Financial Literacy Update #1

Before I get to this post, I’d like to thank Larry MacDonald for featuring me in this weekend’s Globe & Mail. I’ve had a number of people asking about the 3% 90 Day GIC that I have from ING Direct. It’s only available as an RRSP GIC. I believe it was part of an RRSP seasonal promotion. It’s still available as of early this morning, but I don’t know how much longer it will be there. If you look at their site, you need to look under “RSP Short Term Guaranteed Investment”. It’s for real – honest. Mine matures in April.

If you are visiting Balance Junkie for the first time as a result of the Globe & Mail article, welcome. Take a look around. I hope you like what you read and I hope you’ll visit again soon. Enjoy the rest of your weekend, and your March Break if you’re lucky enough to have the week off!

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Financial Literacy Links

A couple of weeks ago I did a series of posts on financial literacy that were inspired by a report issued by the Task Force on Financial Literacy. They are looking for input from Canadians on ways to improve the financial knowledge and access to information for all Canadians. I think personal finance bloggers can be a great help in terms of initiating discussions and eliciting ideas from Canadians.

In order to do my part, I’m going to periodically publish Financial Literacy Updates like this one. I’ll try to pool together recent information that addresses financial literacy in general or the goals of the Task Force on Financial Literacy in particular. Here are a few recent articles that I found interesting:

• Michael James on Money wondered about the right model for financial advice. This is a huge issue as a lot people don’t realize that their advisor is probably a paid salesperson who may have more incentive to recommend expensive mutual funds rather than lower cost alternatives. This raises some interesting issues about how to better structure advisor compensation.
• Thicken My Wallet did an excellent 2 part series in which he asked Could Too Many Financial Products Be Ruining Your Finances? This gets at the issue of the variety and complexity of financial products that are available today and the difficulty average Canadians might have figuring out which is the best for their needs. The preceding link will take you to Part 1. Part 2 is well worth your time as well.
• Tom over at the Canadian Finance Blog had a good guest post by Jim Yih that addressed the Task Force specifically, asking What Is Financial Literacy?

If you know of any other good articles that I might want to include in these updates, please send me an email and I’d be happy to highlight them in the next Financial Literacy Update.

Bonus Links

These articles contain some pretty strong and maybe not all that widely held opinions on the economy and the markets. I love to hear all sides of the story, so I tend to gravitate toward information that is outside the consensus. These articles provide some in-depth information and the comments sections can be pretty interesting too. Even if you don’t agree with the views expressed, I guarantee they’ll make you think – or make you mad. Either way, I hope you enjoy them!

• There is an interesting article comparing the banking and mortgage systems of Canada vs. the U.S.. If you’re Canadian, you’ll probably be beaming with pride by the time you finish reading the article. While I agree that our banking system is far superior to that of the U.S., I think that very low interest rates and the accompanying tendency for Canadians to take on more debt could cause trouble down the line if rates rise and people cannot afford their payments if they have a variable rate. Further, if rates rise a lot, those with fixed rates could have a nasty surprise when they go to renew their mortgages at the end of the term. I shamelessly stole this link from Rob Carrick’s Personal Finance Reader.
• Naked Capitalism has a guest post containing 6 Theories on Why the Stock Market Has Rallied. This article is rife with conspiracy theories. Suffice it to say the author is not buying into this rally.
• Again from Naked Capitalism, here’s an article with such a long title that it probably doesn’t need anymore explanation: 82% of Americans Say Clamp Down on Wall Street, Financial Experts Say Rein in Big Banks to Save Economy, Politicians Say Keep Them Lobbying Dollars Coming!
• Here’s a 3rd contribution from Naked Capitalism that asks a really important question: We Can’t Inflate Our Way Out of the Debt Crisis . . . So What CAN We Do?
• This article will raise a lot of eyebrows as it asks Do Dividends Matter? Unlike most other analysts you listen to right now, the author basically says that the answer is no. I don’t really have a strong opinion on this one. I can see both sides of the argument. But I’ll bet there are quite a few people who do have some thoughts on this. If you’re one of them, let’s hear it. Is the author off base by a mile, or does he have something here?

As always, I’m interested to hear your thoughts on these topics and I welcome your comments.