Canadians don’t need another media story to tell them that the cost of living is skyrocketing. But at a time when it’s nearly impossible to balance the books, they might benefit from hearing that money management is still critical to help make ends meet.
Inflation is eroding Canadians’ purchasing power. Day-to-day costs are becoming increasingly challenging. In a recent RBC Canadian Financial Wellbeing Survey, almost half of Albertans reported that stress related to finances is affecting their mental health. For those living on lower incomes, inflation and rising living costs hit particularly hard. Tight budgets provide little room to manoeuvre, and even small price increases of essential goods and services can have a disproportionate effect.
The rising cost of food is a powerful example. We all experience increased grocery prices. But for Canadians living on lower incomes, increased food prices are resulting in record demand for food banks. This year, Food Banks Canada reports that food bank usage rose to its highest level on record.
In times of rising costs and interest rates, it is arguably even more important for us to manage our finances as prudently as possible. Money management isn’t just about pinching pennies; it’s about preserving our financial well-being as best as possible despite the current economic challenges. Financial literacy can empower people with the knowledge and skills needed to make informed financial decisions. We can’t control our entire financial situation, but effective money management can provide some sense of control, which in turn contributes to reduced stress and greater peace of mind.
A few ways that financial literacy can help people navigate inflation and rising costs include budgeting, debt management, savings and access to other resources. Budgeting can help track spending and cut unnecessary expenses, while assessing other possible income sources. Debt management skills can support with managing existing debts as effectively as possible, such as pursuing debt consolidation. Regular savings — even a very small monthly amount — can help build an emergency fund for the unknown. Financial literacy can also lead to connecting to other resources, such as lower-cost banking options and access to income-boosting government benefits.
Money management support is becoming increasingly important in this time of inflation and record debt levels. Many community organizations in Alberta have worked for years to increase access to money management resources. Since 2011, Momentum and community partners have offered money management programs to more than 30,000 Albertans. On-demand money management courses can be taken by anyone, anywhere, at any time. Financial coaches in Calgary are also able to work through personal financial challenges on an individual basis. Community-based tax clinics have also supported more than 2,300 Calgarians already this year to file taxes, putting $370,000 in tax return dollars back into the pockets of people living on lower incomes.
But money management skills can only do so much. The challenge for people living on lower incomes is often not one of financial mismanagement, but a lack of financial resources. Stagnant or fixed incomes limit the effect of good money management practices when faced with ballooning living costs. We need more living wage employers that pay staff enough to get by every month, and we must develop more affordable housing and boost rent supplements for people living on low incomes since housing is often a household’s single biggest expense.
Financial literacy is not a silver bullet solution to financial challenges facing many Canadians, but it is a powerful tool that can empower people to reduce debt and build savings. As we mark Financial Literacy Month this November in Canada, let us remember the importance of money management as a critical life skill while also striving to provide more economic opportunities for all Canadians.
Let’s work toward leaving no one behind in ensuring Canadians have the financial resources needed to make ends meet.
Jeff Loomis is the executive director of Momentum, a non-profit organization working with people living on lower incomes to learn, earn, save and thrive.