Money and Me for Canadian Families

Alison Griffiths Says "Count on Yourself"

2012-02-24T11:44:00.002-08:00

If there is one word that came through loud and clear for me in Alison Griffiths new book, Count on Yourself, it's the word "discipline." The subtext being: decide what kind of investor you are, choose a mix of reasonably-priced investments that works for you and stick with it just like you would with a diet and exercise program, only this program is much easier and takes less than an hour per month, once you get started.

I am getting started. This week, I've used Alison's step-by-step advice to do an inventory of my investments and figure out a few things like: What is my true risk tolerance? Am I really a risk-taker? Will taking big risks really pay off? What is my ideal asset allocation? How far away am I from that ideal? How much am I paying in mutual fund management fees? Can I switch products to reduce those fees?

I have a TFSA, RESP, RRSP, and non-registered investment account. That's a lot of decision-making and too much math for me, but you know what? I had a look at my self-directed investment profile with the bank I use and found that they have an online tool that does all this stuff for me once I set a few parametres such as a goal, timeline and asset mix. I started with my RRSP because my goal is simple: save for retirement.

Saving Money While Saving Money in my RRSP
After a good hard look at the major differences between the pie chart that should be and the pie chart that is, I did two things. First, I needed to add some US equities to my holdings (I had none before) but what to buy? In the interest of following Alison's advice to keep management fees to a minimum (because every dollar matters when you are talking about compounding growth), I used the mutual fund screener on my investing site to find a US equities mutual fund that charges less than a percent in annual fees and has no load (no fee for buying or selling). I found an index fund that charges a reasonable 0.7% management expense ratio. But that's not all.

What was really interesting for me about Alison's insistence that we pay as little as possible for our investment vehicles (she's a huge fan of ETF's and index mutual funds), I looked at the management fee for one of my bond funds. The fee is 1.76%. That means that if the fund earned 5% in 2011, then my money actually only earned 3.24% because the fee comes off the top. That's really bad if the fund has negative growth. I still have to pay the fee!

I looked for a lower cost option and found that the company offers the same fund with a more reasonable fee of 0.9%. What's the difference? To get the lower fee you have to have a much higher initial investment. Thanks to my years of savings, those savings were enough to buy into the new fund. I did a switch (no charge incurred to move my money) and now my money is making an extra 0.86% every year. Very nice! Thank you Alison!

Discipline = More Money
Now that I'm on my way to getting the right asset mix for my goals and making more money by reducing management fees, I have to be disciplined about it. Alison makes it very clear that the key to making long-term financial gains with your investments is to stick with your asset allocation and rebalance your portfolio a couple of times a year or maybe once per month. That means if one of your investments is doing really well and starts to take up a bigger slice of the pie chart, you need to do the tough job of selling it back down to the percentage you are trying to maintain. That's not easy but a quote from the book makes the case for being a disciplined investor. She writes,

"Wealth managers tell me privately that 60 percent or more of the money they make for clients comes from the discipline of selecting an asset allocation, maintaining it through the ups and downs of stock markets and interest rates..."

Some of the other nuggets from the book for me were the charts at the end that show returns based on different risk profiles over the long term. It turns out that conservative investors tend to do better in the long run. I also appreciated her discussion of the power of dividends and her insights into the blossoming ETF market.

If you are not an investor yet, don't worry. The first two sections of the book are tailor-made for novices and will get you going. Alison makes it easy to start investing and simple to keep up. And, as you can see from my RRSP example, counting on yourself Alison-style can make you a little bit richer. Click here to buy a copy of Alison's book or visit her financial education website at www.alisongriffiths.ca.

Copyright 2012. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

Second Series of Money Moment Wraps Shooting

2012-02-07T13:07:00.000-08:00

With the first series of my TV show airing on Delta TV 4 since October, I am really pleased to say that we are almost done shooting the second series. And what a whirlwind it's been!

Dr. Robert Ironside, Author & Money Moment Guest

Last week, from Wednesday through Friday, Scott Lunn and I shot nine of the ten episodes. We'll do the final one this week on location with Som Seif, President of Claymore Investments, at the Hyatt in Vancouver. The guests were great and I think that by the time we shot the last four episodes on Friday, I had finally relaxed and was able to be more my chatty self on camera, rather than the stiff talking-head I've felt like until now.

One of the highlights of the shoot was my amazing make up artist (Jana Wachowski) who not only made me look great under the studio lights, she also used her mom-connections to outfit me for the show at the eleventh hour. I am so pleased with my wardrobe. Who knew that Mark's Work Wearhouse has such pretty business clothes for women? Another highlight was taping an episode at the BC Securities Commission. It's just nice to have an excuse to go downtown and the folks there were great.

How to See the Show

Maurice Freer, CGA & Money Moment Guest

Scott is busy in post-production—cutting and adding captions. Series Two will start airing on Delta Community TV 4 (Eastlink) in a few weeks. They will reach about 22,000 customers and will air 3 times every day. After they start airing on Delta TV 4, the episodes will be sent to Halifax where they will be made available on-demand to Eastlink customers across Canada. Finally, they will make their way to Eastlink’s You Tube channel.

In the meantime, anyone can buy the complete first series on a DVD. The cost including taxes is $28.75 ($33.75 will get it shipped to you). Please email Scott to order at slunn@deltacable.com. Series Two will also be available on DVD soon.

Also, for those who are looking to reach a family audience with messages about their financial services or products, we do have sponsorship opportunities. Each Money Moment will air about 82 times as a filler between many of Delta TV’s most popular programs. Sponsorship tags or graphics can be purchased at reasonable rates. Please note that Delta TV is a community, not-for-profit station so the revenue from advertising goes back into the operating costs of the program.

Hopefully this show will evolve into something bigger that will help improve our economy and the personal finances of many, many viewers.

Future of Financial Education Report Released

2012-01-18T12:43:00.000-08:00

Quote from Julie Hauser of the FCAC

If you recall, back in May of 2011 I attended a conference called Partnering to Turn Financial Literacy Into Action in Toronto. Sponsored by the Financial Consumer Agency of Canada (FCAC) and the Organization for Economic Co-operation and Development (OECD), the conference brought together hundreds of experts from around the world who are involved in financial education through government, business and non-profits.

During our two learning-packed days, I had the chance to meet researchers like Jonah Lehrer and financial celebrities and authors like Alison Griffiths (who is going to appear on my TV show Money Moment this season and whom I will meet for coffee when she rolls into town on January 28th for a book signing at Chapters - her new book is called Count on Your$elf). Yes, it was a great conference that boosted my faith in the financial literacy movement. Things are moving and the hard work of creating financially savvy citizens continues. In fact, just this morning, the FCAC and the OECD jointly released a report from that conference called The Future of Financial Education.

According to a FCAC news release which I received this morning, the report "highlights the growing recognition, in Canada and internationally, of the importance of financial literacy." The report does a good job distilling the main themes of the conference keynotes and seminars. Some of these include: leadership and national strategies, financial literacy studies that are going on worldwide, the use of technology in financial education and in marketing financial products, the rise of government-sanctioned choice architecture, and information on the long term effects of financial illiteracy.

Like I said, things are moving. Let's keep it that way by having a glance at this report and sharing its contents with our social networks.Click here to read it online. But if you don't have time to read or share it because you are too busy working to pay off those holiday bills, just keep in mind the overarching theme: the world would be a happier place if we all had a little more control over our finances.

Copyright 2012. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

Money Moment - Fraser Elliot

2012-01-10T13:28:00.000-08:00

The $0 New Year's Eve Party

2011-12-29T15:02:00.000-08:00

Christmas is expensive and having kids to please doesn't make it any cheaper. I am dreading the arrival of the January credit card statements especially because I have a policy of never carrying a balance. I may just have to kick off the new year by dipping into my savings account to keep that policy alive unless I can limit my New Year's Eve party budget to zero dollars.

So if you are one of the (un)fortunate souls who is joining my family this year for New Year's Eve, here's a sneak peak at what the party may look like.

10 Ways to Party Like You're Broke

1. Send out invitations through Facebook. Event pages are free and easy to use. Your friends don't have to be Facebook users to get the invite. You can enter their email addresses manually.

2. Don't plan to drink alcohol unless you've still got a Christmas stockpile. Drink water or whatever else you have kicking around. Got leftover pop? Add some juice and make punch.

3. Don't shop for food. Use your holiday leftovers and comb those bottom and top shelves in your pantry for odds and ends that can be crafted into snacks for the party.

4. Out of napkins? Put out a roll or toilet paper or a box of Kleenex. It's tacky but it will make your guests chuckle.

5. If you have the urge to decorate, have the kids do some artwork. What are their dreams for the new year? Have them draw it. Or cut up your Christmas cards and make paper chains (with glue or tape) to drape across the living room. Or just keep the Christmas decorations up.

6. Dress up. Put on the fanciest clothes you have hanging in your closet. They are there anyways so you might as well use them. Go for your high heels, black ties and all.

7. Use the TV for background noise. There are always New Year Eve countdown specials on with live music and other family-friendly entertainment.

8. For kids' activities, play board or card games, have a dance party or sing-a-long and set the kids lose outside for a while with flashlights. Or, get out all the Lego and build the biggest tower you can as a group.

9. For adults, get a bunch of rocks from outside. Give everyone two rocks and a marker. Have everyone write their most special moment from the previous year on one rock and their biggest hope for the new year on the other. Have everyone share their stories and dreams.

10. Skip the made-in-China noisemakers. Go old-school and bang pots and pans at midnight.

All the best for 2012!

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

Christmas Spending - Frugal or Frivolous?

2011-12-11T08:24:00.000-08:00

How high would you score on a Scrooge-o-meter?

