Financial Literacy

[SharperDingaan]

70% of Canadians are financially illiterate, and Canada is one of the most financially literate countries in the world, according to both national and international measures. The good news is that Canadian youth < 15 are amongst the top 2 most literate in the world. https://www.canada.ca/en/financial-consumer-agency/programs/research/review-financial-literacy-research.html

 

Financial literacy is influenced by a range of related factors. Ability to make a decision, ability to persist through a problem to find the right solution, ability to plan out financial behaviors and stick to that plan. The research cites four key dimensions.

• financial confidence (and its cognitive cousin self-efficacy)

• executive functioning (e.g., self-control, working memory, problem solving)

• attitudes towards money (e.g., time-orientation)

• behavioral habits

 

All Canadians means everyone from Inuit/First Nations people, through to retirees, and the executive suites of Bay Streets towers, from 1-100+ yrs old. Assume maybe 60% financial illiteracy for the vast bulk of Canada’s population living within 200 miles of the US border.

 

So what?

 

Assume 60% financial illiteracy within the sample, 60% financial illiteracy within the subset ‘investing’ (the young through to the old), and that only 1 in 4 have the financial confidence to engage in the more advanced financial investments (options, bond duration, distressed valuation, etc.). Roughly, what % of the population actually knows what it is doing in the investment space? Binomial calculation suggests about 4% [100x(1-.6)x(1-.6)x(1/4)]; and that all the top 2% ‘elite’, use experienced advisers that know what they are doing.   

 

COBF is an ‘investment’ board, has 3,000 members (big enough sample), and should be representative of the second level; 4% at the third level suggests that about 120 posters know what they are doing, past and present. Seems about right ….. if you have been on COBF for some time, you could probably even identify them. Please don’t!

 

We see a lot of the four dimensions play out across COBF space, hence it’s an excellent training tool. Furthermore, as compounding does its thing, the COBF literacy rate should also gradually creep up. All good.

 

Takeaways?

 

A lot of people are going to get burned over the next 5 years, some deservedly, some not so much. If you are on this board, you are already in the 16% most financially literate, and learning from the best. You might want to quietly find some of the deserving who could use a little guidance.

 

SD

Edited November 4, 2023 by SharperDingaan

[John Hjorth]

The actuality of this topic seems to be permanent and never fading.

 

If any of my fellow CoBF members has a person in own sphere near and dear to you where you may aware of that particular person with such challenges as to :

• Managing debt
• Navigating the financial marketplace
• Building savings
• Budgeting

I will just say it can be a hard task to open up a such discussion with another person, so please think carefully about how to do it, because it's likely highly sensitive for that other person. Most likely challenges are about several bullets above, because they are interconnected.

 

A way to start could be giving a book gift with some well thought out words delivered together with it :

 

Morgan Housel : The Psychology of Money [ CoBF topic ].

Edited November 4, 2023 by John Hjorth

[Spekulatius]

I knew an accountant at my former workplace who was basically financially illiterate. That assessment was based on how bought cars or dealt with expenses. He also seemed constantly broke and had significant credit card balances. Amazing.

[Paarslaars]

Aah well said, learning from the best, that's what I try to do here.

I stil consider myself financially illiterate compared to most people here.

 

I've been thinking about how to handle the topic of finance as well amongst friends & family.

I've got two friends who spend their entire life savings on their dream houses... which is nice, they have a good income so it's not going to harm them.

But they ruin their compounding potential... seems like a shame to me but to each their own.

 

Also my sister in law mentioned they couldn't afford a 10k repair on the house.

They make good money and have a low mortgage... it baffled me, until I remembered their spending habits.

But this is such a sensitive topic to touch... especially because the in-laws hate taking advice from me.

(I'm an engineer, they have high school diploma's and kind of a stick up their butt when someone who 'went to college' gives them advice)

[LC]

Doctors are usually pretty bad. 12 years fully immersed in one subject, with 3-400k of debt, suddenly making an incredible amount of money per year. It’s understandable. 
 

I see their earnings statements and they tell me they have no clue how they get paid or what drives it.

[Gregmal]

This is the real pandemic lol 

[John Hjorth]

45 minutes ago, Gregmal said:

This is the real pandemic lol 

 

Greg [ @Gregmal ],

 

The book I mentioned above by Morgan Housel would actually serve your needs expressed earlier in some other topic here on CoBF by you about how to get your kids on a good path in life, but when your kids are older than now [, which I recall as <=10 years old]. Like late teen years, and in drips. The good path does not start with investing, it starts with saving, and all the math and logic related to the concept of saving.

