My motivations

I recently took a look at the financial statements of a close family member to determine when would be the earliest date that they could retire. Much to my surprise and dismay, most of this family member’s investments were only marginally generating yields better than 91-day Treasury Bills (typically considered the safest, but one of the lowest returning investments in the market) and, more disturbingly, this poor relative did not know why.

In other words, I would like to help increase people’s “financial literacy”, which was defined by the Task Force on Financial Literacy as: “having the knowledge, skills and confidence to make responsible financial decisions.”

More precisely, I would like to share some key skills and knowledge that I consider necessary to make informed and educated decisions about your budget and your finances. However, I should note that reading my blog will NOT qualify you to be a professional day-trader anymore than any blog can make you qualified to be a brain surgeon (and no, I am not comparing traders to neurosurgeons!). I would like to equip you with questions and mental tools to go out into this crazy market and help you avoid some of the pitfalls and traps that have caught so many people.
Also, I am fully aware that the term “financial literacy” is somewhat of a loaded term. According to Barry McKenna of The Globe and Mail, there is no evidence that financial literacy leads to better financial outcomes, calling it a “smokescreen”. I am actually in agreement with Mr. McKeena on this point in that “financial literacy” is being used by the Government of Canada while simultaneously shifting the financial burden from government to individuals. This blog is a product of this experience. My goal is to address what economists call “information asymmetry” – what can be generally defined as a situation in which one party in a transaction has more or better information compared to another and can be harmful because one party can take advantage of the other party’s lack of knowledge.

Saul Schwartz, professor of public policy at Carlton University points out that the federal Task Force for Financial literacy is headed by the CEO of Sun Life Financial and the Chairman of BMO Nesbitt Burns – likening them to “foxes in charge of the chicken coup”. This is valid, as anyone should be wary of anyone wanting to “educate” them – especially when there’s money involved.

So, to be clear, I think “financial literacy” should be though of as a toolkit and a critical (or sceptical) approach with dealing with financial professionals (like myself), economists, politicians, and the like. It should be used in conjunction with an social activist approach were we put pressure on government to put more stringent requirements on the size of mortgages and credit lines, be way more clear about interest rates paid and fees charged on financial products, and having financial statements and prospectus’ written in plain English.

Phew! With that, I hope you enjoy my insights and let me know what you think – I love to hear about your insights, experiences and questions.