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rob carrick

Here are six essential things you need to understand to be financially literate – no math required. They're presented in recognition of November as Financial Literacy Month.

1. It's not a competition
Stop comparing your financial position to your friends and neighbours. Appearances are never more deceiving than in financial matters. Huge homes and fancy cars can mean big debts, not a genius mind for saving and investing. Anyway, the biggest measure of financial success is the extent to which you live within your means.

Also, don't measure the success of your borrowing and investing choices against those made by other people. The right financial decision for your needs isn't always the one that generates the biggest return or results in you paying the least interest.

Mortgages are a great example. A fixed rate comes at a higher cost than a floating rate, but it shields you from interest rate increases for a period of time. There's value in having that kind of security, but it's not reflected in the interest rate you pay. Make financial choices that are right for you and forget about playing to an audience.

2. Saving is its own reward
The weakest excuse of all for not saving for the future is that interest rates are low. We've somehow decided that we must be rewarded for saving – otherwise it's not a smart use of our money. Wrong. Saving is about having money safely at hand to accomplish goals and to carry you in emergencies. Making interest is a bonus.

Interest rates are, in fact, pathetically low right now. It's a result of weak economic conditions in Canada and globally, and not a plot against savers. People saved heroically in the early 1980s thanks to double-digit rates. Saving today, with rates barely in single digits, is just as important; okay, more important – when you consider how high debt levels are, on average.

3. Information overload is a good thing
Think back 15 or 20 years ago. In that pre-Internet time, personal finance was a niche topic fit only for the back of newspaper business pages. In the financial industry, this age of unenlightenment was a golden period. No bold customers coming in to bargain for better rates, or asking questions about fees and credentials.

Today, there's a vast amount of personal finance and investing coverage in media of all types. It's overwhelming, but it's healthy because it gives people exposure to all kinds of views. We don't have to take the financial industry's word for it any more.

4. Some cynicism is healthy, but too much is a cop-out
More than providing sound advice, it's the selling of products that brings big profits at banks and investment firms. If that's not enough to make you cynical about the investment industry, then its misadventures through the past five years should do the trick.

Just don't get so carried away that you pass up on all the good products and services that are available. Mad at your mutual funds? Consider exchange-traded funds. Disappointed in your adviser? Find a better one – possibly someone who works for a fee and doesn't get paid in commissions. You don't have to thrash around on your own in the mistaken belief that no one else can be trusted with your money. Do the work to find the best people and products. Anything less is a cop-out.

5. Being wrong is normal
You will pick bad investments. You will overspend at some point. You will take on debt and not pay it off as quickly as you could. Well, so what? The mark of a financially literate person isn't a mistake-free record – it's a willingness to change course or adapt when things don't go right.

The mark of a financial illiterate is to make a bad choice and then do nothing about it. Help is almost always available, whether you took on too much debt, made a bad mortgage choice or messed up your investments. There's usually a cost to fixing your mistakes, but it's a good value compared to doing nothing.

6. Financial literacy begins with you
Government, schools, non-profit groups and even the financial industry have a role in teaching people about money. But nothing will change unless Canadians make it a personal priority to become more financially literate.

There are no stupid questions in personal finance. Ask and ask again until you understand fully. Don't know where to go? I'm here to help.


Got questions?

I attempt to answer all questions from readers, some directly and some by posting them for discussion (with permission) on my Facebook personal finance page at Here are some other resources for answering financial questions:

This should be your first stop in learning about the basics of investing and personal finance; the site is run by the non-profit Investor Education Fund, so the information is free of bias.

A online financial encyclopedia.

Click on the "Investor Education" tab for videos and lots more content.