More than once or twice I've heard my favourite money guy, Kevin O'Leary, tell an audience that if you want to discover the truth about an organization (or individual) follow the money because "money never lies." If O'Leary is right then we should be able to use our cheque books, credit card statements and debit slips to find out where our hearts truly are this Christmas. Are you more like Scrooge or Cratchit?

Until recently, all the financial evidence pointed to the fact that I was ringing the bell on the Scrooge-o-meter. I have always been the sole parent and breadwinner for my family. Having a frivolous Christmas was never an option. Every dollar mattered. I filled stockings with underwear, bath soap, shampoo, toothpaste, and even cash. Every November I would do an inventory of household goods and use that list to make what I thought were very practical purchases that qualified (in my fiscally responsible mind) as Christmas-worthy gifts. But were they?

This year, I have a new person in my world who believes that Christmas is not about giving Mom a kilogram of bath salts or Dad a package of razor blades from Costco. No, this hardworking soul believes that Christmas gifts should not be practical. He believes that Christmas gifts should be fun, carefree and most definitely not serious. In other words, Christmas gifts should be frivolous.

That's an idea that, at first, was a bit bothersome for a frugal mom like me. I mean really, doesn't it make more sense to blow you Christmas budget on things the family really needs? Won't that turn into savings for the next fiscal year? I think so. Or should I say, I thought so.

I've realized something this year.

Frugal gifts say, "It's all about the money."
Frivolous gifts say, "It's all about the person."

So this Christmas shopping season I have taken a step back from making practical purchases and I confess that it is kind of fun to lighten up.

In the process, I've realized something else. A frivolous approach to gift buying doesn't effect the amount of money you have to spend. I have a budget and I'm sticking to it. And, though it pains me a little that not stocking up on underwear, bath soap, shampoo, and toothpaste at the tail-end of 2011 will defer the expense to 2012, I can deal with it. I want my family to know that Christmas is all about the person and not about the cash. In fact, this Christmas I may just ring the bell on the Cratchit-o-meter.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

The High Cost of Low Literacy at Home

2011-12-02T10:57:00.000-08:00

The Velcro Effect Makes it Easier to Learn

I was at a literacy seminar once where the speaker pulled out a strip of purple Velcro. Several times, in the quiet of the lecture hall, she ripped the two purple strips apart and put them back together again. Rip, stick, rip, stick, rip, stick, until she finally told us that literacy in one area of life improves the "stickiness" of new "literacies" in other areas of life. The more you know, the more you will learn.

Beyond the literacy of reading and writing, we've had several different categories of literacy defined in recent years. These are new terms defined largely by social advocacy groups and sometimes picked up by the public sector. A few examples include computer literacy, media literacy, environmental literacy, emotional literacy, nutrition literacy and, of course, financial literacy. All of which are primarily promoted by non-profit advocacy groups that are on a mission to ensure that all Canadians have a chance to learn the language of money or feelings or whatever literacy a group is promoting.

It's no secret that I am on the financial literacy bandwagon and I promote teaching children and adults the language of money whenever I can. But when I think back to the Velcro effect, I can't help but turn the gaze upon myself as a parent. Literacy-focused non-profits raise all kinds of private money from corporations and individuals. They also receive government grants for their causes. Promoting literacy is expensive you need offices, trained staff, teaching and promotional materials.

While I'm sure these efforts are beneficial on some level, I can't help but wonder if that money needs to be spent at all. Can't basic literacies be taught at home? Are we parents just too busy to bother or is our own literacy too low to do the job?

I might not be an expert in computer literacy, media literacy, environmental literacy, emotional literacy, nutrition literacy, and financial literacy, but I do talk to my daughter about the basics of surfing the Net, the power of advertisements on YTV, the benefits of recycling paper, how to save her tears for times when she is really hurt, the difference between a healthy meal and junk food, and how to read a stock chart. I can do all of this for free and when I get to the end of my expertise in a particular language, I am literate enough in a general sense to know that we should consult a professional or get outside help.

The speaker was right. The more I know, the more I can learn. Rip, stick, rip, stick, rip...and it's free.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

Maximizing the Value of Birthday Money

2011-11-07T15:15:00.000-08:00

It's unavoidable: birthday money. No matter how old or how successful I get, there are a handful of elders in my family who insist on celebrating the passing of another year by putting a cheque in a card and sending it to me for my birthday. Not that I'm complaining. But what should an adult do with a birthday cheque or any other kind of "found money"? How should it best be spent? Or should it be spent at all?

Five ways to maximize the value of birthday money

Pay down your credit card or line of credit. Even twenty-five dollars from your auntie in Halifax can add up to more than a few cents of savings on interest payments.
If you have contribution room in your TFSA, put it in there and let it grow tax free.
Put it in your emergency account. You can never really have too much money on hand in case life goes sideways.
Put it towards something big that you are saving for.
At the very least, cash the cheque and put the money in a coffee can under your bed for a rainy day.

In August, I had a guest business coach on Money Moment, Doug Turner, who talked about saving money forever, not just for a rainy day. Doug's radical suggestion seems particularly relevant when it comes to passive income such as money that just drops into my mailbox on my birthday. After all, I didn't lift a finger to earn that money and so, it seems, that one of the easiest ways to show respect for a cash gift is to maximize its value and, if I don't have debt to pay down, then I should sock it away...maybe forever.

And, just in case you have a rich uncle who likes to write big, fat birthday cheques, breathe easy. In Canada there is no income tax on cash gifts unless the recipient is your spouse or minor child.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

Money Moment - Dear Piggy Bank

2011-10-24T10:29:00.000-07:00

Want-it-now! and other Financial Pitfalls

2011-10-20T15:44:00.000-07:00

Financial Literacy Now!
I don't usually put things off. I'm more of a "get the job done so that I can go on to the next thing" kind of person. But sometimes frustration can trigger a rather nasty episode of procrastination. Tomorrow is a professional day. The kids get a long weekend, but teachers will be at a variety of subject-specific conferences. I have been invited to present a workshop for K-12 teachers on the subject of financial literacy, a subject that is just a blip on the K-12 curriculum.

I wonder how many teachers will sign up for my workshop on "lessons that boost storytelling skills and build financial literacy." They don't have to teach kids about money (unless they are teaching the four-week financial unit of Planning 10) so why would they bother attending my workshop? And, as I know from having done these workshops for teachers before, the ones who come usually have a decent level of financial literacy already. So how is my work advancing the financial literacy cause? Why bother?

Financial and other Pitfalls
Last week, the business editor at The Province newspaper asked me to write a week's worth of tips and advice on money for kids between the ages of 10 and 20. This is part of a larger financial literacy series that starts Sunday, October 30th. My tips will run the second week.

As I pondered the assignment and wrote the seven tips, along with an additional three pitfalls that teens and their parents should avoid, I started to think that tomorrow's financial literacy workshop may not be futile after all. When I drafted the pitfall on delayed gratification (see #3 below), I realized this: Just like every dollar counts when it comes to spending and saving, so does every workshop participant count when it comes to building a more financially literate citizenry and a brighter economic future for all of us.

I have to remember that I don't have to have the world today, the "world" being a country in which every student leaves high school financially literate. The truth is I want this now, but I can wait and doggedly continue to do my part to make it happen one step at a time while side-stepping frustration and procrastination.

On the same note, here are three money pitfalls that youth and their parents should try to avoid.

#1 Not letting teens manage their own money.
Teens, don’t let your parents handle your finances. Parents, give your teens some money to manage entirely on their own. It is far better to regretfully blow $500 when you are 15 than $5,000 when you are 25, or $50,000 when you are 35.

#2 Making money a taboo subject.
Don’t make money a taboo subject in your home. Money should be one of the easiest things to talk about at the dinner table: the good, the bad and the ugly. Share everything, including the gaps in your knowledge. Learn together.

#3 Not practicing delayed gratification.
Don’t buy into the idea that you have to have the world today. Even when you have saved up for something, slow down and wait seven days before you go out and buy it. You don’t want to be a slave to a want-it-now attitude. Practice some self-control.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

South Delta Leader - Local flavour: Money talk

2011-10-14T08:49:00.000-07:00

South Delta Leader - Local flavour: Money talk

TFSA Over-contribution Nightmare

2011-10-07T10:20:00.000-07:00

Are you one of the 1.5% of Canadian TFSA holders who "accidentally" over-contributed to your TFSA in 2010? If you recieved a letter about this from Revenue Canada in August, you have just 60 days from the date the letter was sent to make sure that you are not stuck paying for your ignorance of the TFSA rules.

It turns out, that you cannot transfer your TFSA from one institution to another without it being considered an over-contribution. Here's what happened to me.

Ignorance could cost me $1,100
Early in 2010 I decided to move my TFSA holdings from a savings account at one bank to an investment account at another. I did this myself without giving much thought to it. After all, it was just a transfer. Though I was maxed out on my contributions, I was not technically adding any more money to my TFSA. Wrong.

Any movement of cash out of you TFSA is considered a withdrawl. You cannot put money back into a TFSA account during the same fiscal year that you withdrew it. Once it's out, it has to stay out. You can top it up during the next fiscal year. If you do so before that, you will be charged 1% of the total of each month's highest excess amount for the year. My $10,000 "over-contribution" meant that I was charged 1% on $110.000, even though I had technically not added an extra $10,000 to my TFSA but had simply moved my money from one spot to another.

Fortunately, as you can see in a press release issued by Revenue Canada on August 19th, there is room for a pardon on this mistake as long as you respond within 60 days of the date of their letter. I had a late summer holiday and came back to a mountain of paperwork. I found my letter (dated August 18th) this week. I have to respond by October 18th and here's what I have to do.

Making your case
This is what Revenue Canada told me to do:

Write a letter to Revenue Canada pleading your ignorance of the rules and asking them to please waive the penalty.
On the one-page TFSA Return 2010 (form 0026301), fill in the "information about you box" and then sign the back at the bottom.
Attach any bank paperwork that proves your innocent mistake.
Put it all in the provided envelope and get it in the mail ASAP. I'm mailing mine today!

