literacy. One expert
who ranked oral communication among the top three Essential Skills argued that in her
workshops on financial literacy, oral communication is very important for success and
learning. She explained that a number of the exercises used in her workshops utilize
group discussions about financial matters - as tools for learning. Thus, she found that
being able to talk and communicate about these matters tends to be helpful to people
in financial literacy workshops. The expert who ranked working with others among the
top three Essential Skills tended to agree with this assessment of the importance of
oral communication.
Interestingly, another expert seemed to disagree with this position. She found that
there were problems associated with people talking to their friends about finances and
acquiring a lot of misinformation. Additionally, because of the confidential nature of
personal finances, she found it troublesome when people occasionally revealed too
much personal information during the financial literacy training sessions. For example,
she said that she and her team found it problematic when people were widely sharing
information about their credit, or their spouses financial planning and other confidential
information. The expert who cautioned regarding working with others being a mixed
blessing tended to agree with the argument that oral communication can be
problematic.
Overall, it can be said that oral communication is important to a certain degree when
engaging with others in conversations about financial information. For example, as one
expert noted, it is important when working with family to budget, save, plan for the
future, etc. Similarly, another expert suggested that oral communication is important
for successfully managing relationships and managing finances within the context of
relationships. Specifically, this expert maintained that many arguments with significant
others/spouses/partners tend to be around money; thus, effective oral communication
was said to be important for successfully resolving these arguments and ultimately for
making effective financial decisions that will benefit the family. Oral communication is
also important when one is talking to financial advisors in so far as it helps one ask the
right questions and make appropriate financial decisions. However, one should also be
critical of information that they receive from others when communicating about
finances; unfortunately, not all information is useful/beneficial, and sometimes
information that we receive from others can also be inaccurate.
g. Financial Literacy and Writing
Lastly, writing was also not generally ranked among the top four Essential Skills in
relation to financial literacy. Almost all the experts agreed, however, that writing was
still relevant and useful for the development of financial literacy. One of the two
experts who ranked writing among the top four Essential Skills suggested that writing is
important because of the more extensive use of computers and hand-held devices;
with the explosion of technological innovations and increased popularity of social
media, one must be able to communicate effectively in written form in all areas of life
including personal finances.
The second expert who ranked writing among the top four Essential Skills mentioned that
she used writing to get her workshop participants to create personal financial goals (e.g., in
terms of credit, debt, budgeting, etc). Another expert mentioned using writing within her
financial education programs to get people to keep a diary of their spending habits. In expert
interviews, it was also suggested that writing was useful in the context of asking financial
literacy program participants to write down their wants and needs; an expert mentioned using
this documentation of participants wants and needs as a preamble for a discussion of
focusing on needs versus wants and saving and budgeting.
F. DESIGNING FINANCIAL LITERACY PROGRAMS TO INCORPORATE ESSENTIAL SKILLS

Important to customize financial literacy programs according to Essential Skill levels
One of the central themes in the experts feedback regarding program design was that of
customizing or tailoring the financial literacy programs to participants levels of Essential
Skills. As one expert pointed out, the financial literacy programs should not be one size fits
all. All experts agreed that financial literacy educators and curriculum developers should
know their audience in terms of the levels of literacy and Essential Skills. One expert shared
that she and her team did not realize at first that much of their audience had quite low
Essential Skills. Then, as they noticed that their program participants were not
understanding the concepts or picking up the skills, the expert and her team started changing
their workshops and programs to adapt to low levels (i.e., Level 1) of Essential Skills. So, for
those individuals with very poor Essential Skills, they developed a program which is almost
entirely visual. More is said about this below.
Prior assessment is a key step for success
Several experts agreed that some form of assessment may be useful for diagnosing the levels
of Essential Skills of the participants of financial literacy programs. Some suggested that it may
be appropriate to do some type of quick assessment of Essential Skills especially for longer
programs or courses with set curricula. For shorter courses or programs, some type of informal
assessment was suggested by certain experts. For example, community financial literacy
educators/facilitators often have a good idea of the types of participants who will likely register
for their programs; they have acquired this knowledge through their extensive experience
delivering the financial literacy programs in their respective communities. Several adult financial
literacy educators, for instance, described that most of their program participants tend to be
individuals with low income and often poor Essential Skills (although some educators indicated
that they dealt with participants with varied income and Essential Skill levels).
Table 3. Summary of experts feedback from the interviews
Experts Suggestion Examples of how to put into action

