Knowledge is the first step to economic success
I am confused! A 2003 survey presented by ABC Life Literacy Canada found that nearly 50% of Canadians admitted to struggling with simple tasks involving numbers.
Greg Pollock, President and CEO of Advocis, The Financial Planners Association of Canada says “I think we have a bit of work to do” regarding teaching financial knowledge to Canadians. Yet he goes on to say “this is probably a 20 to 30 year program once you get down to it,” He may be correct because it took the Canadian Federal government over 7 years to initiate a 13 member committee (of which Greg was a member) to study the state of Financial Literacy in Canada. Then Greg goes on to say that “budgeting is key”.
I guess understanding insurance, stocks, bonds, GIC’s, EFT’s, mutual funds, residual incomes, trailer fees, credit cards, car loans and finally last of all mortgages, are not as important as learning how to budget. For most Canadians a mortgage is the biggest investment of their lives. A lot of Canadians are forced to accept at face value whatever advice a Lender gives them because they are unable to easily or personally verify the lenders advice. Most of the free calculators on web sites are there to attract your eye balls not really be helpful. Remember nothing is free. You only get what you pay for and that you can take to the bank.
Here is a refreshing idea, why not teach students how to put money in a financial vehicle that gives them the best yield or return for their eventual retirement (read: pay down your mortgage or invest in equities). This is the classical question posed to many financial planners. I have found its usually best answered by someone who does not have a vested interest in selling you a given product, that is an independent financial planner that charges you a flat fee and does not have residual income in the back of his mind clouding the issue. It’s an analysis that requires an understanding of present value future value mathematics.
Why not introduce the student to interest calculations and progress to how they are used in mortgage and loan calculations then compare the cash flow to other financial vehicles in order to see the best return. This is the difficult task ahead, not teaching how to budget. My late father was not privileged enough to make it past grade 7 yet he somehow knew how to budget and had a very comfortable life because of it. I know of a lot of people that also have that innate common sense. The “simple tasks involving numbers” and so called budgeting is a smoke and mirrors tactic and takes the focus off the people in the financial industry that make a comfortable living because of the average Canadians financial ignorance. Even a village idiot knows if you only have $1000 per month in income you cannot spend $2000 per month on coffee and donuts. Again I repeat, in my other article, Mortgage Experts, only one of the 13 appointees on the Task Force on Financial Literacy was a teacher.