Budgeting, understanding interest rates, the potential drawbacks of purchasing on credit, and the implications of signing contracts are some of the skills taught in financial literacy.
They are basic life skills that many Canadians struggle with and ones that the Cariboo Chilcotin Partners for Literacy is currently attempting to address through the development of more in-depth financial literacy workshops thanks to a recent $99,000 grant.
“It’s a huge issue. People have difficulty making ends meet. A large part is not understanding what’s involved,” Bruce Mack, president of CCPL, says.
“Some financial literacy is basic math: fractions, percentages — that’s what interest rates are.”
The recession and growing personal debt, Mack thinks, have resulted in the growing interest in finance 101.
He says there is no simple reason for the financial problems people face. Maybe it’s the West’s desire to have “things,” or advertising that can mislead with the details in the fine print, or just not putting money into savings or pensions.
“There isn’t a simple answer. It differs from individual to individual,” he says. “Awareness is a big part of the solution.”
Some of the key points Mack hopes to impart to people who participate in CCPL’s workshops is the importance of budgeting, tracking where one’s money goes every month, planning for known expenditures and paying for items immediately rather than buying them on credit.
“There are things that shouldn’t catch us by surprise: insurance, winter tires, kids hockey lessons,” he says advocating the practice of putting money aside for items we know we’ll need in the future or for savings.
“Putting money aside — $25 to $50 a pay cheque can really add up. If you take it off on payday you don’t miss it.”
Also important is knowing the difference between good debt and bad. Investing in a house or education, Mack says, is debt that will likely pay off down the road. A trip, on the other hand, won’t.
Knowing there are different methods used to purchase items and, due to the effect of interest rates, some, like buying on credit or leasing, are probably more expensive.
“You end up paying more than if you bought it in the first place,” Mack says of both.
Understanding how and how much loan companies charge in usury rates before using one is also critical.
Debt is not only bad for one’s credit rating, it may also be bad for one’s mental health.
“It’s a huge stress. Self esteem goes down because individuals can’ find a way out. There is a lot of trying to maintain a facade when things are falling apart inside. That’s very difficult for people.”
The group’s workshops will provide plenty of information but they are not intended to give financial advice. Mack plans to bring financial literacy workshops to any group that expresses an interest.