Financial life skills are easier to build than you might think

Remember the story about Jacques Demers, the Montreal Canadiens’ hockey coach who “came out” as an illiterate adult in 2005?  He had carefully organized his life so that other people took care of anything that involved the ability to read and write.

I was a bit like Mr. Demers, only in terms of financial life skills. For years, I made do with the most basic financial literacy and was content to delegate my finances to someone else.

Sure, I kept a budget. I eventually took the time to understand what a stock is, and a bond, and a mutual fund.  These days, I’m saving for retirement, and I meet with my financial advisor every year to evaluate my progress. I even have a financial plan (in my head). But it’s surprising how easy it is to skim the surface, not quite understanding what the advisor is saying, going along with  recommendations without asking basic questions—like, what’s this going to cost me in fees? and, is there something else that’s cheaper, or has less risk?

It turns out I’m not alone. According to BCSC research published in October 2008 called The 21st Century Investor pdf, Canadian investors know the basics—stocks, bonds, mutual funds—but their knowledge drops off sharply when the topic shifts to more complex products  like Exchange Traded Funds, known as ETFs.

It is also clear from the research that while Canadians often understand what they should be doing, their behaviour tells a different story.  For example, almost 90% of Canadians believe that having a financial plan is important, but over half (58%) don’t have one.  Most (92%) agreed on the importance of conducting independent research before investing.  But almost half did not personally research their most recent investment.

So if you’re ready to start increasing your financial life skills by applying those skills to better manage your money, here are some basic resources to get you started.

2 from BC Securities Commission investor education

3 from the Canadian Securities Administrators  (CSA)

  • Investing Basics You know you should be more involved, but where to start? This guide can help.
  • Investments at a Glance Learn about different kinds of investments and what to keep in mind when considering them.
  • Understanding Mutual Funds A plain language primer on the investment type most Canadians hold either in their own portfolios or through their pension plans.

How are your financial life skills? If you’re already on your way, do you have any great sites or books to recommend? If you’re just starting out, how can we help?