1. Adult financial literacy programs should not be Find out Essential Skills levels through a quick
one size fits all assessment so as to tailor programs
2. Target Essential Skills (ES) together with Incorporate program activities that simultaneously
financial literacy (rather than singling out the ES) develop both - Essential Skills and financial literacy (e.g.,
review a banks statement or bill; demonstrate how to
calculate interest)
3. Follow tenets of Adult Learning framework Discuss learning goals and objectives of the program at
when designing ES and financial literacy the outset
programs Link the learning activities with the real-life issues and
problems; who how to address the problems
Try to draw on participants experience and knowledge
(during program activities)
Incorporate either the real world activities or close
simulations of these
4. For participants with low ES, tailor programs Use less text to read and more visuals (e.g., charts,
to their specific needs illustrations) to demonstrate concepts
Use hands-on, experiential activities (e.g., go to a bank
or a grocery store; demonstrate how to compare prices,
etc.)
Contact program participants for follow-up sessions
after program completion
Give opportunities for participants to ask questions
Involve participants in group/one-on-one discussions
Start with simple concepts (geared toward Grade 5
learners) and build up to more complex concepts
Consider using trusted community educators
5. For participants with high ES, use more Go over various financial documents (e.g., pay
challenging activities statements, credit card statements, bills, mortgage papers)
Ask participants to write down their financial goals
Ask participants to keep a diary of their spending habits
(for a week or two)
Include more group discussions and knowledge sharing
Explain compound interest and demonstrate how to
calculate it
Discuss mortgages
Discuss retirement planning, investments, etc.
Incorporating Essential Skills into financial literacy programs
So what did experts think about how should financial literacy programs be designed to
incorporate Essential Skills? Interestingly, the majority of the interviewed experts
agreed that Essential Skills should not be singled out or targeted separately, but rather
incorporated together with financial literacy. In fact, many experts remarked that
financial literacy is a useful and relevant context within which to target Essential Skills
especially in adult financial education programs.
Using the Adult Education Framework can be helpful
Several experts argued that the Adult Learning framework is a useful one to follow in
the case of financial literacy and Essential Skills training. Specifically, according to
Knowles (1996) Adult Learning framework, adults tend to be autonomous and self-
directed, goal-oriented, relevancy-oriented, problem-centered, as well as experience-
oriented. Thus, according to this framework or model, adult learning programs should
be designed so as to be relevant to adults experiences and their realities, to help
adults achieve important goals or benefit them in some way, to present adults with
different learning options, etc. Consistent with these tenets of Adult Learning
framework, the experts argued that separating Essential Skill training from the financial
literacy training would likely make adult participants question the relevance of the
Essential Skills training. As one expert explained it, doing divisions (to develop
numeracy) is likely to be perceived as boring and irrelevant, whereas showing how
math applies in the context of loans and mortgages is likely to be of significant interest
to adults.
Experiential learning and real world applications are important
Similarly, almost all the interviewed experts recognized the value of experiential
learning within the context of developing Essential Skills and financial literacy. A
number of the experts mentioned that among the best ways to engage any participants
including those with low Essential Skills was the use of real world, practical
activities; some also suggested the use of activities that recreate in the class what
people would do in real life. One expert explained it aptly: when we do something that
feels real, we remember it better. The experts provided a number of examples of such
real life, practical activities. For instance, a number of experts provided an example of
looking at some type of a bill (e.g., telephone bill) and asking program participants to
answer questions such as what does this charge mean, how would you add up these
charges, what would you do to address an inaccurate charge, etc.
Virtual learning is also effective when possible
A number of experts also talked about either doing a virtual shopping trip (i.e., online)
or an actual activity of going to a store (e.g., grocery store), looking at prices and doing
price comparisons (to teach people to compare prices and save money or stay within
their budgets). Other activities that were thought (by several experts) to be useful and
practical include signing up for a bank account, signing up for online banking,
completing applications (e.g., for credit cards, loans, etc.), searching for specific pieces
of information within financial statements and explaining the meaning of different
entries on common financial statements (e.g., pay statements), showing ways to
prepare budgets, creating personal financial goals, practicing calculation of interest and
compound interest, etc. A number of experts also argued in favour of having group
discussions regarding various financial matters.
Simultaneously addressing financial literacy and the Essential Skills
As can be noticed, in addition to having to do with financial literacy, these activities also
tend to employ various Essential Skills. For example, studying various financial
statements makes use of document use (and possibly reading). Completing various
applications and generating ones financial goals makes use of ones writing skills.
Class discussions make use of oral communication, whereas calculating interest and
adding up charges makes use of numeracy. Most of the above-mentioned activities
also employ thinking skills such as making use of memory, problem-solving, critical
thinking, and decision-making. Thus, these activities are good ways to develop both
the Essential Skills and the financial literacy of program participants.
Designing programs for those with low levels of Essential Skills
When asked to comment on designing programs for people with low levels of Essential
Skills, the interviewed experts provided concrete and insightful suggestions. For
example, one of the experts who said that many of her program participants had low
Essential Skill levels, talked about her team revising their financial literacy training so
as to contain as much visual material and as many visual demonstrations as possible.
Basically, the idea here was to have less text to read and more pictures (e.g., charts,
illustrations) to demonstrate financial concepts. This expert noted, however, that
although the visuals are typically helpful in conveying information during programs, the
financial information/knowledge is often not well absorbed and retained because of
the participants low thinking skill levels.
So, this expert added that it is important to utilize hands-on, experiential activities
(e.g., going to a bank and interacting with a bank teller to open an account; going to a
grocery store and compare prices). Moreover, this expert argued that it is important to
do some type of follow-up with the program participants several months after the
program has ended; this provides trainers/facilitators a chance to see how the
participants are doing and if they are applying what they have learned to real life.
Use of visuals vis-a-vis text
A number of other interviewed experts agreed with this experts view and suggestions.
Specifically, almost everyone agreed that for the participants with low level of Essential
Skills, it is important to use less text and more visuals. Everyone also agreed that
experiential learning activities should be employed more extensively than other
strategies such as lecturing.
The importance of following up, opportunities for questions, and group size
Moreover, experts also tended to agree that follow-up with participants (several months
after the program) is a must. One expert also added that participants should be given
lots of opportunities to ask questions and check-in with facilitators. Another expert
suggested that smaller class sizes (i.e., maximum 8 students) be used and one-on-
ones be incorporated into sessions with low literacy participants.
Progressive learning and development and trusted facilitators
This expert also suggested that he would start with simple concepts (e.g., geared
toward grade 5 level of education) communicated in simple language, and then
proceed to build the difficulty of language and concepts to about grade 12 level.
Finally, one of the interviewees also suggested that participants with low Essential Skill
levels should work with community educators to develop their financial literacy; the
expert explained that because individuals with low Essential Skill levels are often self-
conscious and prefer to hide their basic literacy shortcomings, these individuals should
work with community educators who they are likely to trust in the efforts to develop
their financial literacy.
Conversely, for the participants with higher levels of Essential Skills, experts suggested a more
extensive use of writing to write down financial goals, to keep track of ones spending, etc.
Experiential learning and adult learning focus were, nonetheless, viewed as important for
individuals with higher levels of Essential Skills (just as much as for those with lower Essential
Skill levels).
SUMMARY AND CONCLUSIONS
To summarize, evidence from the reviewed literature and expert interviews not only suggests an
overall link between Financial Literacy and Essential Skills, but it also supports links between
individual Essential Skills and Financial Literacy (and its outcomes). Specifically, the most
strongly supported links are between financial literacy and the Essential Skills of numeracy,
reading text and document use, and thinking skills. Nonetheless, evidence exists in support of
the associations of the financial literacy with computer use, continuous learning, working with
others, writing and oral communication; it was shown (by the interviewed experts) that these
remaining Essential Skills can also be profitably used to develop financial literacy.
Table 1. Evidence of financial literacy-Essential Skill links from the literature review.
Other
Empirical X X X X x
Support
for Link
Anecdotal X X X X X X X X X
Evidence
for Link
Table 2. Evidence of financial literacy-Essential Skill links from the expert interviews.
Other
Skill X X X X
Ranked by
Majority in
Top 4
Skill Said X X X X X X X X X
to be
Relevant
In the case of each of the Essential Skills, it can be said that they appear to contribute to the
foundation of skills that are necessary for the development of Financial Literacy (just as they are
necessary for the development of other useful life skills and knowledge). As such, simple
possession of these Essential Skills would not guarantee a well-developed financial
knowledge/understanding and decision-making. Nonetheless, the Essential Skills are likely to
be the necessary (but insufficient on their own) conditions for developing Financial Literacy. For
that reason, the Essential Skills should be considered when designing, developing, and
implementing financial literacy programs.
Essential Skill Links and Recommendations for Policy and Program Design
As mentioned, there is considerable empirical and anecdotal evidence supporting the

link between Numeracy and financial literacy; both empirical and anecdotal evidence
also exists to support the relationships of financial literacy with the Essential Skills of
reading and document use, and thinking skills. Once again, most of the evidence
suggests that these Essential Skills are important for providing foundation based on
which one can develop his/her financial literacy. Thus, these four Essential Skills
should be taken into consideration when designing financial literacy programs.
Based on the feedback from the expert interviews and the analysis of the literature on
financial literacy and Essential Skills, several implications and recommendations for
program design can be proposed at this time (see Table 4 below for an expanded
summary of recommendations). :
1. Before starting a program in financial literacy, participants should undergo

an Essential Skills assessment to evaluate their skill levels
2. Financial literacy programs should incorporate development of the Essential Skills -
and Essential Skills development programs should teach financial literacy
3. Financial literacy programs should be customized for learners of lower and
higher level abilities in the Essential Skills
4. Financial literacy programs (for adults) should be based on principles of Adult Learning
1. Essential Skills Assessment
As experts suggested, it may be helpful to include some type of Essential Skills

assessment formal or informal prior to involving people in financial literacy
programs. In some cases, the experiences community educators will have a good idea
of the general levels of Essential Skills of their program participants, so this knowledge
can be used to tailor the financial education programs toward certain levels of Essential
Skills. Of course, in other cases in which the levels of Essential Skills of workshop
participants are either unknown or are likely to vary, some form of quick assessment of
Essential Skills may be important to administer right at the beginning of financial
literacy programs so as to understand the participants better and to be able to tailor
the programs to the appropriate Essential Skill levels. Some options for assessments
may include either tests of Essential Skills or informal discussions to get a feel for
general skill levels. Then, if varying levels of Essential Skills are found to exist among
program participants, program organizers and coordinators can either divide
participants into different subgroups (who would receive different training) or be sure to
provide a wide range of diverse learning activities that would appeal to both individuals
with low and high Essential Skill levels.
2. Shared Content
According to the interviewed experts, the Essential Skills should not be covered
separately within the financial literacy program; instead, the Essential Skills are best
covered together with financial knowledge and skills (rather than singled out on their
own). Indeed as suggested by the experts, numerous activities employed in the
financial literacy programs can (and often do) incorporate some types of Essential
Skills activities and exercises. Therefore, these exercises/activities that simultaneously
address Essential Skills and financial literacy are good tools/strategies to utilize to
develop both Essential Skills and financial literacy.
3. Accessible and Tailored Programming
Financial literacy programs geared toward individuals with low Essential Skill levels
should be designed so that they are tailored to the needs of these lower skill learners.
Specifically, consistent with experts suggestions, these programs should include less
text and more pictorial representations and visual demonstrations of financial concepts.
In addition to that, it may be helpful for these programs to include some activities
involving going over basic financial documents (e.g., bills, pay statements) to provide
some practice and development of document use skills. An expert also suggested that
some basic numeracy could also be incorporated and perhaps practiced by writing on
the board (using very simple mathematical operations and formulae).
As a number of experts suggested, practical, experiential activities should also be

