Tom Hamza is the President of Investor Education Fund (InvestorEd.ca)

The financial literacy problem in this country is well documented.  Poor financial knowledge and behaviours are having a tremendous impact on household wealth and threaten our perception of what retirement will be like.   What isn’t well known is what steps are needed to improve the situation.

Where Do We Start- Surely it Can’t Be That Difficult?
Our recent study on financial literacy in high schools indicates the obvious – the problem begins young.  With less than 38% of Ontario high school students feeling prepared or somewhat prepared to effectively manage their money after graduation, there is a problem.  The fact that over 60% of students indicated that they would like to learn this in schools makes it obvious that this is where we need to start.

Developing a base of financial knowledge is absolutely necessary.  In Ontario, we have spent the last decade teaching over 3,500 teachers how to use our Taking Stock in-class resource and presenting our Funny Money seminar to over 50,000 students per year.  Support for the topic has spread beyond students to teachers, schools, school boards and the Ministry of Education in several provinces. Although it will take years to complete, the interest levels in this subject are rising.  Converting this to action is an ongoing process, but we are further along than we ever have been.

Easy Then – Is That It?
If everybody agrees that the school system is the only problem, it should be easy to solve.  However, the school system is just one step that needs to be taken.  It is an issue that goes beyond the classroom because this requires a life-long approach to learning.

Our research studies consistently indicate that learning about financial topics spikes at times that are closely aligned with major life events.  When you get your first job, need to purchase a house or have your first child, you suddenly need unbiased consumer-centric information that is written in plain language. Solving the looming financial literacy crisis requires us to build a life stage approach to getting the right information into people’s hands at the right time.

Financial literacy can’t be improved solely by knowing about life-stages.  However, it is a mindset that is essential to get into the head of the average consumer. It allows us to take a marketer’s approach to break down the population to learn exactly how to reach people with the information that they need.  It is about taking the communication medium that is relevant to one group and using it to package a message. It is about recognizing that a ‘demographic’ is in fact many different sub-demographics that act differently.

Marketing the Material Can Be More Difficult Than Creating It
Any effective marketer knows that it takes strong research to know who your target audience is, and how to reach them.  Making an impact on financial literacy requires understanding the mediums, language and frequency needed to make change, and a longstanding effort to penetrate through the daily clutter of messaging that the average individual faces.

We are currently undertaking research that will help provide the answers to focus our efforts on how people learn, and the mediums with which they are best reached.  For us, the challenge will always be to take the multitude pages of unbiased financial information that we offer at www.investored.ca and to put the specific information in front of a person exactly at the right time.  We need to understand the behaviours and the resources that the 50 year old divorcee will trust and give her the material in a way that fits her needs.  We need to recognize that this is different than what the new graduate and young mother would rely on. Just creating the material is not sufficient- we also need to put it in the right place, and make it engaging and practical to that specific individual.

Similarly, the results must be tracked.  We must get beyond measuring interest and measure what it is actually learned and acted on by the user.  Criticism of financial literacy programs usually focuses on the inability of individuals to learn large amounts of financial information at once.  However, like any other topic, we have to assume that people can understand something and change their behaviour.  This needs to be done through focus-testing before releasing material, and measuring results after the materials are released.  The research needs to be about what the individual actually learned and retained, rather than what they felt about a program. Without understanding how people process information and change their behaviour, refining and improving efforts will be next to impossible.

That said, our challenge is not creating the information.  It is much more of a marketing challenge of positioning, customizing and delivery, and fundamentally understanding our customer’s needs in order to affect change.  This can’t take place over one learning experience, but it has to be developed and done over a lifetime of financial decisions.

What About People Who Don’t Know What They Don’t Know?
Teaching financial literacy in school is an important starting point, and a lifelong learning approach is essential for helping people learn about critical topics at the right time.  But what if someone isn’t looking for information and should be?  How do we reach them?

One of the challenges of financial literacy programs is that they sometimes don’t reach those that need it most.  The people that show up to our classroom training sessions or visit our website are often supplementing the knowledge that they already have.  Reaching those that need it most is extremely difficult and requires outreach, especially with a topic that can be intimidating and difficult to confront.

At some level, financial literacy needs to develop a set of expectations and behaviours that are currently missing in our society. If saving is a prerequisite to retiring, then we have to communicate this message to people that aren’t looking for it.  Delivery of these messages to people that aren’t engaged is an essential supplement to school and lifelong learning.  We must make targeted efforts to actively address financial literacy issues- including behaviours such as saving and debt- through direct mediums such as advertising.  Financial literacy concepts needs to be actively marketed to individuals, in the same way that drunk driving and anti-smoking has.  Changing behaviours and habits is always difficult, especially with a topic as unspoken as personal finance.  We have to recognize this and develop an integrated plan to reach people with these messages at the right time.  It requires taking financial literacy messages and marketing them- like drunk driving and anti-smoking advertising have done in the past 20 years. This is critical to changing societal expectations on this issue.

Change Requires That We Consider All of These Building Blocks
Changing financial literacy in this country requires recognition that behaviours will not alter solely by developing new material or addressing the topic in a single way.  It requires building a base of knowledge in schools, supporting it, and actively informing people about the necessary behaviours.  Unless we look at the whole financial literacy picture, we are doomed to continue well-meaning but piecemeal efforts that will have little effect.