For reprint permission contact moneyme at telus dot net.

Financial Education Impacts Economy

2011-09-30T14:31:00.000-07:00

It's official. Financial education is good for the economy. The Boston Consulting Group has just released the results of an independent study on the impact of Canada's non-profit Junior Achievement Program (JA) on the Canadian economy. It turns out that teaching students in grades five through twelve about business and finance pays big dividends. Here are just a few of the tangible results.

For every $1 spent, JA Canada returns $45 to Canadian society.
$425 million dollars per year of economic activity can be attributed to JA alumni.
JA alumni are 50% more likely to start a business.
JA alumni on average earn 50% more than those who do not participate in the program.
JA programs reach 250,000 students per year and are delivered free of charge.

What is Junior Achievement?
I spoke with Chris Hindle, Marketing and Communications Manager for Junior Achievement BC, to find out what this largely volunteer organization is all about and how their activities fit into the financial literacy movement. Chris began by expressing one of JA's central messages: to build financially literate citizens you need to start with youth.

"Youth are at the centre of the financial responsibility solution," said Chris, referring to a presentation that JA made to the Task Force for Financial Literacy in 2010. He added, "Our recommendation is that early intervention encourages positive financial behaviours." He also acknowledged that while financial education is important, our kids are just not getting it at school. JA, he said, has a solution.

Their solution is to offer a selection free financial educational programs that are delivered in classrooms by volunteer business people. According to their fact sheet, more than three million Canadian students have participated in JA programs since 1955. Today, through it's seventeen charters in ten provinces, JA volunteers reach over a quarter of a million students every year. Their programs include: Business Basics for grades five through eight, Investment Strategies and Economics for Success for grades nine and ten as well as more advanced business programs for grades eleven and twelve.

What I love about JA is its non-profit, volunteer approach to financial education. I've even met a few local entrepreneurs who volunteer as teachers. Their passion for business and financial literacy are inspiring. But, how do we get our ministries of education and school boards to pick up on that enthusiasm so that every student, not just the ones who happen to have a JA program come to their school, can be better equipped to deal with the financial realities and responsibilities of citizenship?

Well...while we wait for our decision-makers to figure out that financial education makes a significant impact on the economy, please stop by the Junior Achievement Canada website and find out how to get involved as a volunteer, make a donation or book a program for your school.

Financial Literacy News

Money Moment with Laura Thomas starts airing daily on Sunday, October 16th on Delta TV channel four. Money Moment now has a Facebook page.
Deadline for Credit Conquest Story Contest contest is October 21.
In early November, 60,000 Toronto-area families (reaching 79,000 eligible children) will be receiving a special notice from the Federal Government inviting them to claim their Canada Learning Bond - free money for their children's post-secondary education. From www.smartsaver.org.
November is Financial Literacy month. Brought to you by the Financial Consumer Agency of Canada. Visit financialliteracymonth.ca for more info.

Getting Real About Personal Finance with a Money-smart Dad

2011-09-21T14:51:00.000-07:00

My interview with Som Seif, President of Guggenheim/Claymore Investments Inc.

Som Seif
A money-smart dad

Som hit my radar this summer when he filled in a few times for Kevin O'Leary on CBC's The Lang & O'Leary Exchange. I was impressed by his analysis of the business news particularly because he focused on how blips and pitches in the economy impact the budgets of ordinary Canadians (by ordinary, I mean those of us who do not call Bay Street "home"). As it turns out, this Toronto-based investment banker and father of two is passionate about financial education.

According to Som, being financially literate means having the ability to understand:

your personal finances and balance your income and expenses.
how much money you will need in retirement.
how to invest to meet your future needs.

These skills, he believes, are lacking today. "I don’t believe that families in Canada have the financial literacy they need to balance their own budgets," said Som, pointing to recent reports that personal debt and spending are out of control and that many Canadians do not realistically prepare for retirement.

Though he believes that families are responsible for their children's financial education, Som acknowledges that this may be a problem for parents and caregivers who are not financially literate or disciplined when it comes to spending. I agree.We need to get real about the state of our household finances as well as the state of financial literacy in Canada, especially when it comes to raising the next generation.

Kids & Money
Beyond "getting money to buy stuff you want," Som didn't learn a lot about budgeting and investing until after high school. It wasn't until university, and then later at his first job, that he learned the importance of having a balanced budget and investing for retirement. Som's hope is that Canadian high school students will start being taught the details of investment and retirement, particularly the benefits of investing early. For younger students, he believes that the fundamentals of balancing a budget should be part of the elementary curriculum as soon as possible.

One of Som's contributions to the "talking to kids about money early" movement involves teaching his two-and-a-half year old daughter about saving. Som shared a story about the time he took her to the bank to set up her RESP account. In the advisor's office, they emptied her piggy bank (which had about $500 in it) and counted out the money. Then they gave the money to the advisor. His daughter was not happy about this. She had been diligently putting money in her piggy bank a couple of times a week for a long time. She cried for hours after they left the bank leaving he and his wife wondering, jokingly, if his daughter had picked up on some mysterious reason we shouldn't give our money blindly to the bank.

Talk about getting real about money! Som's daughter freaked out because she was blind in that situation. She didn't understand why her money was going to the bank or what would happen to it there. We adults face that all too often when it comes to financial products. When I asked Som what word he wishes that we all understood better, he said, "fees."

Not surprising coming from an ETF guy, but he has a point. We have to get real about borrowing, spending and investing for retirement. And we need to get real about the fees we are paying as we do. The sooner we (and our kids) get money-smart, the less likely we will find ourselves crying for hours when we leave the bank...something that's not hard to do these days with all the blips and pitches.

***

Watch for Som on my new financial literacy show Money Moment with Laura Thomas. And if you have a personal story to tell about dealing with debt or credit, check out the Credit Education Week website. There is an essay contest for Grade 12 students (maximum 1000 words) and one for adults (maximum 300 words). The deadline for both is October 21, 2011.

Surrendering to Money

2011-09-16T14:34:00.000-07:00

Surrender (verb). 1. to relinquish to another under duress or on demand: to surrender a city. 2. to relinquish or forego as a voluntary concession to another: he surrendered his place to a lady. 3. to give oneself up physically, as to an enemy. 4. to allow oneself to yield, as to a temptation or influence. 5. to give up.

Surrendering to money means...

Paying what you owe. It's possible to avoid creditors, for a while. It's possible to live on credit, until no one will lend to you anymore. It's possible to borrow endlessly from friends and family, until they start saying no. It's possible to burden your loved ones with your end-of-life expenses, if that is the legacy you wish to leave behind you. But wouldn't it be easier to surrender and pay what you owe?

Sharing what you have with others. Beyond shelter, food, clothing and basic cost-of-surviving expenses, what else do you need? Instead of surrendering to your wants, could you give that extra $20 in your pocket to someone who is struggling or who would benefit from some heart-felt compassion? Giving up money when you don't have to is an act of surrender, a powerful one.

Working hard, really hard. We give our time and talent in exchange for money. Respect that exchange. Embrace it. Give in to it. If you don't have much money, that may be because you have not surrendered to this fact of life. You have to get your body and mind out into the market place in order to make money.

Giving up luxuries unless you can afford them. Surrendering to money means surrendering to a budget. If you are living without a budget or far beyond your budget, then you have not surrendered to money. It means that you have been tempted by marketing ploys or influenced by unrealistic expectations.

Giving up the idea that you can live outside the economy. There is no outside. Michel Foucault, the French philosopher, was right. We are always inside society and always influenced by the powers and authorities that govern it. That includes the marketplace. You cannot escape money, not if you want to belong.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

Use Back-to-School Shopping to Celebrate Saving

2011-09-02T05:55:00.000-07:00

It's the final few days before Canadian kids head back to the grind. On one hand, I'm cheering for all the kid-free hours I'm going to get back. At the same time, I'm weeping for all the money I'm supposed to spend to mark my triumphant return to Freedomville.

At least, I was weeping. Today, I've come up with a plan to ease the pain of this expensive season and that plan is to throw a little education of my own into the mix.

I'm planning to get more bang per buck by giving my daughter a money lesson. I'm going to show her how to save money when you have to spend it. And I'm going to use back-to-school shopping to show her how it's done.

Make a list
My daughter is going into grade three and for the first time she is going to have her own desk where she can keep her own school supplies. Up until now we have purchased the school's package of supplies because they have always been pooled for the whole class to share. This has meant that back-to-school shopping has been limited to clothes, a back pack and lunch bag.

This year we are taking it up a notch. We are going to choose and purchase school supplies on our own with the aid of our handy supply list. Along with that list, we are making a list of clothing and other supplies that she thinks she will need for the first few months of school.

Budget wants and needs
Once we have our list, we are going to talk about how much money Mom has to spend for back-to-school stuff. Then, we are going to arrange the supplies in order: mandatory items at the top, wants at the bottom. I have set aside a certain amount of money to spend with a twist. I have promised my daughter that any money we have left over will be hers to put in the bank and save.

Have a temperate shopping spree
Armed with the idea that any leftover cash is hers to keep, we will hit the stores, the discount stores. Knowing that we live in a low interest rate environment (and may be doing so for a very long time) it's critical that I teach my daughter the importance of saving today's money so that it will grow for tomorrow. This incentive will help shape discussions about her choices as they arise during our spree.

When she picks up a notebook with a funky design that costs $2 more than a plain one, I can smoothly remind her that the extra $2 could be hers if she makes the thrifty choice. The same goes for clothing. Is there really a difference between $25 gym shoes and $50 gym shoes? Very little, unless your child has special footwear needs.