incorporated into these financial literacy programs so as to learn by doing and
through experience. Finally, follow-ups should also be performed several (e.g., 3-6)
months after the programs so as to further assist program participants with their
financial capability and to check the transfer of training to real life.
For the program participants with higher levels of Essential Skills, financial program
managers and coordinators should also employ a diverse set of exercises/activities that
appeal to different learning styles (e.g., visual, auditory, kinaesthetic). They should
also include more challenging activities that involve more extensive use of the
participants Essential Skills. For example, these participants could go over more
financial documents, additional group discussions, as well as a number of written
exercises (e.g., keeping a diary of ones spending habits; writing down ones financial
goals) in order to further develop both their financial literacy and their Essential Skills.
Additionally, material could be covered at a faster pace in the programs for individuals
with higher Essential Skill levels. These are individuals who are likely to be more
highly educated and to be used to more-or-less learning on regular basis. Thus, these
individuals would likely absorb program material at a faster pace than individuals with
lower Essential Skill levels.
4. Follow Adult Learning Principles
Regardless of the participants levels of Essential Skills, adult financial literacy

programs should be designed so as to follow the tenets of Knowles Adult Learning
framework. Thus, the financial literacy and Essential Skill programs should be closely
tied to real life issues and problems, and should include practical exercises that closely
mimic/replicate the corresponding real-life practices. Because adults place emphasis
on their experience, educators/facilitators should try to tie the program material into the
adults common experience. Additionally, because adults tend to be goal-oriented, the
purpose and the learning objectives of the adult literacy programs should be explicitly
stated right at the outset. Ideally, the educators/facilitators should demonstrate right at
the beginning of the program what the adults will learn and how the program will help
them address specific problems/issues (that they have encountered). Moreover,
because adults tend to be autonomous and self-directed, they should be given as
many opportunities to contribute to activities and learning whether it is through group
discussions, questions or other means. Adults also need to be treated with respect
and as equals regardless of their levels of Essential Skills and financial literacy.
Table 4. Summary of implications and recommendations
Implication Recommendation for Program Design
1. Participants ES levels of Consider including an Essential Skills assessment

participants need to be (informal or formal) prior to or at the start of the
considered prior to program
administering financial literacy
programs.
2. ES should not be covered Address financial literacy and Essential Skills

separately from the financial together in a program rather than separating the
literacy content (in the adult Essential Skills training
literacy programs).
3. Financial literacy and ES Tailor programs for people with low Essential Skills
programs should not be one to the needs of low skill learners (e.g., less text,
size fits all. more visuals and activities)
4. Financial literacy programs For participants with low ES, try incorporating less
for participants with low ES text and more visual demonstrations
should be designed differently For participants with high ES, incorporate more
from those for high ES reading and going over documents
participants. For participants with low ES, write on the board
examples involving simple numeracy
For participants with high ES, include
demonstrations and explanations of financial
concepts involving more complex numeracy
For participants with low ES, include exercises that
involve limited or some low level writing
For participants with high ES, use writing exercises
more liberally
For participants with low ES, avoid singling people
out during discussions (if they seem uncomfortable
speaking in public)
For participants with high ES, use computers more
extensively in the programs e.g., view online
statements, prepare a budget using Excel, etc.
5. Practical hands-on activities Incorporate plenty of hands-on activities that
that are clearly linked with real clearly demonstrate what program participants
world issues/problems are would do in reality e.g., practice going over
beneficial to all adult learners. financial statements, doing basic calculations of
charges, addressing erroneous charges, etc.
6. It is important to appeal to Try to include learning exercises that appeal to
diverse learning styles. visual, auditory, and kinaesthetic learners e.g.,
include pictorial and graphic demonstrations, get
participants to interact with financial documents and
tools, etc.
7. Keep Adult Learning Tie the program material into the adults common
framework in mind when experience
designing programs. Explicitly state the purpose and the learning
objectives of the adult literacy programs
Show how the material learned during the program
will benefit the adults in real life
Give plenty of opportunities for participants to
contribute to activities and learning whether it is
through group discussions, questions or other
means
8. Be mindful of difficulties with As financial documents are often written in technical
reading and document use in language, there should be an emphasis on policies
policy design. in favour of using plain language in financial
documents
9. Be mindful of misinformed Emphasize credentialing for financial advisors and
financial advisors with other financial professionals
inappropriate credentials.
H. KEY FEATURES ASSOCIATED WITH SUCCESS IN IMPROVING ESSENTIAL SKILLS AND

FINANCIAL LITERACY
Based on the previous discussions of the links between Essential Skills and financial literacy
and their implications for the program design, we propose that there are several features that
are likely to be associated with success in improving Essential Skills and financial literacy (see
Table 5 below for the summary of these features). The first group of these features are best
categorized as personal characteristics of people who are working on improving their Essential
Skills and financial literacy. Individuals who are most likely to succeed in their efforts to improve
their Essential Skills and financial literacy must be open to new experiences and continuous
learning; that is, they must realize the benefit of and show dedication to lifelong learning.
Additionally, these individuals must have a certain level of self-efficacy confidence in their
ability to learn and master new things. These people must also be able to observe and
understand their own behaviour before they can turn toward changing their behaviour. They
also must possess (or show willingness to continue developing) their critical judgment and
evaluation skills as well as their prioritizing and decision-making skills. Thus, these
characteristics should be recognized and encouraged in adult literacy educators and
practitioners.
The second group of the features associated with success in improving Essential Skills and
financial literacy are characteristics of the programs for improvement of these skills and
knowledge. As mentioned in the previous section, the successful adult literacy programs are
likely to follow/incorporate tenets of Adult Learning framework. First, effective adult literacy
programs tend to incorporate practical, experiential activities that teach desirable behaviours
through concrete, practical examples. Effective adult literacy programs also tend to help adults
to address their real-life financial issues/problems. For example, they may include
demonstrations of what information to watch for in financial statements (e.g., bills) and how to
proceed with disputing wrongful charges. They may also provide concrete examples of doing
price comparisons when shopping for groceries, clothes, books or other commodities.
Effective programs also attempt to engage adults in discussions about financial knowledge/
understanding, money management, financial decisions and other behaviours. Successful
programs also include a variety of activities to appeal to different learning styles. Lastly, an
important feature of successful programs is follow-ups with program participants several months
after the programs have ended. Follow-ups are important to assess transfer of training and
determine if further assistance (or training) is needed to change participants financial
behaviour.
Table 5. Summary of personal and program features associated with success.
Characteristics of People who Succeed in Characteristics of Programs who Succeed

Developing Financial Literacy in Developing Financial Literacy
(& Essential Skills) (& Essential Skills)
Openess to new experiences Follow tenets of Adult Learning framework
Dedication to lifelong learning Incorporate practical, hands-on activities
Self-efficacy confidence in their ability to Engage adults in discussions about
learn new things personal finance and money management
Ability to observe and understand their own Include a variety of activities to appeal to
behaviour different learning styles
Critical judgment and evaluation skills Include program follow-ups (several
months the completion)
Prioritizing and time management skills
Beyond Adult Education Programs
The majority of the findings and recommendations of this report have focused on how financial
literacy can be improved by expanding upon existing adult education programs. However, we
anticipate that the number of adults with financial literacy challenges reached by these
programs is a small percentage of those facing difficulties. The ongoing challenge will be the
ability to reach individuals who are the most marginalized whether due to lower literacy skills or
abilities in an official language or poverty. Below are recommended policy initiatives beyond
adult education:
1. Continue to focus on the financial literacy of youth and young adults

