Letter: Canada’s financial literacy gap

In Ms. Valcin’s piece, literacy is presented as a necessary foundation for good financial decisions: people must be able to read statements, compare interest rates and understand basic terms before they can act with confidence. That is clearly true. One in five Canadian adults performing at the lowest literacy levels is a serious concern for both social equity and economic performance. Addressing that gap is good public policy.

But literacy, even “financial literacy,” is fundamentally about knowledge and skills. Empowerment is about having the practical ability to use that knowledge in real markets, against real incentives, with real constraints.

A few examples illustrate the difference:

• A consumer may understand compound interest perfectly well and still be trapped in high-cost credit because every “offer” in front of them is designed to keep them revolving rather than repaying.
• A retiree may know the basics of diversification but be pushed toward high-fee, complex products whose risks and costs are buried in fine print or layered disclosure.
• A newcomer may understand the concept of comparison-shopping yet face opaque fees, language barriers and sales channels that make meaningful comparison impossible in practice.

In each case, more education helps at the margin, but the binding constraint is not the person’s knowledge; it is the structure of products, the distribution channels, the conflicts in advice models and the lack of simple tools and effective recourse. That is the terrain of empowerment.

An empowerment agenda would ask slightly different questions than a literacy agenda:

• Are products, defaults and advice structures designed so that a reasonably informed person is likely to achieve a decent outcome without needing to be an expert?

• Are the most common “friction points” for vulnerable consumers (e.g., upselling at renewal, add-on insurance, early-withdrawal penalties, teaser rates) tightly governed, simplified or eliminated?

• Do people have access to timely, independent help when something goes wrong, and is it realistic to use that help if you are busy, stressed or not highly educated?

• Are new technologies, including AI, being deployed to reduce complexity and support better choices at the point of decision, rather than simply pushing more information at people and testing whether they can pass the quiz?

For vulnerable cohorts — the very groups Ms. Valcin highlights in shelters, food banks and settlement services — this distinction is especially important. People who are dealing with housing instability, health issues, caregiving or insecure work have limited time, bandwidth and emotional capacity to decode financial fine print, however strong their numeracy or reading skills may be. In that context, “empowerment” looks like:

• simpler default options that are genuinely in the customer’s interests;
• guardrails around the most harmful sales practices;
• complaint and redress systems that are easy to navigate; and
• tools that translate complexity into clear, actionable choices at the moment they are needed.

None of this diminishes the value of the work United for Literacy is doing. On the contrary, their programs are vital. But when governments, regulators and financial institutions talk about closing the “financial literacy gap,” we should be clear that literacy is only one part of a larger equation.

If we stop at literacy, we risk implying that poor outcomes are primarily the fault of individuals who have not studied hard enough. An empowerment lens, by contrast, recognizes that markets, institutions and technologies can be designed to support good decisions by typical, busy, imperfect humans — including those who are already under strain.

Ideally, future conversations will treat financial literacy and financial empowerment as partners, not substitutes: investing in literacy so that people can understand and question what they are offered, while also reshaping products, advice frameworks and recourse mechanisms so that that understanding can translate into better outcomes for all cohorts, vulnerable and otherwise.