Eat ice-cream and celebrate the joy of saving
Hopefully, at the end of our shopping spree, there will be at a few dollars left for her to put in the bank. If there is, we will make a big deal out of it. I will count out the amount in cash down to the penny, hand it to her in a special envelope and then we will go to the bank to deposit it during the first week of school. I may even offer a bonus of a few percent interest that she can deposit as well, a little something extra for every dollar saved.

And then we'll go for ice-cream, of course. What would a celebration of saving be without a little ice-cream? Freedomville, here I come!

For reprint permission contact moneyme at telus dot net.

Financial literacy in schools: Are we afraid of change?

2011-08-03T14:18:00.000-07:00

I was so excited last week when I heard that the Ontario Ministry of Education had released its new curriculum guidelines for bringing financial literacy to the classroom this fall. Well, I have good news, bad news and scary news.

The good news

The good news is that Ontario teachers are getting some support. The Scope and Sequence resource documents provided by the ministry have several practical lessons on how to use the existing subject areas to teach students about money. Some examples are: using an art lesson to teach grade-four students how companies use images to promote their wares; and, getting grade-six students to think about why a game company might choose to advertise their newest release with a hip hop song instead of Beethoven.

Another bit of good news is that teachers have the opportunity (though not the mandate) to take a three-day workshop on financial literacy at the Ontario Teacher's Federation Summer Program called A Sound Investment. But none of this is mandatory. There are no prescribed learning outcomes for financial literacy. Teachers don't have to take the workshop, which brings me to the bad news.

The bad news
The bad news is that Ontario's weave-it-in-but-don't-make-it-mandatory approach to financial education, like British Columbia's, is not likely to have the learning outcomes we should be aiming for. Wouldn't it be great if the day after graduating from high school young people could walk into banks, insurance companies or brokerage houses and be able to clearly express their needs and wants in the appropriate language. Wouldn't it be fabulous if all high school grads had the confidence and ability to negotiate a reasonable price for whatever financial services they require.

It gets scary

The scary news is that more than a few adults don't care about the financial literacy of young people. Many seem to subscribe to the school-of-hard-knocks. And some think that because kids don't have much money, they don't really need to learn about it. While others believe that the family, and not the government-run education system, should take responsibility for this aspect of education.

Reading the comments posted in response to a Globe and Mail article on this issue, many people seem to believe that it is ironic that any overblown, deficit-ridden, budget-breaking government would try to teach anyone anything about money, especially about fiscal responsibility.

This leaves me wondering. Do we (if "we" is really the government leaders that we put in power as our representatives) really give two hoots about financial literacy in the preventative, educational sense? Or are we only interested in it as an anesthetic, a soothing fantasy stirred up in our collective imaginations by crashing markets and a double-dip recession? Are we scared to make financial literacy a mandatory part of the education system? Are we afraid of change?

Maybe we are
After all the false hype about mandatory financial education in Ontario, I'm left with two thoughts. First, at least some Ontario students will have teachers over the years who will use the workshops and resource documents to weave money topics into art, drama, music, health and physical education, math, language arts, science and technology and social studies.

Perhaps some of those students will graduate with a deeper understanding of the economy and personal finance and then go into politics. Though whether or not we will get enough financially fluent faces to do something about governmental fiscal irresponsibility, only time and our municipal, provincial and national bottom lines will tell.

Second, financial education will become mandatory in schools when we are no longer afraid of money or the powers that wield it.

For reprint permission contact moneyme at telus dot net.

An Investigation of Financial Education in B.C. Public Schools

2011-07-18T12:37:00.000-07:00

Part 1: What's happening in the middle years, grades 4-6?

How many B.C. high-school grads
are financially literate?

I've been trying for a while to get a comment from B.C.'s Minister of Education on where we are going with financial literacy in the public school curriculum. Is there a move to make financial education a mandatory part of the grade four to 12 curriculum like Ontario is doing this fall? Or are we sticking with the status quo? Are B.C. high-school grads financially literate? Are we testing for that?

I was recently told by someone in the Ministry of Education's media department that not only is financial education woven throughout the existing curriculum, the twenty hours of instruction that students get in the finance unit of Planning 10 is "significant."

Is that so? As a parent with a child going into grade three this really matters to me. So, I've decided to comb through the curriculum to find out just how much financial education B.C. students are getting right now. I have gone through the subject areas for grades four through six which seem most likely to contain personal finance concepts: Health and Career Education, Math and Social Studies.

The following is an overview of what I found in the Prescribed Learning Outcomes (PLOs) for grades four through six that are made available by the Ministry of Education. PLOs, by the way, are government policy that establish "the learning standards for the provincial K to 12 education system and form the prescribed curriculum for British Columbia. They are statements of what students are expected to know and do at the end of an indicated grade or course."

Grade 4
In Health and Career grade-four students learn to identify the steps in a decision-making model, to inventory their skills and about the importance of developing effective work habits and how those habits can lead to success. These topics are not obviously related to personal finance but there is a connection to career and consumer choices.

In grade-four Math, students become literate with numbers up to 10,000, patterns, variables and equations, shape and space, 3D objects and 2-D shapes, statistics and probability and the concept of chance. How often money is used in examples and exercises seems to be up to the teacher. Nowhere in the PLOs does it specify that financial concepts be taught. Social Studies, however is more promising. In the unit of study called "Economy and Technology," students compare bartering and monetary systems of exchange in the context of exploration and how European explorers traded with Aboriginal people.

Grade 5
In Health and Career grade-five students start to learn how media can influence decision-making, how to identify types of work that appeal to them and continue to learn more about the benefit of having effective work habits. In Math, students work with numbers up to 1,000,000 and go deeper into the other topics covered in grade four. As is the case in grade four there are no money concepts specified on the PLOs for grade five. In Social Studies, however, students learn about supply and demand using specific resource examples such as the boom and bust in Barkerville and how fashion trends in Europe drove the fur trade. But that's it for money concepts.

Grade 6
In Health and Career, students build on the grade-five PLO's but go deeper into planning, goal setting and goal attainment including the consideration of "costs and resources." They talk about the word "budget" and do some exercises to practice creating a budget for a project or to achieve a goal. In Math, grade-six students learn to work with numbers greater than 1,000,000 and continue to build on the other mathematical concepts they have been working on since grade four. Again there are no money concepts in the Math PLOs for this grade.

In the "Economy and Technology" unit of Social Studies, grade-six students learn about trade between regions and countries including what imports and exports are. They also compare Canada's economy, technology and quality of life with those of other countries (suggested for comparison are the Horn of Africa countries). Here they learn terminology such as: industrialized, developed, developing and least developed, non-profit organizations and fundraising.

Not mandatory means it's up to teachers

From grades four through six, B.C.-students learn about decision making, effective work habits, career choices, goal setting, and do some budgeting in Health and Career. They also study Math, which is great and foundational for financial literacy. And in Social Studies they learn about bartering, monetary systems, trade, supply and demand, imports and exports, non-profits and fundraising. That's not bad...or is it?

The bottom line is that personal finance concepts are not specified in the PLOs in the intermediate grades. How many of these concepts each student is exposed to depends entirely on the school and the teacher. As the Ministry states, "Schools have the responsibility to ensure that all PLOs...are met; however, schools have flexibility in determining how delivery of the prescribed learning outcomes can best take place....Evaluation, reporting, and student placement with respect to these outcomes are dependent on the professional judgment and experience of teachers, guided by provincial policy."

Can most teachers teach money concepts?
In May, I asked a group of 42 elementary school teachers to complete a financial literacy questionnaire.When asked this question, "If you were given a list of 100 money-related words, how many do you think you would know?" exactly 50 per cent said they would know less than half of the words. I also asked the respondents "How often do you talk about money issues in your classroom?" While 12 of the 42 teachers responded that they talk about money at least once a week, 17 responded "hardly ever" and 13 said "maybe once a month." That means 71 per cent of the teachers in my survey don't generally talk about money to their students.

It's becoming clear to me that the answer to the question, "What are kids in grades 4 through six learning about money in B.C. schools?" is far from clear and certainly not universal. I can imagine that a small percentage of teachers with a personal interest in investing or entrepreneurship may bring a host of financial language to the PLOs, while those who are financially illiterate likely shy away from talking about money and do just enough to meet the requirements.

Who is responsible?

Unlike the commitment to financial literacy that the Ontario Ministry of Education has made by making personal financial education a mandatory part of the grade four through twelve curriculum (complete with teacher training), B.C. is leaving it up to individual teachers, many of whom are not financially literate themselves.

My hope is that by the time she finishes grade six, my daughter will be fluent in the basics of earning income, credit and debit, cash flow and investment. After all, she already has amassed quite a nest egg and if she makes smart money decisions now that will surely pay big dividends as she gets older. The sooner she is saving and investing her money, the longer she has for that money to grow. Raising fiscally responsible citizens is central to the economic future of Canada. Funny how our "underfunded" school system and "underpaid" teachers in B.C. don't seem to be striving to meet that goal, at least not that I can see from the PLOs that I've been reading.

By the way...there is still room in the Money & Me camp for ages 9-13 that I'm teaching next week in North Delta from 1:30-3:30 pm. Call 604-940-5550.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

Dialoguing to create a-ha money moments

2011-07-15T11:02:00.000-07:00

Ideally, a "money moment" is going to be an "a-ha" moment. What's an a-ha moment? According the World English Dictionary, an a-ha moment is "an instant in which the solution to a problem becomes clear." Am I going to be able to create a-ah moments for my money moments? I hope so but I don't think I can do it alone.

Creating 10 a-ha moments
Now that my stint of teaching youth writing camps and guest blogging for the Vancouver Sun are almost behind me (today is my last day of teaching a week-long short story camp), I can turn my attention to the pre-production work that needs to be done for my new 10-episode TV show. The show is called Money Moment with Laura Thomas and it's entirely up to me to create the a-ha moments that I believe should be central to each episode.