2. Further develop government regulations on financial products
3. Make financial information accessible
1. Youth and Young Adults
Prevention of financial literacy challenges is critical to an individuals ability for future success.
Work must continue with the provinces to ensure that secondary and post-secondary students
are taught the required life skills to deal with financial challenges. Many educators are
incorporating financial literacy into math courses or courses focused on life skills, however
additional learning materials and lesson plans could be provided to teachers to ensure they
have up-to-date materials and tools which teach skills focused on the financial demands faced
by adults. CFEEs collaborative efforts with the provinces of Manitoba and Saskatchewan are
examples of how this can be done strategically and effectively over the course of the school
years from grades 4-12.
At the post-secondary level, there is much less standardization of what is taught to students as
this often falls to financial support offices or student service departments. A large opportunity
exists to provide these schools with standardized programming which will help to educate young
adults as they make major financial decisions for the first time.
2. Government Regulations
Recent government regulations regarding changes to mortgage rules are one example of
progressive policies which provide safeguards for Canadians when they are not reached by
education. Additional research could be conducted to develop recommendations for
progressive policies which allow for greater access to financially beneficial products and limit
access to products and the scale of decision-making that can result in excessive debt or
financial difficulty, while, at the same time, balancing individual freedoms.
3. Accessible information
Several experts mentioned that because reading and other language-related literacy skills are
crucial for the development of financial literacy and because financial documents are often
written in technical language, there should be an emphasis on policies in favour of using plain
language in financial documents. As with recent changes in clarity of information to credit card
products, additional pressure could be placed financial services providers to clarify and simplify
the information that supports their products. Also, additional effort can be expended by the
government to clarify regulated products which are often laden with acronyms (e.g., RRSP,
RRIF, TFSA) and restrictions that can be challenging for most Canadians to understand.
In addition to language skills, financial information needs to be in a format that is accessible to

all residents of Canada regardless of access to technology. Simple and clear information
produced by government organizations and non-profit organizations should be available and
freely shared before the purchase or acquisition of a financial product from the financial service
provider or another organization.
Means, Methods, and Strategies to Improve Financial Literacy
Essential Skills are a critical foundation for improving financial literacy
As evidenced from the results of our research, there is little suggested support for the
advancement of financial literacy as a new Essential Skill. What is apparent from the
research however is that the Essential Skills are a critical and necessary foundation for
the acquisition of additional skills in financial literacy. Our viewpoint is that the
Essential Skills and four of them most specifically are key skills that will influence a
persons ability to become financially literate.
To illustrate, a similar comparison could be drawn to the ability to maintain a healthy

lifestyle, which we will call health literacy for this explanation. For an individual to
maintain their health they may need information on what foods are healthy by
understanding product labels or Canadas food guide. Individuals may need
information on how to exercise correctly and how often. They may also need
information on who is eligible for provincial health coverage and how to access it.
Thus, the notion of health literacy may involve the use of reading, speaking, document
use and other Essential Skills. However, the critically missing element is to determine
what will lead a person to act on this knowledge and be able to apply the knowledge
effectively to decisions and actions that are taken.
The Essential Skills, in many ways, relate to the skills and behaviours that will lead to,
and enable, a person to act and take steps that manifest into effective financial
behaviour. Without the skills, and willingness, to act, knowledge may be of little use
and we may see little in the way of change among the financial behaviour and
conditions of Canadians overall.
Therefore our recommendation would be to pursue policies and programs which lead
to an increase and improvement in both financial knowledge and skills, particularly the
four Essential Skills highlighted as important foundations or cornerstones for improved
financial literacy. It would appear that, not only will this help to improve financial
literacy and capability leading to potentially improved financial decisions, actions and
outcomes but efforts to improve the Essential Skills can also benefit from being
associated with efforts to improve financial literacy.
We believe that there is an extraordinary opportunity to simultaneously improve both

Essential Skills and financial literacy by designing programs that incorporated key
success strategies noted in this report and developing programs that link the two sets
of target outcomes.
We offer the following as further suggested success factors that could lead to
developing programs that are effective in simultaneously improving financial literacy
and Essential Skills.
1. Start young (e.g. age 8/grade 3 or age 9/grade 4) when behaviours can be
developed as opposed to starting later when behaviours are often well-
developed, influenced, and potentially entrenched
2. Target behavioural change since simply transferring knowledge (e.g. one

should budget and here is how you can budget) often does not result in
desired behavioural change (i.e. person actually budgeting). Achieving
desired behavioural change requires more than the transfer of knowledge
3. Incentives are extremely important. Much of human behaviour is

motivated by the pursuit of benefit or reward or to avoid penalty or
punishment. Changing incentives can effectively affect behaviour. Positive
incentives are preferable to negative ones when possible to achieve.
4. Targeting less is likely to achieve more. People often become

overwhelmed with volume and detail and will shut down or turn off.
Attempting to achieve less and presenting a contendable amount in an
effective and engaging way is likely to be more effective and likely to inspire
the learner to want to learn more in the future and to feel that he/she is
capable of learning
5. Simulation and participatory learning are often the most effective

strategies. Research has shown that learners are more engaged and retain
and apply more of what is learned when they participate in the learning. This
also enables mistakes to be made in a safe environment when
consequences of mistakes are not long-lasting and do not impact directly
ones financial situation or capabilities.
6. Video is very effective especially for young learners. Yet very little
good video is available to support improved financial literacy.
7. Instruction, help, and assistance must come from a trusted source.

Many people are distrustful of sources of financial help, assistance, and
advice. There is a legacy of many efforts to take advantage of people by
those in the past who made claims they were trying to assist. Therefore, the
most effective resources and programs are going to emanate from sources
that people have come to trust.
8. Provide access to credible filters and sifters of the mass of material and
sources. There is so much information on money and financial matters
and the quality is so variant and the sources so disparate in intent and
motivation that there is a need for those who are regarded as credible and
trusted to help filter and provide access to those that are of the best quality.
9. Integrate financial education into the schools to build a foundation and

learning framework for lifelong learning
10. Recognize that quick hits dont work. Effective learning needs to be
developed over time to have an impact, be retained, and be effectively
applied to decisions and actions.
11. Building confidence is key. It will be impossible to teach someone all that
they could know about financial matters. And information changes rapidly.
Therefore the key is to develop a sufficient level of financial confidence and
competence that a person will be willing to ask questions, take initiative,
act, and assume responsibility for their actions and decisions by seeking out
the information that is needed and relevant to a choice or decision.
12. Improving economic literacy is important too. For example, one can
teach a person about mortgages but, if the person has no idea of how to get
a sense of future interest rate changes/movements, the person could make
a decision that could cost them tens of thousands of dollars.
13. Meta-cognition is very important. Encourage people to think before they

act even briefly, can often help improve decision-making, avoid impulse
decisions, and result in fewer bad decisions and less financial difficulty.
14. Encourage people to consider trade-offs and opportunity costs. In

encouraging people to take a moment to think before they act, encourage
them to think about the trade-off or opportunity cost they are making that
is, the loss of the next best alternative what they are giving up in making
the decision. Every decision has an opportunity cost.
15. Train teachers to build their confidence and competence in providing

