Instead of complaining that the rosebush is full of thorns, be happy that the thorn bush has roses.
On February 22, the Task Force on Financial Literacy released a public consultation document called Leveraging Excellence. The task force was established by the Canadian Minister of Finance in 2009 to examine ways to boost the financial literacy of Canadians. I thought that the title of the report was interesting in light of the fact that I (and others) believe that excess leverage is the single greatest personal finance challenge facing us today. But the Task Force wasn’t referring to that kind of leverage. They simply want to look at ways to use existing resources in order to improve financial literacy among Canadians. I’m all for that.
My local newspaper carried an opinion piece by Jay Bryan on the Task Force report. Mr. Bryan is in favour of financial literacy, but offers 3 main points as to why he thinks other issues are more important. I pretty much disagree with all of them, but I’ll outline them for you here, offer my humble opinion on each, and let you decide where you come down in the debate: (For the record, I am not a supporter of Stephen Harper or his political party.)
1. It’s Not an Emergency
Mr. Bryan feels that financial illiteracy is”not a big emergency” and that “we have no shortage of real financial issues that hurt real people every day.” I beg to differ. Financial illiteracy is a real financial issue and it’s the job of the Task Force to keep it from becoming an emergency. If we wait until it reaches emergency status as we did with the financial crisis, we will be forced to undertake reactive solutions that provide short term benefits and long term pain. How many years will it take taxpayers to pay for the bailout of the automotive industry? An ounce of prevention is worth a pound of cure. (Or a penny of prevention is worth a dollar of cure?)
2. Pension Issues for Bankrupt Companies are More Important
Referring to the former employees of bankrupt companies like Nortel and AbitibiBowater, Mr. Bryan thinks “immediate action to prevent the possible gutting of their company pensions is a more pressing issue than a task force on financial literacy.” Really? What about the vast majority of Canadians that have no company pension, are struggling to save for retirement on their own, and were just handed the tax burden of funding the pensions of GM and Chrysler employees? I think those people might benefit from a little help figuring out how to save enough for retirement.
I agree that the government should ensure that the employees are treated fairly in the bankruptcy proceedings, but bailing them out should not be an option. The rest of us simply cannot afford anymore bailouts. Further, it’s unfair for some employees to receive taxpayer dollars while others do not, and backing up every pension fund is just not feasible. Employees need to be made aware of the risks inherent in company pension plans in the same way that investors in any other vehicle need to understand the risk-reward ratio.
3. Curbing the Outrageous Practices of Large Financial Institutions
Mr. Bryan asserts that the government would be better off studying and eliminating “outrages” like the “sneaky, frustrating ways in which Canadians are chiselled and misled by giant financial institutions whose ability to dream up sneaky fees and hidden expenses are enough to defeat even a PhD in financial literacy.” While I’m not a fan of the sales tactics of many financial firms, I think that increased financial literacy is the antidote for them. You don’t need a PhD in financial literacy to invest in simple instruments like GICs or even ETFs.
As for the rest of the “sneaky” products, just say no. Knowledge is power. The more financially literate Canadians become, the more likely they are to say “no” to these products. Financial institutions will be forced to bring products that people actually want and need to the market instead. If they don’t, stick with the simplest savings and investing vehicles and you’ll do just fine – unless your taxes are raised to fund other people’s retirement so that you can’t afford to save for your own.
Mr. Bryan concludes with this snarky snippet: “So once it perfects our financial literacy, maybe the Harper government could do a little work to help our real world financial security.” How about enabling Canadians to manage their own financial security instead of cultivating a society of unthinking people who are waiting for the next government handout?
Call to Action
It’s so easy to grab the torches and pitchforks and form a posse whenever a government proposes something new. But we’re all in this together and we’ll only be able to solve our problems through collaboration and cooperation. In the spirit of the 2010 Vancouver Olympics, I’d like to give the Task Force on Financial Literacy a gold medal for getting the process started.
The Task Force report raises a lot of relevant issues, many of which caused me to start this blog. I do think that Canadians need unbiased information about their financial options and reading books and blogs is one way to get that information out there. The Task Force is asking for input from Canadians and I intend to do my part by writing about the many salient questions raised in their report over the next few weeks.
I invite you to read the report and join in the discussion. Michael James has already weighed in on Conflicting Views of Debt. (Bloggers: Don’t be shy about sending me an email if you write about the Task Force or the issues the report raises. I’d be happy to link to your article!)
Is the Task Force on Financial Literacy relevant or should the government direct its resources elsewhere?