No pressure right? We start filming in two weeks and I'm already losing sleep.

Earlier this year when I sat down with one of the producers at Delta TV (a community arm of Eastlink in Delta, British Columbia) and made my pitch for a series of short fillers that would boost the financial literacy of viewers in my community, I was blissfully unaware that months later I would be setting the bar really high for myself by feeling the need to deliver an a-ha moment to as many viewers as possible in every episode. I knew that I wanted to educate, but I hadn't fully envisioned what it would mean to not just educate but help viewers actually figure out how to solve at least some of their money problems. That's a big goal and I've decided that I can't achieve it alone.

It's a synergy thing
This blog is not even a year old yet, but in the course of the interviews I've done--even with celebrities like Arlene Dickinson and Robert Herjavec--the biggest insights have come organically out of the conversations, not purely out of the questions I have asked or the answers that my interviewees have given me. Synergy is what I'd call it: the working together of two or more entities to produce an effect greater than the sum of their individual effects. Which is why I've been on the phone this week looking for people in my community to co-star with me in each Money Moment. Rather than deliver a monologue, I am going to set up a dialogue for each episode.

In the episode on realistic budgeting, I'm going to be in conversation with Rob Wright of Cap's South Shore Cycle. In the episode about the theory of financial bubbles and how to get ahead on your mortgage, I'll have realtor and entrepreneur Fraser Elliot on the show. And Delta City Councillor Heather King has agreed to hit the streets with me so that we can talk to people about the their financial successes and failures. Financial blogger and finance guru Preet Banerjee will also drop in for an episode, if he's in town at the right time.

I'm still looking for a few more chatty folks to come on the show and dialogue with me about new mobile banking technologies, credit cards, the gender gap in financial literacy and other money topics. I'd also like to do a budget-wise home makeover for two single dads and need some help with that.

So if you know someone from the Delta area (or who can get to Delta during the first week of August) who loves to explore ideas, talk about money and be in front of the camera, have him or her contact me as soon as possible. Or if you or your company would like to sponsor this community-based financial literacy project please email me for a rate sheet.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

Will B.C. voters keep or kill the HST?

2011-07-12T08:43:00.004-07:00

On Friday I wrapped up my two-week assignment writing for for the Vancouver Sun "Your Money" blog with what I thought was a neutral overview of the debate. Reading over the comments I can see that there is no such thing as neutral when it comes to the HST referendum. It really is keep or kill, with a very vocal emphasis on kill. And, the folks who seek to kill the HST seem to be zeroing in on a single major complaint: the HST favours businesses over consumers.

Business v. Consumer
At the root of the "business over consumer" complaint is skepticism about whether or not businesses are truly passing on their savings to consumers. Under the old sales tax system, businesses paid PST on their operating expenses such as power, heat, rent and anything else that goes into making a product or service. Under the new system, many businesses are reimbursed that seven per cent with the idea that they will pass that savings on at the till or use that cash to re-invest in equipment or on improving productivity. Either way, the theory is that when businesses pay less tax the economy grows.

Has B.C.'s economy grown since the HST was introduced last July? According to the Business Council of B.C., the province's economy (according to their "economic index") has expanded, but only marginally. The economy dipped into negative territory in the third quarter of 2010, rose slightly in the fourth quarter and then dropped slightly to a 0.6% gain in the first quarter of 2011.

On the other hand, what has grown with more gusto is the tax burden paid by households. It has been estimated that in 2011/2012 households will pay 1.33 per cent or $1.33 billion more in sales tax while businesses will pay 0.73 per cent or about $730 million less in taxes.

Business v. Business, Consumer v. Consumer
When you look deeper at the "business versus consumer" complaint, the issue gets even more divisive for each camp. While the "average" B.C. household with an income between $40,000 and $60,000 is paying about $350 more in sales tax, 40 per cent of the HST has been collected from families with a household income of more than $100,000. These higher-earning households have seen a net increase in tax of more than $1,000.

There are inequities in the business camp as well. Businesses that under the old system only had to collect five per cent GST on their services are now forced to charge their customers twelve per cent. This means that restaurants, recreation and entertainment businesses, builders and people who offer creative services (such as myself) have been negatively impacted by the HST.

Speaking with a home renovations contractor recently, it seems that the extra seven per cent has created a slow down in new business as customers now have to factor that extra expense into their budgets. Undoubtedly, the slowdown is likely to continue through the upcoming months until the tax issue is resolved and consumers know exactly what they are going to have to pay if they want to remodel their kitchen.

Financial institutions, insurance companies, doctors and landlords are also negatively impacted by the HST because they do not qualify for the seven per cent rebate that is given to other companies on their operating expenses.

Us v. Them
So what's the bottom line? On the surface, under the HST regime consumers are paying more tax while businesses are paying less but how that plays out depends on household income and the type of business. This is part of what makes the outcome of the referendum impossible to call at this point.

The other part is that it's just weird (I could even say fiscally irresponsible) that our elected officials are giving voters the chance to decide, especially when we know that not every voter is financially literate or fiscally responsible. I do worry that we may keep or kill the HST based on divisiveness and defensiveness rather than on sound financial principles and a clear understanding that whatever happens, we are in this economy together. There really is no us versus them.

As you witness the fallout of the HST versus GST/PST debate feel free to use this coupon for Turbo Tax to save a few dollars on software that will help you deal with those pesky taxes.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money me at telus dot net.

Your Brain on Credit Cards

2011-07-01T08:40:00.000-07:00

Impromptu dinners out at posh water-side restaurants, spontaneous shopping sprees for over-priced camping gear and all that good but crazy-expensive festival fare are just some of the ways we might blow our budgets this Canada Day long weekend. But it doesn’t have to be that way. Even with all those little financial decisions looming large this weekend, there is no reason to jeopardize the household budget. Try practicing metacognition—thinking about thinking—and leave the credit card at home.

When I was at the FCAC-OECD international financial literacy conference in Toronto last month I was fortunate to attend a keynote presentation on consumer choices by neuroscientist and writer, Jonah Lehrer, author of How We Decide. Our consumer decisions, explained Lehrer, begin and end with a tug of war between two tiny but highly emotional parts of our brains—the nucleus accumbens and the insula.

A Tug of War

The nucleus accumbens is part of the dopamine reward pathway, which basically means that it plays a big role in the experience of pleasure and is generally associated with the “good feelings” that lead to addiction. The insula, on the other hand, is the part of the brain that registers nausea, disgust and pain.

Lehrer talked about a neuroscience experiment in which undergraduates were given two hundred dollars spending money, put in a brain scanner and then given the option to buy a variety of goods that would appeal to the average twenty-year-old such as George Forman Grills, Harry Potter books, DVDs and a variety of snack foods. While in the scanner, students were shown a picture of one of these desirable items.

The researchers found that when the consumer product was desirable to the student the nucleus accumbens would “light up and get very excited.” Lehrer said, “The possibility of getting something we want seems to drive consumer desire and the scientists could, in fact, use the relative activation of the nucleus accumbens to predict which items people actually wanted.”

In the second part of the experiment, after they were shown a picture of a desirable item, students were shown the price of that item. When the price was shown, the insula became very excited causing an emotional tug of war between itself and the nucleus accumbens. According to Lehrer, “Scientists could predict with 90 percent accuracy which items people would actually buy by simply looking at the relative activation of the pleasure of the nucleus accumbens and the pain of the insula.”

Credit Cards as "Anesthetic" for the Insula
Back to credit cards. In one of the conditions in this experiment students were allowed to pay by credit card. What the scientists found was that when paying with plastic the negative emotional activity of the insula was greatly reduced as opposed to when students had to pay with cash. The insula was “anesthetized” in the credit card condition as opposed to the cash condition in which the insula seemed to register the pain of giving something up more forcefully.

Commenting on credit cards and the forthcoming pay-with-your-smartphone technology Lehrer said, “The end result is that because we don’t fully experience the pain of spending money, we spend money that we don’t have.”

Lehrer concluded his talk by suggesting that our brains aren't really equipped to handle the modern economy. He encouraged us to use the new science coming out of behavourial economics to analyze our daily financial decisions—to think about how we are thinking about money—so that our household budgets have a better shot at staying in the black, especially on holiday weekends.

A similar version of this article ran in yesterday's Vancouver Sun where I'm guest blogging for Your Money guy James Kwantes while he's on holiday from June 27 to July 8.

Hard Knocks and Spare Change: Arlene Dickinson on Financial Literacy

2011-06-22T14:33:00.000-07:00

Part 2 of my interview with Arlene Dickinson, Dragons' Den Star

Watch Arlene on Dragons' Den
Wednesdays at 8pm on CBC

When you watch her on Dragons' Den, you make all kinds of assumptions. She must have come from a rich family. She must have grown up surrounded by entrepreneurs. She must have an MBA. Indeed she is a smart, powerful woman with a talent for communication, building connections and negotiating a good deal, but the truth is Arlene's roots are far more humble. Maybe that is one of the secrets of her success.

Hard Knocks Graduate
Arlene grew up in a relatively poor home. She never felt entitled to money and understood that if she wanted it she would have to earn it. She learned about money "through the school of hard knocks." There was no one to turn to when things were tight because no one in the family had any money. There were times when she had money and times when she didn't. She had to figure out how to manage it through the ups and downs on her own. And she did.

I was surprised to learn that Arlene didn't get to go to university. She's entirely self-taught. And if that's not impressive enough, she did a lot of this self-educating while raising four kids as a single mom. That led me to ask her what she does when she's in a business meeting and a money-word comes up that she might not know. Arlene's strategy is very practical: if it's appropriate she will interject with a question; if it's not a good time to interject she will make a note of it on her Blackberry and research the word later.