financial instruction. Most teachers do not have a background or extensive
knowledge when it comes to money and financial affairs. At the same time,
they can play a strategic and vital role in helping to improve the financial
literacy of youth. One of the best investments we can likely make is in the
training and readiness of our teachers to be able to provide financial
education to students.
16. Dont abandon hard copy. As much as the web is popular and certainly so for
suppliers and providers who do not incur the high costs of printing and
distribution, there are still many learners who prefer, and will do better, with hard
copy resources.
17. Reach people where they are or where they go. As important as it is, people will
often not seek out financial education or ways to improve their financial literacy.
Therefore, the impact is likely best and widest if we can find ways and means to reach,
engage, and help people where they are or where they go e.g. the workplace,
seniors residences, schools, churches, community halls and assemblies, immigrant
serving agencies, social service agencies, Service Canada centres.
18. Utilize opportunities that the government has to help Canadians via the
current connections that the government has. There are many reasons and
programs that link the federal government to Canadians and which can provide
opportunities for improving financial literacy. These include the following and
these represent means by which the federal government could help provide
financial information to Canadians and help to improve financial literacy.
Registered Education Savings Plans
Registered Retirement Savings Plans
Canada Pension Plan
Employment Insurance
Bankruptcies
Student loans
Canada Education Savings Grant
Canada Learning Bond
Canada Savings Bonds
Guaranteed Income Supplement
Contact with employers
Pension providers (Indirect contact)
Financial institutions (Indirect contact)
Service Canada sites
Passport offices
Canada Revenue Agency and various taxes
Immigration offices
Elections Canada
19. Develop and implement appropriate government regulations. Some

argue that focusing on improving financial literacy is an alternate strategy to
putting in place regulations that are needed to protect or provide required
discipline to Canadians or certain groups of Canadians. This, we believe,
is a foolish view and implies that financial ignorance is a desirable and
acceptable outcome and that we should leave people ignorant and go
about putting in regulations that more closely determine peoples financial
behaviour and actions and those of financial institutions and providers of
financial products and services. Efforts to improve financial literacy should
be seen as an obligation to Canadians who face more extensive,
demanding, and complex financial decisions than ever before.
Nevertheless, reasonable and relevant regulations should be designed and
enforced as needed to provide protection to the financial well-being of
Canadians especially from fraud, scams, misleading information and
advertising, information that is too complex to reasonably understand,
financial exploitation, and providing financial advice and services below
acceptable industry standards. Ideally, regulations should be designed so
that there is synergy among them, that one regulation does not counter the
purposes or intent of another, and that, where possible, the use of positive
incentives can be used instead of negative ones.
20. Promote the free sharing of high quality information, tools, and
resources. Canadians should have ready, easy, no-cost access to high
quality information, resources, sources, and tools that are validated and
channelled through sources trusted by Canadians.
I. CONCLUSION
Overall, this report has demonstrated a strong connection between many of the Essential Skills
and the acquisition of financial literacy skills. What is even more apparent is that additional
work is required to further develop literacy and Essential Skills programs and financial literacy
programs so that opportunities to simultaneously improve both are exploited.
Efforts to improve financial literacy will be enhanced if they can be built upon a foundation of
Essential Skills especially the four that we have highlighted in this report. At the same time,
efforts to improve the Essential Skills will be enhanced if they can be related to efforts to
improve financial literacy.
People are generally interested in improving their financial literacy, usually want to improve their
financial literacy, and will therefore be interested in programs that provide the opportunity to do
so. This can help capture interest and an audience and provide the opportunity to use the
interest in financial literacy to develop and improve Essential Skills which stand as importance
pre-requisites for improved financial literacy. The complementarity and synergy between the two
is evident yet vastly unexploited.
Our primary recommendation in this report, then, is to tap this mutually beneficial relationship
and design, develop, and implement new creative programs, addressing key success factors
noted in this report that can simultaneously improve financial literacy and the Essential Skills.
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Appendix A
LIST OF SEARCH TERMS

Financial Literacy and Consumer and Financial Literacy
Financial Competence
Behavioural Finance
Behavioural Economics
Economic Literacy
Financial Knowledge
Financial Understanding
Personal Finance Skills
Basic Financial Skills
Money Management
Money Smart
Essential Skills
Literacy and Literacy skills
Basic Skills
Key Skills
Key Competencies
Core Skills and Core Competencies
Workplace Skills
(Basic) Job skills
Employability Skills
Cognitive abilities
Computer use
Reading
Writing
Document use
Numeracy
Money Math Skills
Scheduling and Budgeting Skills
Measurement and Calculation Skills
Data Analysis Skills
Mathematical Ability
Math Skills
Thinking Skills
Critical Thinking Skills
Problem Solving Skills
Decision Making Skills
Planning and Organizing
Memory Skills
Finding Information
Continuous Learning Skills
Working with Others
Teamwork Skills
Appendix B
Interviewees Name Interviewees Position Interviewees Interviewees Country

Organization of Residence
Mack Rogers Program Manager, ABC Life Literacy Canada
Money Matters Canada
Joanne K. Yoong, PhD Economist The RAND Corporation USA
Melanie Buffel Facilitator/Coordinator The Canadian Centre Canada
for Financial Literacy
(CCFL)
Melanie Vautour Enterprise Development St. John Community Canada
Officer Loan Fund
Steve Stillwell Money Advice Service Money Advice Service UK
Diana Crossan & Retirement Retirement Commission New Zealand
colleague Commissioner
Donna McBride Financial Literacy Momentum, Calgary, Canada
Manager AB
Nigel Kidd Executive Director The Edmonton Financial Canada
Literacy Society
Lois Vitt, PhD Chair and Founding Institute for Socio- USA
Director Financial Studies
Natasha Bozek Executive Director The Literacy Coalition of Canada
New Brunswick
Appendix C
List of Questions for Expert Interviews
Here are the questions that we would like to discuss with you during the interview:
1. From your experience and understanding, which of the 9 Essential Skills (i.e.,
Reading Text, Document Use, Writing, Numeracy, Oral Communication,
Thinking Skills, Working with Others, Computer Use, and Continuous Learning)
are linked most closely with Financial Literacy and its outcomes? Why?
2. For each Essential Skill that you think is linked to Financial Literacy, could you
elaborate on the nature of the link? Does the Essential Skill form the basis for
developing ones financial literacy (i.e., without the Essential Skill, financial
literacy cannot be developed)?
3. From your experience, how are the Essential Skills related to financial
outcomes (e.g., money management, saving, indebtedness, retirement
planning, investing)? Which essential skills have the strongest links with
financial outcomes?
4. In your opinion, what are the implications of the previously-discussed links

between Essential Skills and Financial Literacy for policy and program design?
5. How should financial literacy programs be designed to take into consideration

the relevant Essential Skills? (For example, Essential Skills training could be
incorporated into early stages of financial literacy programs or a
test/assessment of Essential Skills can be administered before undertaking
financial literacy training.)
6. In what tangible ways can Essential Skills be incorporated into the financial
literacy programs? For instance, what tangible exercises could be used? What
discussions could be facilitated?
Appendix D
Financial Literacy Learning Framework
The Framework begins on the following page.
LEARNING FRAMEWORK
FOR FINANCIAL CAPABILITY AND RESPONSIBILITY:
N.B. This Framework covers all content elements of the
OECDs PISA 2012 Financial Literacy Framework.
LEVEL 1 LEVEL 2 LEVEL 3
1. MONEY AND DECISION-MAKING
Topic:
LEARNING TARGETS LEARNING TARGETS LEARNING TARGETS
Activity:
Know: Know: Know:
How bartering becomes difficult as the number of people The importance of clearly defining the problem, opportunity, What determines the amount of money in the economy
and products and services increases or challenge before trying to make a decision How the amount of money in our economy is controlled
How money makes exchange in the economy easier Steps to take in making a good decision when using money Why people wouldnt be better off if we printed more
Reasons why we have money spending, saving, pricing The kinds of money decisions people face money and gave it to all
What is used as money to pay for things How money can be used to help others The effect inflation can have on the value (purchasing
What we can do with money Countries use different kinds of money power) of money
Why money has value Ways the value of money can be increased Money will help in achieving some life goals but not all
Resources, including money and peoples incomes, are Using credit is using someone elses money that will need to Possible life goals they can consider
limited and so we cannot have everything we want be repaid Ways money can be used to increase the value of, and
Every money decision we make involves a trade-off giving improve, things including skills and abilities
up something else
Be able to: Incentives that can affect money decisions and actions
Identify the opportunity cost (best alternative) when making
Be able to: money decisions Be able to:
Experience the problems that arise with bartering and Use a decision-making process to make key decisions about Set personal and financial goals
how money makes it easier to exchange things money Describe the role of the central bank
Recognize money and the value of different denominations Change money of one country into the money of another Describe how the central bank can influence interest rates
Have a sense of the value of money and how goods and country and the amount of money in the economy
services differ in value and cost
Recognize ways money can cause stress and tension
Use money to spend and save
Action/Behaviour:
Calculate correct change
Apply decision-making skills when making key money Action/Behaviour:
decisions Consider possible life goals short, medium, and long term
Action/Behaviour: Identify the opportunity cost of key money decisions before Consider the impact of inflation on money decisions
Think about options and the trade-offs when they make a they make any decision
money decision what they are giving up Have a sense of personal responsibility when making
Consider the possible impact of their decisions on others decisions and how their decisions may impact others
Consider the impact their money decisions may have on Think about the future consequences of decisions made today
others Verify sources and quality of information that can affect
their financial decisions and actions
Make decisions knowing they cant have everything they
want
2. SPENDING AND SAVING MONEY

