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What is Financial Literacy?

I am often in appointments where people apologize for not being ‘up’ on what is happening in the financial world. It seems that they think that financial literacy is about knowing what stocks or bonds they should buy and why – I couldn’t disagree more.

• Financial Literacy is about spending, not investing
• Focus on your household
• People are too busy to be able to know everything

Realistically, we don’t expect to tell our dentist how to perform a root canal – in fact, if you do, you should find another dentist! – why should every person know how to invest?

And what is financial literacy?

I think of it as understanding how spending decisions affect your household. If you bring in X dollars a month and spend X plus, this is not financial literacy. If you are spending X minus, this means you have considered how to spend and save and you have spent time making sure that your house is building net worth month over month by not spending every penny and wasting money on debt.

That’s it. When I consider how much time people spend at work and on home maintenance and getting the kids to hockey and… and… and… how could a person reasonably expect to know about the complicated world of economics and investment products?

Go easy on yourself! You don’t need to know everything – just floss and brush regularly and let your dentist take care of the chair work.