Financial Literacy vs. Financial Capability


Choosing the Right Path to Support Your Children

At the Canadian Foundation for Economic Education, our team is adamant about the importance of capability as a benchmark in all that we do. It’s so fundamental that it’s a part of Our Vision: Every Canadian has the capability and opportunity to build a successful economic future. Of course, that sounds impressive, but what does it actually mean, and how do you know if you’re following the right path to support your children? Let’s take a moment to look at a few key questions that will help us understand this vital feature of CFEE’s work.

What is Capability?

Capability is a unique combination of knowledge, application, and confidence, which leads to action and achievement. For someone to have Economic Capability (one of our Four Pillars of Capability), they must be able to identify what is happening in an economic situation, recognize an appropriate response, and have the personal confidence required to put that response into action.

How Does Capability Differ From Literacy?

Traditional literacy is centred around the first two aspects of our capability definition: knowledge and application. Financial literacy education teaches us how to assess a situation and identify a response – I need to save some money, so I should make a budget. The key difference between capability and literacy is the third aspect: confidence. Confidence is what leads to consistent action and, eventually, achievement. In the example of saving money, financial literacy helps us identify the need to save and the solution of creating a budget. Financial capability comes from practice and experience working with budgets and gives us the confidence to get started and, more importantly, stick with it.

How Do You Measure Capability?

Unfortunately, true capability is more difficult to measure than literacy, as it goes beyond the information you have to the actions you take. Every few years, the Government of Canada completes a major Financial Capability Survey, with the last compiled by the Financial Consumer Agency of Canada (FCAC) in 2019. This survey assessed Canadians’ financial decisions, like budgeting, saving, and preparing for unexpected future costs. On a smaller scale or individual basis, capability is primarily measured through confidence: do you feel ready to take the necessary steps to implement a change? Confidence can change over time, making it necessary to constantly monitor the national landscape and develop new programs to stay on top of Canada’s evolving needs.

How Does an Organization Like CFEE Prioritize Capability?

CFEE prioritizes capability by designing it directly into our programs. Any time a program is developed, special emphasis is placed on how we can help users practice the skills we are teaching them and exercise their new knowledge. Activities, quizzes, projects, money fairs, scenarios, and cases are added to test and share what we’ve learned. Teacher and Parent resources make it easy to reinforce topics through repeated exposure, improving comprehension and removing the pressure from something new and intimidating. Online access and take-home, downloadable modules and resources provide on-demand access to trusted information, making it easier to navigate key financial decisions as they arise. The final, critical step in implementing capability into programs revolves around open and monitored feedback systems. All CFEE programs have personal surveys or online direct feedback mechanisms to help us learn and improve. With continued input from Canadians, we can ensure our programs are always ready to meet your evolving needs.

How Do I Integrate CFEE’s Four Pillars of Capability at Home to Support My Children?

Repeated exposure to information and experiences is an important way of helping young people learn and grow. In recognition of this, many of CFEE’s programs have parent guides and resources that can be used at home to reinforce what was covered in the program. Set aside time to sit and speak with your children about finances, the economy, and their future to see what interests them and what they’d like to learn about.

Use programs like Talk With Our Kids About Money or Money and Youth to help guide the conversation and answer their questions.

Mouth & Youth

Find topics of interest and sit down regularly to discuss and learn together. Encourage them to come to you with questions or concerns they have. By creating open, honest lines of communication with your children about finances, you can work to remove the stigma associated with money conversations and help them grow.

At CFEE, our team is adamant about the importance of capability. Capability is so much more than just learning. It is confidently facing your decisions so you can build a successful economic future.

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