Sunday, October 10, 2010

Money-Talk: How Fluent Are You?

I woke up this morning with a thought, a curious thought, about the situation of some of the pitchers on the popular CBC reality show Dragons' Den. My thought was: Is it fair that financially illiterate pitchers end up giving away chunks of their businesses (and chunks of future profits) to Dragons who are fluent in the language of business and finance?

I love the show, but I don't think it's ethical (and I wonder that it is even legal in Canada) to enter into a contract with someone who does not fully understand the language the agreement is written in. Like I said, a curious thought to wake up with on the Sunday morning of Thanksgiving weekend. However, it has prompted me to investigate further and I will blog the fruits of that research in the coming weeks.

As for today, I posted a survey on my blog (top right corner), which I hope that you will participate in. And I decided to throw out some of the vocabulary that makes up "money-talk" and see what you can do with it. Take a look at this list and see how many of these ten words you completely understand:

annual percentage rate
compound interest
ETF or exchange traded fund
gross income

So how did you do? Are you fluent in money-talk or is it Greek to you? Either way, here are a couple of my favourite online financial dictionaries: The Money Belt by the Financial Consumer Agency of Canada and Investopedia. If you find some of other good ones, please post a link in the comment box below.

If money-talk is truly foreign and uncomfortable, remember that no matter what your financial fluency is today, it can be better tomorrow. Learning just one word a day could translate into real money gains in the future.

Copyright 2010. Laura Thomas. All Rights Reserved.
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  1. I don't see why you think it is not ethical for the pitchers to give some of the profits to the financial experts in Dragon Den. 50% of making a deal work is knowing how to make it a financial success. Most great ideas get nowhere because there was not a good money person to direct the process. And they can hire a lawyer to read over any contract before they sign it to make sure they are not being taken advantage of.

  2. I think about the grade one's in my daughter's 1-2 split French immersion class. I think about the brain-freeze that I get when her Quebecois teacher gives me instructions. I remember what it's like to negotiate with a beach vendor in Cabo over the price of a silver bracelet. I can get by in French and Spanish but I am nowhere near fluent.

    I understand financial literacy to be the same, which is why I couldn't help but make my observation about Dragons' Den. Even when you have a translator (such as a lawyer to read over a contract for you) negotiations are risky when you don't really understand what is being said.

  3. I like your blog, and agree this is a funny thought to wake up to! (I was thinking of Turkey...lots and lots of turkey...)

    However, I must say I agree with Thyiela. Angel investment is important for early stage growth of a company - a bridge between the family and friends / grants and the venture capital world. When angel $ is involved, it means giving up a share of ownership in your company in some form. And angels typically exit the investment once the venture capital cash comes in and the company moves on to mid-range growth/IPO.

    Although a pitch like as seen in Dragon's Den is pretty sensationalized(thanks reality tv), the idea of the angel investor becoming part owners is standard.

    In a way I suppose you can almost look at it a bit like when anyone buys company shares/stocks. They become part owner of the company, may have voting on company business, and they can receive a share in the profits (dividends). I guess angels do so on a more amped up level...and usually provide mentoring along the way to bring the company to the next level.

    I also agree that it is the responsibility of the "pitcher" to be reading any contracts (either themselves or with the help of a professional) and making an informed decision after the cameras stop rolling and reality sets back in. Just like anyone - never sign something you haven't read or don't understand! All the tricky stuff is in the fine print.