Know: Know: Know:
The difference between needs and wants Different ways to pay for things Needs and wants are sometimes difficult to tell apart
Spending and saving are two choices in how to use money The advantages of comparing costs and benefits when making Some spending decisions have greater consequences than
Others can try and influence money decisions a consumer decision others
Spending uses money today, saving stores it for future use Some things we need and want may require saving Spending and saving decisions can be helped with a budget
Why saving is important and the possible benefits from sometimes over a long period of time (examples) Various factors can affect the prices of what we need and want
saving Why people have different amounts of money to spend and A goal of saving is to increase future purchasing power
Where money can be saved and the role of banks save Factors that can impact future purchasing power of saving
Why we cant have everything we want People make different money decisions for different reasons (e.g., inflation, fees)
Why things they need and want differ in cost Impact of compound interest
Others often try and influence how you use your money
Be able to: Different factors and forces can influence saving and spending
Transfer money and purchase things needed and wanted Production of products and services has to abide by decisions at different times of ones life the life cycle
regulations and laws protecting consumers Legal documents and contracts should be reviewed carefully
Save money
Open a bank account Both consumers and producers have rights and responsibilities
Assess how advertising can try to affect money decisions Be able to:
Be able to: Consider whether they need or want a product or service
Set priorities for their needs and wants Compare advantages and disadvantages costs and benefits
Action/Behaviour:
Find ways to save money in making consumer decisions
Consider the benefits that can come from saving for the
Make good spending and saving decisions Track expenses and estimate their spending capacity
future
Use an ATM appropriately and safely Save for a specific purchase or goal
Consider whether something is needed or wanted before
Deal with the influences of others effectively when making Try and increase the value of money saved
making a purchase
money decisions Calculate how much will be needed, and how to save, for their
As possible, save some of their money for the future
Complain effectively about a product or service if justified future education or training
Recognize and consider the influence and goal of
advertising before making a spending decision
Action/Behaviour: Action/Behaviour:
As possible, save some of their money for future use Compare the potential benefits of a purchase with the price
Consider the trade-offs and opportunity cost today and in being paid
the future when making money decisions Make saving and spending decisions to live within their means
Avoid impulsive buying Make thoughtful, informed, consumer decisions
Consider the possible impact on others and the environment Review legal documents and contracts carefully
when making money decisions Make saving and spending decisions considering the possible
impact on others and the environment
3. PRODUCTION OF GOODS
AND SERVICES

Know: Know: Know:
Examples of natural, labour, capital, and technology Countries have different types, quantities, and quality of Characteristics and skills common to many entrepreneurs
resources that are available for production resources Enterprising skills and abilities can be applied to all
All resources are limited The role and contributions of businesses and entrepreneurs endeavours
Some resources are renewable and some are not Different kinds of businesses that exist How to explore and identify opportunities
Resources are combined to make goods and services that Reasons a business may succeed or fail How to compare and evaluate business opportunities
people need and want and are willing to buy How consumers influence what is produced and the concept Key steps in setting up an enterprise
By specializing it is possible to produce more, and better, of consumer sovereignty Key components of a plan to set up a business
goods and services Why some goods and service are produced by governments Roles of cooperatives, unions, NGOs., and volunteers in
Specializing leads to the need for exchange and Examples of inventions and innovations that have affected producing and providing goods and services
interdependence production
Opportunities for business and production are the needs, Key skills for entrepreneurship success
wants, challenges, and problems consumers face
Be able to:
Assess their personal entrepreneurial interest and potential
Be able to: Identify and assess opportunities for enterprising initiative in
Be able to: Consider their own interest in entrepreneurship their community
Combine resources to see how a product is produced or a Describe contributions of business and entrepreneurs to the Create and assess some ideas generated for an opportunity
service is provided economy and to their community
Develop a plan for an enterprising initiative to address an
Provide examples of businesses in their community and the Develop enterprising skills to apply to any kind of endeavour opportunity in their school or community
goods or services that they provide Discuss and debate decisions as to what goods and services
Provide examples of goods or services that are provided by should be provided by business and/or governments
governments in their community
Action/Behaviour:
Make informed decisions about their participation in the
Identify an opportunity in their school or community Action/Behaviour: economy
something that people need, want, or see as a problem Apply enterprising skills to a wide range of endeavours
Follow news and events that might lead to opportunities and
Support business activity that helps to improve and sustain affect their actions and decisions
Action/Behaviour: the environment
Develop an effective plan to setup a business if they make the
Consider new and better ways of combining and using Identify and explore opportunities as they perceive them in decision to become an entrepreneur
resources they have school, at home, in their community
Consider opportunities for social enterprise to start initiatives
Consider the possible effect of their decisions on others and
that could help others or sustain the environment
the environment
Act on an opportunity of any size when they see it in their
class, school, home, community
Work well with others to try and address an opportunity
4. GETTING AND EARNING MONEY

Know: Know: Know:
Ways by which people can get money How people get paid for work e.g. wages, salaries, contracts, The components of a career plan
Why people get different amounts of money from gross vs. net pay, types of deductions, etc. Occupations that are of personal interest
different kinds of work Benefits that may be possible to earn from work Education and training needed for occupations of interest
Things that affect how much money a person can make Factors affecting how much money they can get from Estimate costs of post secondary education and training
How people with more money can help those with less employment Sources of funding assistance for post-secondary education
Ways they can increase their ability to earn money Factors affecting standard of living and quality of life
Be able to: The difference between employment income and earning Compare life goals requiring money with others that do not
Develop a good work ethic that helps them to earn income money as an entrepreneur (profit) A balanced life means considering things other than money
Identify and consider a wide variety of occupations that How it is possible to get money from investing in themselves that are important
provide an opportunity to earn money and other investments Be able to:
Governments have programs to help people improve their Set career goals and develop a career plan
ability to earn money
Action/Behaviour: Develop a sense of passion for what they like to do and
Governments have programs to help those with low incomes would like to do
Consider how their effort and quality of work can affect
their ability to earn money How jobs change, and are changing, over time Select post secondary education and training programs that
Role of unions in influencing income and benefits align with their interests
Consider situations and make judgments with an
understanding that people and households have different Be able to: Identify sources of funding to help with post secondary
amounts of money available for many different reasons Identify sources of information regarding possible careers education and training
Appreciate things in life that do not require money How to explore interest in different career options Action/Behaviour:
How to look for a job Align education, career, and work with their personal passion
Consider opportunities there may be to assist others
How to prepare a resume Find ways to invest in themselves to improve their ability to
Value all forms of work
How to handle a job interview achieve their goals
Estimate potential future income and possible income needs Live a balanced life considering both monetary and non-
The risks in gambling to try and get more money monetary goals and priorities
Action/Behaviour: Consider careers that can contribute toward sustainability
Explore areas of personal interest or passion that may affect
their future career choice
Begin to plan for investments in skills and abilities to prepare
for the future
Effectively look for a job if they wish to do so
Monitor payment for work done to ensure accuracy
Avoid gambling problems and addiction
5. BORROWING MONEY AND

