We've decided Canada has a financial literacy problem, even as ever-increasing amounts of information about personal finance are being made available.
The Globe's doing it - we now have personal finance coverage in our Life section, in Report on Business and online at Globeinvestor.com. Other newspapers have ramped up coverage, bloggers have become a major force in personal finance, extensive educational websites are available, and so are lots of books.
What's all this information got us? A level of national indebtedness that some think is dangerously high and a recent report from a national task force on financial literacy that says "too many people remain under-equipped when it comes to understanding money matters."
Author Bruce Sellery believes the problem is that there's too much focus on pure information, and not enough emphasis on how it relates to real people.
"We have given everybody more information than they can ever possibly consume, without giving them insights," said Mr. Sellery, author of a new personal finance book called Moolala: Why Smart People Do Dumb Things With Their Money (And What You Can Do About It). "Insight drives behaviour."
Mr. Sellery is a former anchor on Business News Network and he handled all kinds of personal finance topics in his years there. Realizing that people were not grasping the financial lessons, he drew on his background as a deliverer of corporate training programs and created a new way to teach people about money.
He's developed workshops on handling money and he's written Moolala, a very approachable, self-help book full of quotes from people he's worked with, personal anecdotes about his cooking and marathon running, and a five-step action plan. Call it the latest in a series of books, starting with David Chilton's The Wealthy Barber, that tries to talk about money in a way that gets people not only to listen, but also to engage.
Accountability and Consequences
One thing you won't find in Moolala is any of the moralizing that Mr. Sellery sees in other personal finance coverage. "People don't enjoy being preached at," he said. "And that's what information on personal finance tends to do - 'you should, you should, you should.'"
Mr. Sellery prefers to talk about personal accountability, actions and consequences. As an example, he mentioned a couple he has worked with that had a sizable six-figure income, a drawn-down line of credit and two new cars. One glaring flaw in their financial situation was the lack of a registered education savings plan to cover postsecondary educational costs for the kids. "The tradeoff I pointed out to them is, 'You are unable to support your kids at university because you have a new Honda CR-V.'"
Ignoring your investments is another action that has consequences. Mr. Sellery is particularly incensed at all the money sitting in mutual funds that aren't performing as well as the benchmark stock and bond indexes. It follows, then, that Moolala favours index investing, where you buy exchange-traded funds or index mutual funds that deliver the returns of the benchmark indexes minus a little for fees.
Mr. Sellery said talk about money is often focused on retirement, but he believes that's too limiting and liable to cause people to tune out. He prefers to have people think in terms of their goals, and then develop a money strategy to achieve them.
To help readers frame their goals, he provides a "priority pyramid" that builds a base on keeping spending below what you're earning and then moves on through tackling debt, saving and so on.
Part of the problem with all the financial information out there is that it distracts people from these simple priorities, Mr. Sellery said. "I actually advocate less information. Don't listen to Uncle Vern and his great stock tips if you haven't paid off your credit card debt. Your No. 1 priority, and it's going to deliver a 19-per-cent return, is to pay that down."
The federal literacy task force produced 30 recommendations for the government, some of which will undoubtedly produce more information on personal finance in schools, online and elsewhere. Mr. Sellery said there needs to be an emphasis as well on finding ways to get people to actually follow through on what they've learned.
In Moolala, he attempts this by keeping up a running dialogue with readers that requires them not just to read, but also to participate by completing various worksheets.
"I don't care if you fill them out," he said. "But if I plant the question, in the shower you're going to think about it and there's a higher probability of you taking action."