When Financial literacy is not enough

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A lot is being written about Financial literacy. In its basic definition, Financial literacy is is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.

There has been a lot of lamentations over the fact Financial literacy is not taught at schools. Although things are starting to change on that front, and I totally agree with the importance of this subject, I believe Financial literacy alone is not enough.

Let me elaborate a bit.


Yep, that’s brutal and cynical but it is the (hard) truth.

You initially don’t need money to learn about Financial literacy, but you do in order to implement what you learned. For example, debt repayment and investing are 2 pillars of Financial literacy.

If you don’t have any -or enough-money to pay off your debt or to start investing, you won’t go very far with your personal Financial plan. The money conundrum needs to be sorted out first.


So you think your Financial decisions all come from a rational, logical, cold place? Think again!

A lot of our decisions come from deeply-ingrained beliefs we all have about money….as well as other aspects of our lives and ourselves. Some beliefs can be very limiting and hold us back.

Behavioral Finance is a relatively new subject field that studies the psychology behind financial decision-making. We all can learn a lot from this. Some common beliefs around money can trigger overconfidence, avoidance or inertia.

If you want different results with your money, look at the belief system behind what you are doing and how you are feeling. This can work in other aspects of your life, by the way.

The first step is to identify the belief and accept it. Then you can figure-out how to change it, if it is a possibility.


In order to be successful, you need to consistently apply the Financial literacy principles you learned as well as addressing your beliefs in an equally consistent manner.

This is where most people fall off the wagon. It can take time to change deeply-ingrained beliefs. Relapses are to be expected. If money is lacking, you may think it is pointless to apply these principles. Please, don’t do this!

Consistency and perseverance is what will yield results.

final word

I look at Financial literacy as being one leg of the “Financial chair”. If you are missing the 3 other ones -money, beliefs and consistency-, the chair will be, at best, shaky.

Financial literacy is a good start. But it simply is not enough.


Be your own financial advisor

Well, sort of. No, this entry is not about whether you should hire a financial advisor/planner, and whether these people are competent or not…at least not really.

It is more about the importance of financial literacy. Lately, I definitely wished I had done better on this, and sooner.

I have been reviewing my investments, and particularly my RRSP. I realized how conservative I have been and how much more this particular account could earn me. I also noticed there were other products that could be suitable for my “profile” while performing better and with lower fees.

My introduction to RRSPs sure wasn’t a great one. Back in 2007, 6 months after arriving from France, I went to my then-bank to “discuss” retirement savings. In my home country, the system is widely different and I knew nothing about retirement in Canada. When I left the bank, I certainly didn’t know any more!

The advisor I met, after asking me a few questions about my finances and current situation, rushed to tell me that “mutual fund Z” was the best for me and that I had to open an account right away. I didn’t know what a mutual fund was.

She quickly explained it to me and then told me I had to put at least $ 500 in “mutual fund Z”. I didn’t understand the concept, she was getting impatient; I felt trapped and didn’t buy the product.

After that, my retirement contributions sat in an account earning 0.5% for 3 years!

Fortunately, these days are behind me, but my investments are still work in progress.

I realized being informed and educated was very important to make financial decisions, even more so than to buy a car or plan a vacation. Yet, I have spent hours researching for these 2 items. Who hasn’t?

For a long time I couldn’t be bothered to do the same with the most important item: my hard-earned money.

I also learned not to take any financial advice at face-value. In a perfect world, we should all be able to trust the professionals handling our money or making recommendations on how to manage it. But, we are not in a perfect world….

Educate yourself; feel empowered. Manage your money; be empowered.