Spare Change Matters
Arlene seemed to enjoy telling me about a financial education ritual that she started with her nine-year-old grandson a few years ago. When he comes to visit she lets him go through her purse and collect all the spare change that is rolling around at the bottom. As he's happily rooting around, Arlene examines the change and tries to recall the purchases associated with it and then tells those stories to her grandson.

Once he has found every last penny they put the money in a decorate vase and keep it there. At the end of the year, Arlene and her grandson do a tally, roll it up and deposit it into his bank account. According to Arlene he is learning a lot about the value of money, especially about the power of small amounts adding up over time. "He is learning that spare change adds up to significant dollars," said Arlene, after admitting that last year her purse produced $700-worth of spare change.

Aside from helping him get a head start on the habit of saving, Arlene explained that this ritual has created a context in which she can talk to her grandson, and the rest of the family, about how money needs to be treated with respect. Over the years she has encouraged her now-adult children to start an RRSP early and put money in it regularly, even small amounts, so that it can compound over time. In fact, when I asked Arlene what money-word she wishes every Canadian understood, she said "interest."

The Bigger Picture
Our conversation then turned to financial literacy education and business culture in Canada. I asked her who she thinks is ultimately responsible for making sure that every high-school graduate is financially literate: families or schools? Even though she wanted to say "both" I made her choose one and she picked "families." Arlene said, "Economies are driven by individuals not governments. Financial literacy needs to start with understanding how to take care of yourself."

Arlene on the Cover of Alberta Venture's
Women and Power Issue in 2009

Given that Arlene is the only female Dragon, I had to ask her about gender in business. Does it still matter? Arlene's answer was insightful and challenging.

She believes that men and women have different approaches in business. We notice this more now, she said, because more women are running small businesses and looking after themselves financially. She thinks we need to accept that there is a gender difference that will always be there and she takes issue with the bad rap that emotion gets in the business world.

Arlene told me that emotion matters because without it you cannot create passion for your product or service. "Emotions belong in business because we collaborate better with others when we are emotionally connected," she said.

Speaking of passion and connection, before I hung up the phone, I told Arlene about the Federal Government's mandate to appoint a national leader in financial literacy and asked her if she might apply. Her answer was, "That's a role that I would love to do because I think the whole idea of finances and how we think about money needs to be simplified."

She went on to say that we need to stop perpetuating the myth that you need to be a highly educated and highly informed individual to be able to manage your own money. "That's not true," she said. "You don't have to hand your money over to someone else to be successful."

Wow. Great answer and a potent reminder that to be successful in life and in finances you don't have to come from a rich family.

Here is part one of my interview with Arlene: "Ordinary People, Fundraising and the Art of Persuasion."

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

Ordinary People, Fundraising and the Art of Persuasion

2011-06-20T14:19:00.000-07:00

Part 1 of my interview with Arlene Dickinson, Dragons' Den Star

Arlene Dickinson has a new book coming
out this fall called Persuasion

When I sat down this morning to blog my interview with this amazing mom, grandmother, TV-star, inspirational speaker, and self-made CEO, I thought it would be easy. I would just dive into our financial literacy discussion and have it written in about an hour. Wrong. We only spoke for about twenty minutes but Arlene shared so much wisdom that I simply can't cover it all in one blog post or you'd be reading this for a week.

So I decided to begin at the end of the interview, the part where Arlene shared some of the details about her new book that is coming out this fall with Harper Collins called Persuasion. Why? Because the subject connects with the recent passing of fundraising-icon Betty Fox and with some cancer fundraisers that have been going on in my community this past weekend.

On Saturday, I participated in a Jail N'Bail fundraiser to raise money to support a local Cops for Cancer cycle tour. That same day, a group of 90 ordinary people cycled 400 km from Kelowna to Delta, B.C. in 19 hours for Ride2Survive, raising over a quarter of a million dollars for cancer research. From my Jail N'Bail "cell" by the liquor store at the mall I began to wonder just what it takes to convince people to open up their wallets and give away their hard-earned cash for a cause.

Interestingly, most of the persuading that I have been seeing lately is being done by ordinary people, not by marketers or professional fundraisers. How do they do it? That got me thinking about Arlene's new book.

Genuine - Authentic - Reciprocal
Often associated with stealthy marketing strategies that suck us into buying stuff we don't need, the word persuasion gets a bad rap. Arlene hopes to change that with her book. Her definition of persuasion has three aspects: being genuine; being authentic or honest about who you are and what your motive is; and reciprocity or having a win-win attitude. For Arlene, persuasion not about getting what you want from someone else at all costs, it's about connecting in way that benefits everyone involved. This is something that Arlene thinks most of us ordinary folk (I mean non-business types) already know. I think she's right.

Jail N'Bail for Cops for Cancer

When Arlene first tweeted about her book a few weeks ago, I assumed that it was aimed at professional marketers and salespeople. But it's not. It's for everyone. As Arlene said, "The audience is an individual who is trying to ensure that their voice is being heard and who wants their opinion to be championed." According to Arlene, that includes anyone who is trying to convince anyone else to do something they might not want to do. That could be getting a child to go to bed or asking a complete stranger to donate money to spring you out of jail for cancer research.

Not only did Arlene talk about the idea that we are all involved in the art of persuasion on a daily basis, she also brought up this interesting point: life and business are interconnected. "We need to take our life lessons into business and vice versa," she said. "If you can manage a household budget, you can manage a business budget. If you can persuade your kids to do things they don't want to do then you can persuade your work-mates to champion your idea." Or...you can convince friends, family and strangers to donate cash for cancer research.

I suppose that is what is behind all this money (and it's BIG money) being raised for cancer research by people who don't have degrees in marketing and sales but who do seem to have an instinctive understanding of Arlene's definition of persuasion. I suppose on some level many of us know that the secret of successful fundraising is to be yourself, be honest and aim for a win-win situation. For those of us ordinary people who may be unaware that our life-skills toolkit is already loaded with persuasion tools, Arlene's book will help us sharpen those tools so that we can raise even more money for the causes we believe in.

On the Radio & Blogging for the Sun
Part 2 of my interview with Arlene will be published in the coming week. In the meantime, please tune in tomorrow, June 21, 2011, to Fiscal Literacy Radio to hear me talk about kids and money at 1 pm EST. And note that I will be blogging daily for the Vancouver Sun "Your Money" section for two weeks starting June 27 so be sure to follow along there too. And, if this article has put you in a giving mood, Cops for Cancer Tour de Valley is still taking donations. Ride2Survive 2011 is still taking donations and registration is now open for the 2012 ride.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

Financial Illiteracy Contributed to Stanley Cup Riot

2011-06-16T12:16:00.000-07:00

Would a small business owner smash a store window? Would a self-employed person flip over a car? Would an entrepreneur set a garbage can on fire? Not likely and it may come down to financial education and the lack of it in BC schools.

It's About Money, Not Hockey
What do entrepreneurial types have in common? They understand money. They know how difficult it is to raise it, save it and grow it. They respect it. They get it. Entrepreneurs tend to understand that an NHL team is a business and the aim of every successful business is to make money. Hockey is secondary to profit. This isn't amateur sports.

Entrepreneurial-types understand that it doesn't really matter who won last night. The teams put on a good show, made lots of money and, riot aside, everybody won. The rioters, apparently, didn't grasp this fact. For this group of young adults, who appear from media images to be primarily in their twenties, it's all about "my team has to win" and so losing is personal. The business aspect, the fact that money is at the heart of professional sports, didn't seem to be part of the individual rioter's thought process. Those who rioted clearly don't understand money nor do they have any respect for it.

Which may be why smashing windows, flipping cars and setting public and private property on fire was an appropriate response for them. There is no consideration of the expense, no cost-benefit analysis, no awareness that everyone who participates in the Vancouver economy will be paying for this outburst in both the short and long term. And why is the average twenty-something Stanley Cup rioter so unaware when it comes to money? It could very well be the lack of financial education in BC schools.

Not Enough Financial Education
Since, 2008 every student in BC has had to take a "life skills" course called Planning 10. In that course there is a four week, twenty-hour unit on personal finances. There are four prescribed learning outcomes for this unit: budgeting, planning for life after graduation, understanding credit and debt and how to report personal income. It has been argued that this is better than nothing. But is twenty hours of instruction enough to make students financially literate, especially when most of those students arrive in Planning 10 with little or no familiarity with the vocabulary and concepts of personal finance? Not likely.

Only a small portion of high school students in BC take business courses. That means most graduates don't get more financial education that what they receive in Planning 10. You cannot create a money-savvy citizenry with twenty hours of instruction over thirteen years, which is why the Ministry of Education in Ontario, starting this fall, is making personal finance education a mandatory part of the curriculum in grades four through twelve.

Imagine those Ontario students who are starting grade four this year. Every year for the next nine years they are going to be learning the language of money. They are going to be introduced to the realities of earning, spending and saving. Core concepts are going to be repeated and reinforced, deepening their understanding of how their personal financial choices shape the world we live in.

In Toronto in 2020, there will probably be a record number of high-school graduates who go on to start small businesses or choose to be self-employed. The city's economy will benefit from this upswing in entrepreneurial spirit, self-driven productivity and healthy respect for money. And if, by chance, the Leafs happen to lose game seven of the Stanley Cup finals in 2025, you can bet that with its financially aware and economically responsible citizenry that there won't likely be any window smashing, car flipping or random burning in downtown Toronto.

Financial literacy is a powerful force. So is financial illiteracy, as we saw in Vancouver last night.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

A Word on Financial Literacy from the Dragons' Den

2011-06-13T11:36:00.000-07:00

Alex Kenjeev
President of O'Leary Ventures

What could be more rewarding for a Dragons' Den fan than talking to a Dragon? How about talking to one of the Dragons' business associates like Alex Kenjeev, President of O'Leary Ventures, a private company owned by Kevin O'Leary? Speaking to me from the set of season six, Alex and I had a a lively conversation which began with a discussion about the connection between the financial literacy level of the average Canadian and the country's economic wellbeing.

