Though much of the discussion surrounding personal financial education and long-term planning has centred on the development of sound money management principles in a generation of tech-savvy youth, consideration must also be given to the financial needs of an aging demographic.
Statistically, Canada is one of the world’s most rapidly aging nations. In a report dated July 1, 2015, preliminary estimates showed that, for the first time, Canada had more people 65 years and older than children aged 0 to 14. The “boom” generation is largely entering late middle age, and the median age of Canadians has risen to 40.4 years. This median has risen by 5.7 years in the past 20 years.
According to the more than 5,000 investment professionals from around the world who participated in the annual CFA Institute Global Market Sentiment Survey (GMSS), conducted in October of 2015, the aging population was ranked the second-most underestimated risk to global financial markets. At the heart of this risk is the tension between savings, pension disbursement, and lifestyle pressures.
In a 2013 report, the Certified General Accountants Association made several astute observations on this issue. Most importantly, the report highlights the need for Canadians approaching retirement to “take charge of their own financial destiny and support their retirement by way of private savings” and, in correlation with that goal, they note “Pension plans should not be allowed to metamorphose into the empires of debt.”
Have personal financial resources addressed these requirements? Creative and specific design of inclusive services and support will need to be implemented in order to do so successfully. Such service considerations may include ensuring that effective monitoring and resolution mechanisms are in place in the event of user-side mistakes. These same monitoring tools will be essential to mitigate or control abuse.
Furthermore, financial service providers will need to ensure that products are easily understood and accessible, and that older people, indeed all clients, are able to make financially sound product choices. Regular contributions to retirement savings and other long term growth sources should be optimized and incentivized, with reminders and reinforcements delivered through easily accessible and low-barrier communications technologies. And, perhaps most importantly as the Center for Financial Inclusion notes in a February 2015 report, “Creating a culture of saving is critical to increasing the preparedness” of an aging populace.