USING CREDIT
LEARNING TARGETS
Know: LEARNING TARGETS LEARNING TARGETS
Why people borrow money Know: Know:
What it means to borrow money Ways to pay for things over time Factors affecting how much you can borrow
Ways in which money can be borrowed Where you can borrow money Factors affecting the cost of borrowing
Why there are costs to borrow money The costs associated with borrowing money Advantages and disadvantages of credit cards
Where you can borrow money What a credit card is Credit rating what it is
How a credit card works Factors that will affect ones credit rating
Be able to: Different kinds of credit cards How a mortgage works and factors affecting the cost
Borrow something and return it within a given time Factors affecting the costs of using a credit card Signs a person may be heading for debt trouble
What living within your means means What payday loans are, and the costs they entail
Action/Behaviour: Be able to:
Recognize there are limits to borrowing Be able to: Set reasonable, affordable limits on debt
Accept responsibility for how much is borrowed Use a credit card wisely Make informed decisions regarding use of debt
since others may be willing to lend more than can Estimate credit card debt that can be reasonably Check and maintain a good credit rating
reasonably be afforded afforded Estimate the mortgage a person can afford
Accept responsibility for returning something Compare credit card types, services, and costs Take appropriate action if debt trouble should arise
borrowed and return it Use the services of a bank effectively Apply for a loan and/or credit card
Keep the costs of credit as low as possible
Action/Behaviour:
Use a credit card wisely Action/Behaviour:
Pick a credit card most suited to their needs Avoid paying higher costs to borrow than is
Consider the risks and obligations that come with reasonable/warranted
borrowing decisions Review contracts and legal documents carefully before
making borrowing decisions
Assume debts that are affordable
Maintain a good credit rating
Avoid debt problems
Take advantage of the benefits that credit cards, and
wise use of debt, can provide
6. BUDGETING, PLANNING, AND

GOAL-SETTING
Know: Know:
Know:
Common costs to operate a household How to set goals over different time periods short,
What a budget is
How a plan can help to achieve goals medium, long term
Benefits of working with a budget
Benefits of having a plan to follow How goals can change over the life cycle
Different types of budgets
How and why plans can change Goals become more challenging when two or more
How to estimate the costs of running a household
Why planning to save money is important people set shared goals
Difference between a budget and plan
Why it is important to know how money is being Components of a good financial plan
Budgets and plans are used to achieve goals
How to adjust a budget to achieve goals Importance of keeping receipts and records
Be able to: How to use a budget and plan to try to achieve goals
Estimate how much is spent on different things
Be able to:
Develop a plan to accomplish a task Be able to:
Develop a simple household budget
Adjust a plan if necessary to achieve a task Set some life goals
Make changes to see how to reduce expenses
Work with others to develop a plan and achieve a Work with others to set shared goals
Use a budget to help save money
task Develop a detailed budget
Use different strategies to save money
Build a simple budget Develop a financial plan to achieve goals
Develop a plan to save to reach a goal
Check and verify bank statements Modify a budget or plan if needed
Action/Behaviour:
Know how money is being used and consider if the Action/Behaviour:
best use is being made of money
Action/Behaviour:
Keep track of expenses Track expenses
Achieve goals or accomplish tasks by using a plan Willing and able to work with a budget
Spend what they can afford
Review and change plans as needed Willing and able to plan for the future
Find ways, as possible, to save
Develop a plan to achieve tasks and goals Prepare for the unexpected
Set some initial life goals and review goals over time
Keep good records and receipts
Begin to consider a plan for achieving financial
independence (i.e. not required to work for income)
7. INVESTING MONEY

Know: Know: Know:
The concept of investing that is, to make something Investment is key to making improvements in our economy Different kinds of investments (stocks, bond, GIC, etc.)
change, grow, improve, etc. Investments in people, equipment, capital, and other Factors that can affect the return on different investments
Different ways to invest time, effort, creativity, money resources contribute to growth, innovation, and employment The different kinds of risks associated with various
Why a person might want to invest in something Different kinds of basic investments (GICs, stocks, bonds, investments
The concept of investing in yourself mutual funds) The trade-off between risk and reward
How resources can be invested to help others How the stock market works Importance of knowing your investment goals, preferences,
Investing can result in losses as well as gains and risk tolerance
How investors can differ in terms of goals, preferences, and
Be able to: Different kinds of investment income (interest, dividends,
capital gains) comfort with risk
Identify ways they can invest in themselves
Roles of banks and other financial institutions in investment Concept of an investment portfolio
Identify ways in which people, groups, organizations have
The Rule of 72 to help predict the growth in value of an The concept and advantages of diversifying investments
invested in their community
investment Various frauds and scams that exist
Make an investment of time, effort, ideas, money etc. to
improve something in their class, school, or community The impact compound interest can have on investments Where to find good information and advice
Be able to:
Action/Behaviour: Identify investments that have led to improvements in the Be able to:
economy and their community Participate in an investment simulation
Look for opportunities to improve things by investing time,
Explain how investments in stocks can earn money and lose Make basic investments, and build a portfolio to fit their goals,
ideas, innovative thinking, and money
money preferences, and comfort with risk
Recognize and appreciate investments made by others
Find advice and assistance if needed
Calculate interest that will be earned on a savings account or
Make investments as they can to improve themselves, the Set investment goals when they are ready to do so
GIC investment
circumstances of others, or the environment Diversify choices when making investments
Compare the risks of different kinds of investments
Action/Behaviour: Avoid frauds and scams
Begin to invest resources they have time, ideas, effort, etc. Action/Behaviour:
to make improvements in their life Make investments they understand
If possible, start saving and investing early to provide longer Ask questions, seek advice, and help when needed
time for growth Use reliable, licensed, registered advisers as needed
Take on risk suited to fit goals, life stage, and comfort level
Diversify when investing
Avoids frauds and scams
Review contracts and legal documents carefully before making
investment decisions.
8. PROTECTING MONEY AND ASSETS

Know: Know: Know:
Savings can be protected in different ways The concept of risk as it relates to the value of money, The risks of losing the ability to earn an income e.g.
Ways to protect cash when carried things you own, health and well-being, etc. because of injury, disability, illness, death
How banks help protect savings Types of risk that exist The risks property and other assets face loss, theft,
Why banks pay interest on savings Things people may own that they will need to protect damage, destruction
Why banks charge fees for their services Risks when using a debit card How insurance can be used to reduce and manage risk
Ways to protect things they own i-pod, bike, etc. Risks when using a credit card Types of insurance
Risks when writing a cheque Who sells insurance
Be able to: Risks when using an ATM The different types of life insurance
Deposit money in the bank Risks that exist for possessions Sample costs for insurance for a car, house, etc.
Protect cash they carry with them Factors that can affect the cost of insurance
Protect their possessions Be able to: The concept of identity theft
Recognize risks when they exist
Action/Behaviour: Use a debit card safely Be able to:
Take steps to keep their money and possessions safe Use a credit card safely Estimate ones own lifetime earning potential
Use the services of a bank when needed and as Write a cheque properly and safely Seek out and buy insurance when needed
appropriate Use an ATM safely Link levels of risk with different costs for insurance
Estimate the cost of auto insurance
Action/Behaviour: Compare costs of insurance for different young drivers
Look to identify risks that might exist
Take steps to avoid or reduce risk Action/Behaviour:
Use financial products and services safely Acquire sufficient insurance as they acquire assets over time
Reduce or eliminate risks, as possible, when they exist Acquire adequate insurance, as and when needed, to protect
family members if death, disability, or disease should affect
ability to earn income
Assign an appropriate amount of a budget to acquire
adequate insurance protection when it is needed
Protect their identity and control what happens to personal
information and material
Review contracts and legal documents carefully
9. THE ECONOMY: THE BASICS AND