Edited November 4, 2023 by John Hjorth

[Cigarbutt]

3 hours ago, SharperDingaan said:

...Assume maybe 60% financial illiteracy for the vast bulk of Canada’s population living within 200 miles of the US border.

 So what?

...

Takeaways?

...

SD

A not widely recognized but verifiable fact is that 90% of Canadians live within 160 kilometers of the US border.

Number 3 reason for this fact is the attraction to Americans for what they represent, number 2 reason is economic ties but...number 1 reason is... simply climatic (not climactic).

For literacy purposes, 1.6 km = 1 mile

-----

i'm involved in the process of helping young adults in my tribe to get the government tools available to them (tax-deferred accounts for first house, for 'saving' and for 'retirement') to do the work for them and the result on their effective tax rate is really significant. And it's not that complicated.

-----

You mention a coming period for the next 5 years where there is a risk of being 'burned'. From my unusual perspective, things are slowly shaping up for some kind of blossom, what am i missing?

[SharperDingaan]

Just to throw out some observations ...

 

You cannot just save your way to a better life; it will help, but you really need to grow the pile ... and to do that you need to embrace risk. Boarding schools are much maligned, but the youth who go; quickly grow up, learn risk/return, what pays, what they are good at, and how to handle bullying/hazing. Thereafter it's largely oversight, and ensuring that risk/return remains in the legal realm; bummer at times!

 

Much of the illiteracy is because it is taught so badly; TVM almost exclusively focuses on use of the Excel functions, via applications that are primarily number crunching exercises. Re-frame it into how much undergraduate debt you can afford to graduate with, based on the starting pay of the entry-level job you hope to get; and you get very different results! Same use of tools, but now you 'think' as well.  

 

Different people, measure by different strokes; and power to them. We have a nephew who studied geography, but kept getting lost as soon as he was in the countryside. His solution, with his portion of some smuggling gains, was to contribute to the purchase/installation of bilingual (Welsh/English) directional signs on a well-known Welsh hiking trail; so that he would never get lost again!

 

SD

 

  

 

 

 

 

Edited November 5, 2023 by SharperDingaan

[SharperDingaan]

1 hour ago, Cigarbutt said:

i'm involved in the process of helping young adults in my tribe to get the government tools available to them (tax-deferred accounts for first house, for 'saving' and for 'retirement') to do the work for them and the result on their effective tax rate is really significant. And it's not that complicated.

-----

You mention a coming period for the next 5 years where there is a risk of being 'burned'. From my unusual perspective, things are slowly shaping up for some kind of blossom, what am i missing?

 

I picked the 200 miles just so as to include the road distances for Calgary, Edmonton, Winnipeg, Thunder Bay, Guelph, Waterloo, etc. But quite true, most everyone is within 100 miles of the  US border as the crow flies.

 

Great work with the First Nations! I did my MBA with some folks from the Kainai (Blackfoot Confederacy), and learnt a lot. For those in the city, many are going to experience a marked decline from an already high standard of living, and poor decisions made during the decline are likely to make it worse; going from richer to poorer, doesn't translate well. Whereas for many First Nations it's more one of going from a bad to a better standard of living, with Truth and Reconciliation Report calls to action further improving the way; translates better. Relativity optics.

 

Good luck with the tools  ... you might want to look at Mitac grants as well 

 

SD

 

 

[bizaro86]

9 hours ago, Cigarbutt said:

A not widely recognized but verifiable fact is that 90% of Canadians live within 160 kilometers of the US border.

Number 3 reason for this fact is the attraction to Americans for what they represent, number 2 reason is economic ties but...number 1 reason is... simply climatic (not climactic).

For literacy purposes, 1.6 km = 1 mile

-----

i'm involved in the process of helping young adults in my tribe to get the government tools available to them (tax-deferred accounts for first house, for 'saving' and for 'retirement') to do the work for them and the result on their effective tax rate is really significant. And it's not that complicated.

-----

You mention a coming period for the next 5 years where there is a risk of being 'burned'. From my unusual perspective, things are slowly shaping up for some kind of blossom, what am i missing?

 

While it's very high, 90% is verifiably more than live within 160km of the US border.

 

Alberta is more than 10% of the 40MM Canadians, and basically everyone here lives further than that from the border. Metros Calgary and Edmonton alone get you over 3MM, and the smaller centres and rural areas get you to 4MM outside that band. It's really only Lethbridge and some farms within that distance of the border in AB.

 

Add Saskatoon (~300k), Newfoundland (~500k) and Northern BC/Ontario and you've got at least another million.