Alex shares my view that individual financial literacy is critically important to the economy and agrees that poor financial literacy skills contributed in part to the US mortgage crisis. He talked about how too many Americans got themselves into mortgages that they could never pay off and then suggested that a country would be better off if everyone followed this O'Leary rule of thumb: save one-third of every pay cheque and put it to work for you earning interest or in investments.

Alex explained that Kevin frequently reminds people who aim to build wealth to focus on the big picture when it comes to personal finances, which often means avoiding spending hard-earned money on consumption expenses such as daily cups of specialty coffee. "One of Kevin's mantras is to invest first and then spend only the interest, never the principal," said Alex. "When you have enough interest for your daily latte, then go for it, but not before that."

Disparity in Financial Literacy
When I asked him what letter grade he would give Canadians for financial literacy, Alex pointed out that the more important issue is the disparity between those who are financially literate and those who are not. Alex gave the example of two people with identical jobs and salaries but who have vastly different financial literacy skills. The person with the higher level would do better financially in his or her lifetime, while the other would be more at risk of financial ruin. "This disparity would be amplified over time," said Alex.

When I asked him about the financial literacy level of the average would-be entrepreneur pitching a business plan, his answer was similar: there is a huge disparity between pitchers when it comes to financial literacy. He said that successful pitchers always have someone along who can talk money and articulate how investors can make money by investing in the business. As a fan of Dragons' Den, I've certainly noticed that pitchers who fumble for the right money word or who don't know their numbers rarely get deals, especially from Kevin.

As we talked a bit more about how the show has helped improve the financial literacy level of it's viewers, Alex made this insightful comment: "There is no real reason why more Canadians can't be wealthy."

He's right. There's no cap on the number of rich people there can be in this country. Dragons' Den keeps that fact in our faces. Every time we watch an episode, my daughter and I are reminded that it is possible to go out into the world and be an entrepreneur and make more money, with the caveat that in order to have a decent shot you need to be financially literate. That is a powerful lesson.

Speaking of powerful lessons, we wrapped up the conversation talking about Alex's (and Kevin's) philosophy of money. Of course, I had to ask him my O'Leary question: What three things should we teach five-year-olds about money? By his own admission, Alex's answer could have come directly from Kevin's mouth:

Be honest about money.
Pay attention to money.
Don't confuse money with feelings.

It's About Freedom
Before I let him go, I asked Alex how he would explain the term "venture capital" to someone who might not be familiar with it. He explained that venture capital is like a "dating service for money." It brings together a business that is looking to grow to the next level with an individual who has cash to invest. Hopefully, it's a good relationship that turns into a serious romance.

I can just imagine that in O'Leary terms a "good" relationship means that everyone is making money or there's going to be a nasty break up. After all, according to Alex's boss, "nothing matters more than money." And, when I asked Alex what he thinks about Kevin's statement he said, "Money is about freedom. It lets you do what is important to you. Just look at Kevin. He can do what he wants, when he wants, however he wants to do it."

Alex's comment made me realize that as a wealthy nation, we truly have the freedom to choose whether or not we want to spend our tax dollars on financial literacy education and getting personal finance basics into our schools. I believe there is money at the provincial and federal levels than can be spent narrowing the disparity between those Canadians who would get an A+ in financial literacy and those would would get an F. Just imagine a country in which every high school graduate was financially literate. It could happen here in Canada. As I wrote in an article for the Vancouver Sun last week, the Ontario Ministry of Education is leading the way.

As Alex said, money gives you the freedom to do what is important to you. Do we understand that more of us could be wealthy if more of us were financially literate? Do we get that individual financial literacy is worth investing because it will build our economy? Is raising money-wise kids important to Canadians in every province and territory? I hope so.

Stay tuned for more words from the Den on financial literacy...I will be talking to Dragon Arlene Dickinson later this week.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus.net.

What's stopping you from talking to your kids about money?

2011-06-07T09:48:00.000-07:00

You don't know where to start.
Sure you do. While watching the NHL playoff game last night my daughter and I talked about how the Vancouver Canuck's horrific loss translates into huge financial gains for the owners, players and collateral businesses. This morning on our way to school, we talked about our summer budget. There is an opportunity for my daughter to go to a horseback riding camp but I explained that the $150 required to pay for it would have to come out of our Europe vacation budget. She got it. We can't afford both.

You are embarrassed because your finances are mess.
Chances are that if your finances are a mess, your kids already know it. They eavesdrop on our conversations and see the lines of worry on our faces. They know when we are stuck in our heads and floundering in a sea of negative thoughts. They know because they see that while we are in the room with them, we really aren't all there at all. Is hiding the mess really better than talking about it and modeling recovery? I don't think so.

You think that money is the root of all evil.
Think about your tongue. Do you use it to encourage and build up those around you? Or do you natter, criticize and tear down? Your tongue isn't inherently evil, neither is money. What matters is how you use it.

You assume they are learning about money in school.
Don't assume. Ontario is the only province in Canada that has made financial education a mandatory part of the curriculum. That's just getting underway in September and will include grades 4 to 12. So if you're in Ontario you can breathe a bit easier. As for the rest of us, we have to do the teaching at home if we want our kids to be financially literate.

You think that kids should figure it out for themselves, like you did.
I had to figure out the basics of personal finance on my own, but that's not how I want to parent. So about a year ago, I decided to begin debt-proofing my daughter by making her aware of the decision-making and self-control aspects of finance. I hope this awareness will help prevent her from developing habits that could lead to financial self-harm down the road. It seems to be paying off. After our conversation this morning about our summer vacation budget, she turned to me and said that maybe we shouldn't spend the $150 at all. "We could save it, Mom," she said.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme@telus.net.

International Financial Literacy Conference Big 5 Themes

2011-06-02T06:46:00.000-07:00

Ursula Menke's Welcome Address

Last week at the Westin Harbour Castle in Toronto, 400 delegates from around the world came together to talk about financial literacy on a big scale. I was fortunate to be able to scoop a media pass for this major event which was cosponsored by the Organization for Economic Co-operation and Development (OECD) and the Financial Consumer Agency of Canada (FCAC).

Over the two days I attended every keynote, plenary and workshop that I possibly could.I interviewed celebrities such as personal finance author Alison Griffiths (who hosted the conference) and neuroscience author Jonah Lehrer. I chatted with power brokers such as Ursula Menke, Commissioner of the FCAC, and key analysts from the OECD. I came home with a book full of notes, several hours of recordings and 16.8 pounds of literature.

I have a lot of writing to do in the coming weeks. In the meantime, here's a quick look at the top five themes that stuck out for me during this two-day international financial education event.

The Movement is Gaining Ground
Did you know that financial literacy was on the agenda at the 2006 G8 meeting? Or that Canada is a global leader in financial literacy? While there are still many countries which do not have financial literacy on their radars, there is no doubt that the international movement to educate and equip citizens around the world to make better financial decisions is gaining ground. Thanks to the work of a variety of stakeholders such as the OECD, policy makers in several countries have accepted the idea that a money-savvy citizenry is good for global and local economies.

This is great because it means that we can move from spending money on convincing politicians to act toward figuring out how to spend money on financial education. The question these days is not so much why but how.

Tests and Measurements
One of the main themes of the conference was evaluation. How do we know which financial education programs and projects are worthwhile? Presentations and workshops on this topic delved into identifying vulnerable populations, what money topics to teach and establishing best practices for implementation and evaluation.

There were also discussions about educational resources and how those should be evaluated. There was a plenary that looked at the importance of evaluating the many financial literacy projects that are springing up around the world. Are they cost-effective and efficient? The OECD along with policy analysts from around the globe are working on the evaluation issue, especially as it relates to bringing financial education to the school curriculum.

Coming to a School Near You
I am beginning to believe that ten years from now personal finance education will be part of the primary and secondary school curriculum. In Canada, this is already underway. Starting this fall, Ontario teachers of grades four through twelve will be teaching personal finance in their classrooms. We are still a long way from a national movement in this direction, but at the conference I heard "off the record" that all of Canada's education ministers are on board.

Globally, Australia seems to be way ahead on this. They have had financial education in the schools for several years. Their advice to advocates from countries where the ministers of education are less open to the idea is to frame financial education as a "value add" to the existing curriculum and give up on the dream of making it a stand-alone subject. The other secret they say is to provide classroom ready resources so that teachers feel confident delivering the material.

Nudge or Educate Debate
Several plenaries and workshops dovetailed on the debate as to whether or not consumers should be educated or nudged towards making a particular financial choice. Education is straightforward and includes teaching kids about money in schools or providing consumers with educational materials or workshops or private consultations that will help them make smarter decisions.

A nudge, I learned, is more controversial. For example, should governments automatically enroll employees in a state-run pension plan and leave it to the employee to do the opt-out paperwork? This is a hot topic. The education advocates say that this is not really ethical, while the nudgers argue that this is an effective way to encourage more citizens to save for retirement.

Another part of this debate is the relatively new field of behavioural economics, the study of consumer choice at the brain level. Apparently, our brains are not well designed to handle credit cards and other tools of the modern financial system. And with the increasing number of complicated products and smart technologies, our brains are going to need some retraining.

Technology is Upping the Stakes
I understand that very soon it will be possible to make a purchase with a wave of your smart phone. There will also be easy access, instantaneous offers of small credit amounts that will be sent through your phone. Mobile banking is growing, too, and there is a great deal of concern over how low-income and at-risk populations will be able to cope.