KEY ISSUES
Know: Know: Know:
An economys role is to use available resources to produce The basic economic questions every society must answer How, in general, an economy works to produce and distribute
and distribute products and services needed and wanted by what to produce, how to produce, and how to distribute products and services
consumers How Canadas economy answers the basic questions Different types of economic systems
Countries have different types, and quantities, of resources The role of key sectors of Canadas economyhouseholds, Key features of Canadas mixed economy
In very early economies, people could take care of their business, government, financial, international The business cycle why it occurs and conditions at various
own needs basic food, clothing, and shelter (necessities) Factors affecting the level of production and employment in points in the cycle
Features of Canadas early economy an economy Statistics used to assess how an economy is performing
Difference between needs and wants Needs and wants change over time leading to new products including trade performance and success
Specialization helps societies produce more and better and services being produced Factors that affect growth, inflation, employment,
things The exchange of products and services take place in markets productivity, and trade success in the economy
Specialization leads to the need for exchange and and at prices set by the decisions of the buyers and sellers Various ways in which economies are linked together
interdependence among people, communities, and Factors that can affect prices in the economy Issues that can arise from globalization
countries Why interest rates may change Current issues in Canadas economy
Businesses are set up to combine resources to produce Why countries engage in trade and how both countries can be
products and services consumers will buy better off after trade Be able to:
Businesses that produce well, and what consumers will buy, Examples of Canadian imports and exports Form opinions on the direction an economy may be headed,
can make a profit and succeed The concept of globalization and how it can affect countries whether interest rates may be more likely to rise or fall in the
differently near future, and when inflation may pose more of a risk
Be able to: The concepts of trade protection and freer trade Generate ideas for improving productivity
Experience how specialization can increase and improve Examples of trade issues and challenges Debate, discuss, and evaluate economic policies and actions
production proposed by the government and different political parties
Identify key resources used in Canada and their community Be able to:
Describe how resources in their community are used to Debate the pros and cons of freer trade Action/Behaviour:
produce products and services Debate the pros and cons of globalization Make informed consumer decisions based on an
understanding of inflation and interest rates
Action/Behaviour: Assess the policies of different political parties that could
Consider, assess, and discuss the advantages and affect the economy and production of goods and services
disadvantages of globalization as events and changes occur Make informed political decisions when presented with
over time economic policy options
LEVEL 3
10. ECONOMIC CITIZENSHIP LEVEL 1 LEVEL 2
LEARNING TARGETS
LEARNING TARGETS LEARNING TARGETS Know:
Know: Possible goals for the economy
Know:
How people determine those who govern them by voting in How various factors can affect growth, employment, incomes,
Concept of economic sustainability
a democracy and quality of life in the economy
Concept of renewable and non-renewable resources
Citizens are responsible for making informed decisions and How the decisions and actions of individuals, organizations,
How business, household, and consumer actions can affect
voting business, and governments can affect productivity, innovation,
the environment positively and negatively
Examples of goods and services provided by governments employment, inflation, incomes, and growth in the economy
How governments policies and actions can affect the
Why governments might produce a good or service as well as the environment
environment positively and negatively
How governments pay for goods and services provided Factors that can affect the distribution of income
Concept of economic, citizenship and what it means e.g.
Examples of taxes that people pay How government policies and actions can affect the
help sustain and improve the environment, be an informed
How people can help others in need both through distribution of income
voter, consider impact of decisions on others, consider the
government activity and other ways Compare environmental conditions, and efforts to improve
circumstances and needs of others, obey laws and abide by
the environment, in various countries
Be able to: regulation
Different views on the role of government in the economy
Identify goods and services provided by governments
Discuss the possible roles of government in the economy Be able to: Be able to:
Recognize how people can affect the decisions and actions Discuss factors that can affect the nations ability to achieve its
Provide examples of how changes in business and consumer
of government by voting economic goals
actions can lead to improvements in the environment
Compare and assess different economic policies and priorities
Action/Behaviour: Make personal decisions that can help sustain and improve
implemented or proposed by government and other political
Take an interest in government and how policies of the environment
parties
different political parties could affect their lives Generate ideas to help sustain and improve the environment
Consider and assess economic activity as potentially helpful or
When of age, be a responsible voter Discuss and assess various actions of business and
harmful to the environment
governments in terms of the impact on the environment
Identify taxes paid to different levels of government
Action/Behaviour:
Live, work, and play in ways that help sustain and possibly
Action/Behaviour:
Make informed assessments and judgements, of government
improve the environment
actions and political alternatives
Support reasonable activities that have a positive impact on
Act in a manner respectful, and helpful, to the environment
the environment
Have a sense of compassion for the needs and circumstances
Consider careers that involve helping to sustain and improve
of others
the environment
Complete a tax return and pay their fair share of taxes

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ESSENTIAL SKILLS AND FINANCIAL LITERACY:

EXPLORING THE CORRELATIONS, COMPATIBILITY, AND

Contact: Gary Rabbior, President

Contacting experts and reviewing the literature to formulate recommendations

In addition, we offer additional recommendations for the improvement of financial literacy

1. Start young (e.g. age 8/grade 3 or age 9/grade 4)

CFEE and Project Background

The Canadian Foundation for Economic Education (CFEE) is a nationwide, not-for-

The project was carried out over a seven month period

The project had multiple aims:

to review the national and international literature exploring the relationships

to interview experts in the area including program managers, adult literacy

B. FINANCIAL LITERACY: SETTING THE STAGE FOR ANALYSIS

Greater financial complexity

More personal responsibility for retirement planning and readiness

Unfortunately, the consequences of poor financial decision making are becoming

Many believe they are better prepared than they are

Several surveys commissioned by the Financial Consumer Agency of Canada suggest

Spending beyond their means

Financial capability is a broad concept encompassing peoples knowledge and skills to

Defining Financial Literacy

A Financially Capable Person is one who:

Spending (e.g., setting financial goals, tracking spending habits)

Borrowing (e.g., cost of borrowing, meeting payment obligations), as well as

Nine Essential Skills

Essential Skills contribute to personal economic success

Improved Essential Skills are important for employers too

Research by NRDC in the U.K. is noteworthy

Links have been made by the FSA in the U.K.

a. Financial Literacy and Numeracy

Numeracy is a critical component of financial literacy

Levels of numeracy correlated with retirement savings

b. Financial Literacy and Reading and Document Use

c. Financial Literacy and Thinking Skills

Given the above-mentioned definitions of financial literacy and financial capability,

d. Financial Literacy and Continuous Learning

Professionals from Credit.org (2011) a non-profit consumer credit management

Thus, Computer Use is likely to be linked to Financial Literacy as a means of acquiring,

f. Financial Literacy and Working with Others

h. Financial Literacy and Writing

Although no empirical evidence exists to support a relationship between financial

E. Links between Financial Literacy and Essential Skills: Expert Opinion

Overall Relationship between Financial Literacy and Essential Skills

Personal financial literacy is the ability to read, analyze, manage and

A financially literate individual understands his/her relationship to money

a. Financial Literacy and Numeracy

b. Financial Literacy and Reading and Document Use

d. Financial Literacy and Continuous Learning

e. Financial Literacy and Computer Use

e. Financial Literacy and Working with Others

F. DESIGNING FINANCIAL LITERACY PROGRAMS TO INCORPORATE ESSENTIAL SKILLS

Prior assessment is a key step for success

Table 3. Summary of experts feedback from the interviews

Experts Suggestion Examples of how to put into action

Using the Adult Education Framework can be helpful

Experiential learning and real world applications are important

Virtual learning is also effective when possible

Simultaneously addressing financial literacy and the Essential Skills

Designing programs for those with low levels of Essential Skills

Progressive learning and development and trusted facilitators

As mentioned, there is considerable empirical and anecdotal evidence supporting the

1. Before starting a program in financial literacy, participants should undergo