How Can We Make Canadians More Financially Literate?

canadian-financial-literacy-updatedIt’s always inspiring to connect with like-minded financial professionals, which is why we’ve decided to start a new segment on the Bankruptcy Blog featuring interviews with industry experts.

For the first installment, I sat down with Toronto-based TV news personality Barry Choi, who also happens to be a self-taught, do-it-yourself investor. Barry’s blog Money We Have offers an easy take on personal finance for Canadians.

We covered a wide range of topics in our conversation, including the importance of financial literacy.

Like a lot of people, Barry learned some financial lessons the hard way when he first started investing.

Fresh out of college, he followed the advice of a financial advisor, not recognizing that the mutual funds he was investing in had high management fees and deferred sales charges. When he realized the error of his ways, he began his quest to educate himself in personal finance. And when he realized that a lot of people were making the same mistakes that he had made, he decided to share his lessons with the public.

Lesson one: Don’t mistake banks for financial advisors.

I personally remember when I went to the bank as a kid, and there were tellers who would help you make a deposit or withdraw cash. Now banks still have tellers, but they’re really sales people. You can go into a private office and meet with an advisor, but they’re really there to sell you a mutual fund or bank product.

Barry agrees. “They’re literally just glorified sales people,” he says. “I don’t have a problem with banks as long as you’re getting informed information. But their jobs are really about sales, so they can’t really give you that informed information that you really need.”

A lot of people reach out for an advisor because financial topics—including savings, investing and managing debt—seem intimidating. But Barry thinks the problem is more basic. “I don’t think it’s too complex,” he says. “I just think a lot of us are too lazy or don’t want to deal with it. There’s always an excuse. It’s a lot easier to spend money than save money.”

Lesson two: Always pay yourself first

His basic rules for financial stability couldn’t be simpler: Spend less than you make, and pay yourself first. Investing in your own future should be the highest priority after paying basic bills. “In theory it should be really easy for everyone,” he says. “You could go pretty far based on those simple rules.”

Barry, at 30-something years old, thinks that it’s a generational thing. “When my parents came to Canada, they paid for their house in cash. It was the whole mentality of save first, then spend what’s left. I feel like my generation is spend first, then save whatever you have left, and most of the time, it’s nothing.”

While I’m not so sure about that theory—my own bankruptcy clients run a pretty wide range in age—Barry and I do agree on this: Financial education is key.

“Personally, I think financial literacy needs to be taught in the school system,” Barry says. “If you’re not learning about this at school, you’re learning about it on television. And what you’re seeing on television is not to pay yourself first and spend less than you make. You’re hearing the commercials from banks: “Hey, you’re richer than you think, debt is part of life, and you can afford that house.”

So at what age should you start teaching kids about fiscal responsibility? Is a 14-year-old ready to learn about credit cards? Do college kids care about retirement planning? Barry compares it to any other topic kids study in school today.

“Why is French or art a mandatory credit to graduate high school? If the school system can make 30 hours of community service mandatory to graduate, I’m sure they can make a five-hour course about personal finance mandatory. Kids might not be interested, but I think if you get them thinking about it and real life scenarios, educate them about how budgets work, gas and insurance… they can build toward that.”

The crux of the problem is, people like Barry and I would like to see concepts like compound interest taught in a practical way in school, but sometimes it seems like we’re the only ones who do. The credit card companies don’t really want you to understand that. There’s really nobody who has any incentive to make us literate, because the economy thrives on our illiteracy.

How financially literate do you consider yourself to be—and how do you compare to the average Canadian? Please leave a comment below!