 

We're having pretty significant in-migration of people who can't afford to live in Vancouver/Toronto any more...

 

 

[Cigarbutt]

8 hours ago, bizaro86 said:

 

While it's very high, 90% is verifiably more than live within 160km of the US border.

Alberta is more than 10% of the 40MM Canadians, and basically everyone here lives further than that from the border. Metros Calgary and Edmonton alone get you over 3MM, and the smaller centres and rural areas get you to 4MM outside that band. It's really only Lethbridge and some farms within that distance of the border in AB.

Add Saskatoon (~300k), Newfoundland (~500k) and Northern BC/Ontario and you've got at least another million.

We're having pretty significant in-migration of people who can't afford to live in Vancouver/Toronto any more...

Despite the above map and other 'sources', you are correct (i was wrong) and the percentage is closer to 80-85%. Thanks for the guidance.

Because of your post, i spent a few seconds on this topic (inter-provincial migration) and the net positive migration to higher latitude (and slightly colder) regions of Alberta is for real and growing. Interesting.

Estimates of interprovincial migrants by province or territory of origin and destination, annual (statcan.gc.ca)

Real estate prices are clearly a factor. One also has to consider the relative commodity boom that is happening but there may be more (along the lines of what's going on in the US with NY/CA to FL/TX positive migration).

----) Back to what SharperDingaan is trying to do with this thread..

[SharperDingaan]

On 11/4/2023 at 11:51 AM, Paarslaars said:

I've been thinking about how to handle the topic of finance as well amongst friends & family.

 

I hear you! We have a very protective mama bear around her youngsters, who would prefer they live a sheltered life  She wasn't impressed upon discovery that her boys had been managing a lock-up of vodka/caviar through the disposal process; had to ensure that we were all far away, when grandma broke the news.   

 

SD

[Spooky]

I made this meme which I think is relevant 

 

[DooDiligence]

On 11/4/2023 at 12:02 PM, John Hjorth said:

 

Greg [ @Gregmal ],

 

The book I mentioned above by Morgan Housel would actually serve your needs expressed earlier in some other topic here on CoBF by you about how to get your kids on a good path in life, but when your kids are older than now [, which I recall as <=10 years old]. Like late teen years, and in drips. The good path does not start with investing, it starts with saving, and all the math and logic related to the concept of saving.

 

Coin collecting can be a good kid starter. Numismatics covers art, history, finance and politics. My Grandfather got me started on Mercury dimes, Buffalo nickels and Morgan dollars, and when I got my first offshore job I started adding St. Gaudens $20 gold and Liberty $5's (EF and up, no special dates), for what now looks like just a slight premium above scrap, plus a numismatic kicker for better dates. I particularly like the Liberty $5's for their association with racketeer nickels, which were clad in gold and passed off as a $5 back in the day.

 

At the time I was working for Petrol Marine as the Hunt Brothers spent gushers of cash doing deepwater pioneering work in the Gulf of Mexico (Green Canyon). Gold was up to $800 (thanks in part to the Hunt bros). Also, if you're an MLS fan, you can thank Lamar Hunt.

 

As an investment, gold has appreciated a lot more than silver (duh). Mercury dimes have gone to sleep for the past 15 years except for the 1916D, 1921D and 1942/41 overdate, plus a few other semi key dates. Same story for Buffalo nickel values. A patient buyer can snipe key dates on FeeBay at reasonable prices. Get a kid a starter album for $200 +/-  (partial set) and show them how to fill it up (teach them how to snipe online auctions    ) If they show interest then they might upgrade the collection over the years and wind up saving and investing in equities => requires more involved sniping skills.

 

I have an album of Mercury dimes that I've upgraded over the years to EF/MS condition (plus a counterfeit 1916D from my Grandfather) and no 1942/41 ( I'm still looking for a good one < $500 ). I'm also still working on filling a higher grade Buffalo nickel album. My favorites though, are a set of Carson City silver dollars from an old GSA hoard. I like these because they were mined and minted in the same town. They come slabbed in lucite with a cardboard box and a bicentennial blurb from Tricky Dick. One of mine is an MS+ 1880/79 VAM6 overdate. I also have a lot of P,S,D and O's (New Orleans) all in uncirculated condition. I inherited some of these when my Mom passed and I'll never sell them.

 

When I retired I sold some of the lower grade, higher mintage gold dates to finance my video, lighting and sound gear habit.

 

Coins are a gateway drug for investing. I believe it's easier to hook a kid than it is to try and change an adult who's already wearing a will work for food sign (literally or figuratively).

Edited November 6, 2023 by DooDiligence