Empowering positive financial habits: A new mobile app for budgeting

by: Jane Rooney, Canada’s Financial Literacy Leader
FCAC

At the Financial Consumer Agency of Canada (FCAC) we are finding innovative ways to improve the financial literacy of Canadians. Recently, we developed a pilot project that encourages people to use a budget.

Why a budget? A household budget is a simple but highly effective tool; it is the foundation for healthy personal finances. Creating a budget can help people identify their income and expenses and allow them to see where to adjust their spending. This can help people start to save and pay down debt, and increase their confidence when making financial decisions.

Budgets work especially well when money is tight. Having a written budget enables people to commit to a spending plan and allows them to set priorities for making purchases.
Data from the 2014 Canadian Financial Capability Survey (CFCS) tell us only 46 percent of Canadians have a budget. But among those who do, 93 percent say they “usually” or “always” stay within it. And the numbers are the same regardless of demographics such as gender and income.

So how do we enable more people to start?

Last summer, FCAC piloted an innovative approach to encourage non-budgeters to do just that. We sent financial education messaging and links to our online budgeting tool directly to the mobile phones of non-budgeters through a mobile app called Carrot Rewards. In exchange, they received incentives for participating. FCAC researchers then studied the impact of the program on the users’ knowledge, confidence and behaviours related to budgeting.

Our findings uncovered some very compelling results—at the start of the pilot, nearly half of non-budgeters said they didn’t know where to start. Over the month that followed, we continued to send these participants messages about the importance of budgeting and how to go about setting up a budget.

Our results showed that this approach worked. Fourteen percent of non-budgeters began budgeting. Non-budgeters increased their knowledge about budgeting and confidence in their ability to create and maintain a budget also increased.
This innovative pilot project has shown us that directly targeting financial education to consumers has the potential to result in positive behavioural change and to improve financial well-being for large numbers of Canadians.

Research like this is central to the work of the Financial Consumer Agency of Canada (FCAC). As a data-driven agency, FCAC’s financial literacy programs, online tools and resources, consumer information campaigns, and outreach to stakeholders are all based on evidence. Our research helps to identify gaps in financial literacy levels across the country and to pinpoint where FCAC and its partners should direct their resources to help strengthen Canadians’ financial knowledge, skills, and confidence.

For these reasons, we recently developed a National Research Plan for Financial Literacy 2016-2018.

This plan acts as a clear road map for the broad network of researchers in the field of financial literacy who are developing innovative new research projects. These projects will further our evidence base and help us help consumers use a budget, pay down household debt, build savings, and understand the increasing complexity of financial products and services.

The plan was developed in collaboration with our 15-member sub-committee of research experts. It’s designed to ensure that the National Steering Committee on Financial Literacy - which includes Susan Murray, the representative from CLHIA - has the necessary evidence to successfully implement the National Strategy for Financial Literacy – Count me in, Canada.

The National Strategy is a framework to engage public, private and non-profit sectors to strengthen the financial literacy of Canadians and empower them to:

· manage their money and debt wisely;
· plan and save for their future; and
· prevent and protect themselves against fraud and financial abuse.

FCAC also has a wealth of online tools and products for financial consumers. Go to Canada.ca/It-Pays-To-Know to access FCAC’s programs, tools and resources.
There you will find:

· Free financial tools and calculators.
· Information on managing money, debt and borrowing, or savings and investments.
· An online learning program, “Your Financial Toolkit,” and a money-management workshop, “Financial Basics.”
· Access information on how to guard against fraud and scams.
· An online Budget Calculator

You can also view our YouTube videos and follow us on Facebook and Twitter.

At FCAC, we believe in the power of collaboration and coordination: everyone has a role to play and can add value to the knowledge of financial consumers. The insurance industry is particularly well-positioned to help Canadians better understand insurance products, and to help build and strengthen the financial literacy of clients. So keep up the great work!