Panels of industry experts talked about how financial education initiatives should address the issue. One workshop looked at how social marketing and communication tools might be used to improve the effectiveness of these initiatives asking how can social media influence and improve the financial awareness of consumers? What a great question and we don't have the answer yet.

Like I said, I have a lot of material to sort through and a lot of writing to do in the coming weeks. If you have any questions or comments about the conference, or have a topic that you would like me to address in a future article, please email me at moneyme@telus.net.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme@telus.net.

Youth FLY to Financial Literacy Conference

2011-05-24T14:02:00.000-07:00

Lately, I've been reading the novel The Wonderful Wizard of Oz to my daughter. When we got to the part where Dorothy and the gang have green-coloured glasses locked on to their heads by the gatekeeper of the Emerald City, I couldn't help thinking about the mysteriously glamorous world of financial products and services. My daughter and I agreed that the green-hued glasses are simply wrong. I think she even said they were "creepy."

Letting kids grow up without money skills is creepy too. But thanks to non-profit organizations like FLY (Financial Literacy for Youth), kids don't have to wait for we grown-up gatekeepers to unlock the green-coloured glasses and let them see the financial landscape as it really is.

Seriously, Youth Want to Learn About Money
It may seem counter-intuitive to some, but I have proof that kids want to learn about money. On May 14th, hundreds of high school and university students spent an entire day at McMath Secondary School in Richmond, BC furthering their financial education at a conference called "Finding Your Financial Piece of Mind." FLY directors Ampere Chan and Iris Lo said, "We're very impressed with the students who took initiative to come to the conference. Not only were more than 220 students willing to give up a Saturday, the attendees this year were the most engaged that we've ever had. Kudos to all the students who made the conference what it was!"

We arrived an hour or so after the conference kicked off. There were icebreaker activities going on in the gym. I could tell from the noise level that the students were having fun. After the icebreaker, the participants were sent off in teams to workshops led by accountants, investment bankers, financial consultants, credit counselors and finance managers.

Between workshops there were more large group games and activities focusing on financial vocabulary and reviewing the basic principles of saving, investing, earning and spending. There was also a trade show with a game that encouraged students to talk to the business professionals manning the booths.

Overall, the conference was well-done, highly professional and very youth-friendly. I was impressed and plan to get involved in future FLY events.

Help Spread the Word
There are several ways for teachers, professionals, businesses and parents to get involved with FLY. Teachers can partner by piloting the FLY curriculum (developed by students for students) in their classroom. Businesses and professionals can purchase sponsorship packages that include trade show space at the annual conference. Parents can help out, too, by letting their kids in high school or university know about the conference and telling other parents.

For more information and to stay in the loop, visit FLY online or join their Facebook page "Financial Literacy for Youth."

Remember, it's for a great cause: helping our kids see the financial landscape as it really is.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme@telus.net.

Who is Responsible for Financial Education in Canada?

2011-05-21T16:02:00.000-07:00

Financial Literacy in Action
This week delegates representing governments and financial education stakeholders from around the globe will be spending two days in Toronto talking about financial literacy at a conference called Partnering to Turn Financial Literacy into Action. As I flip through the agenda for this by-invitation-only event, there is one workshop in particular that catches my eye. It's called "Financial Education in Schools: How do we bring financial education programs into the classroom?"

In this workshop the OECD (Organisation for Economic Co-operation and Development) will be presenting its Guidelines on Financial Education in Schools. The panelists will debate the pros and cons of different methods for integrating financial education into existing curricula around the world. They will also talk about the challenges of training teachers and discuss the development of teaching resources.

This workshop--coupled with some recent financial literacy presentations that I have made to primary school teachers and parent groups and some interviews with financial educators such as Gail Vaz-Oxlade--has got me thinking about who is ultimately responsible for making sure that every child is financially literate by high-school graduation.

Whose job is it?
Is it Mom and Dad's? Most parents I've talked to believe that personal finance should be taught in school. On the other hand, in a poll of 40 primary school teachers that I did a few weeks ago, half said that parents are ultimately responsible for their children's financial education. But what if mom and dad aren't financially literate? What then? Can teachers fit more curriculum into existing instructional hours? Should they?

Should it be our ministries of education? When I asked financial education self-help guru, Gail Vaz-Oxlade this question, she said that parents should be teaching this stuff to their children because "not everything should be taught in school." She used the example of how schools teach kids about the food pyramid and how that knowledge is meaningless and out of context for them because they (the kids) don't make the food choices at home. Mom and Dad do.

Money choices are the same, Vaz-Oxlade said. Teaching kids about money when they have none of their own is be pointless. Nonetheless, Manitoba and Ontario are introducing personal finance this fall, K-12 in Manitoba and grades 4-12 in Ontario.

Are we expecting our kids to be self-taught? Some of the most interesting and successful people that I have talked to about financial literacy are self-taught. Everything that I know about money I have taught myself. We never talked about money at home. I didn't learn anything about it in school. As a result I've made a lot of mistakes on my way to financial stability, but at least I've made it. Is this the best option? I don't think so, which is why I spend so much time talking to my daughter about money, and making sure that she has her own money to practice with.

Should entrepreneurs step up and develop lucrative products that will do the job? There are a few small companies in Canada that are currently developing financial education products and services. (I know. I've been approached by a few). But the question remains, who should those products be aimed at? Can you make any money developing financial education products for schools? Or would it be better to create products that will help parents teach their kids about money? Which is the better investment?

Responsibility Leads to Action

This is a funny place that were are in right now. It reminds me of the whole sex-ed dilemma. Whose responsibility is it to teach kids about sex these days anyway? The family? The school? There is an uncanny parallel between sex and money in education. What is it about teaching kids the "facts of life" that sets parents' and educators' teeth on edge and makes them pass the buck back and forth?

It will be interesting to see where the discussions lead at the "Turn Financial Literacy into Action" conference next week. Seriously, if we don't agree on who is ultimately responsible, it will be impossible to point the finger at anyone and say, "Okay, Dude, open up your wallet and spend some money on financial education." Without responsibility, there is not likely to be any action and I'm not sure the global economy can afford that.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme@telus.net.

Moola Lingo: Derivatives

2011-05-10T16:49:00.000-07:00

Derivatives is a money-word that bounces around quite a bit in the business news, often in the context of traders' "bad behaviour" and the "blind greed" of the American bankers who drove the U.S. into the mortgage meltdown and the rest of us into the global financial crisis of 2008. But, seriously, I had no idea what a derivative was until I decided to invest far too many kid-free hours of the last two days into not only finding out what it means but how I might translate into something that the average financial illiterate (and his or her five-year-old) can understand.

Yes. You read that right. I'm not only working on how to teach we grown-ups what a derivative is, I am also taking a crack at introducing it to five-year-olds. If you are thinking that I'm crazy, you are not alone. Last week I had the chance to ask 40 elementary school teachers whether or not kids in primary school should be introduced to moola lingo such as ETF, liquidity, T4, bonds, passive income, equities, overdraft, capital gains, etc.

Almost all of the teachers said, "No way!"

I disagree, of course. For me financial literacy comes down to two things: vocabulary and confidence. It's never too soon to start building either of those highly valuable personal commodities. And as someone who has logged many hours as a coach, I know that sometimes we grow the most when the bar is set higher than we think we can handle. When it comes to moola lingo, the word "derivatives" certainly fits the bill as a training tool. So put on your helmet. Here we go.

Not the Real Thing

A derivative is NOT an original thing. A derivative gets its meaning and its value from something else. In science, think of opium's derivatives: morphine and codeine. In etymology (the study of words), think of the Latin word "aqua" and its many derivatives such as aquamarine, aquatic, aquarium and Aquaman. Just think, without the Latin word for water (aqua) Norris and Weisinger might have named their underwater hero Soggyman or Wetman.

In moola lingo, it's the same idea. Derivatives cannot exist or have meaning or value without the thing that it is based on. There must be real wheat for flour and real pork bellies for bacon before you can create and trade in corn futures or pork belly options. (Options and futures are the two most common kinds of derivatives.)

According to Investopedia.com a derivative is "a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties." Here's an example.

Short & Long on Balls

Imagine a market where everything baseball is bought and sold. A coach needs new balls for her team. There is no avoiding it. She will have to spend money on balls but, hopefully, not too much. The annoying thing is that the price of balls goes up and down all the time. Sometimes they cost $2 each, sometimes they go as high as $10 each. She does not want to pay $10 for each ball. She needs 100 balls, so that would cost $1000!

The day the coach goes to the baseball market, balls are selling for $5 each. She doesn't need the balls today (she doesn't even have enough money to buy today) but she wants to buy the balls at today's price. She goes up to a ball guy and tells him that she will buy 100 baseballs from him at $4 each and that she will need them delivered to the field on opening day. The guy agrees because he thinks that the price of balls is going to go down to $3 when all the other ball sellers come to the market next week.

The coach and ball guy write all of those details on a piece of paper. That piece of paper is now called a "futures contract" and it's a kind of derivative. Like the word "Aquaman" depends on the existence of the Latin word "aqua," this piece of paper depends on the existence of real baseballs and how much they cost at the market on any given day.

The coach is called a "speculator" who is "long" on balls, which means that she thinks that $4 is a good deal because the price of balls will probably go up. The ball guy is called a "hedger" who is "short" on balls, which means that he thinks the price of balls is going to go below $4 and he wants to get as much money for his balls as he can.

On opening day, the price of balls at the baseball market is $10. The ball guy delivers the 100 new balls. The coach pays him $400 dollars and is really happy. She saved her team $600 dollars. The ball guy is not happy. He lost $600 because the futures contract says that he must sell 100 balls for $400 when he could have sold those 100 balls that day at the market for $1,000. Poor guy. But what if the price of balls on opening day had been $2 each. Then the ball guy would be happy that he had the coach locked into paying $4 per ball. The coach would have been annoyed at paying $400 instead of $200.

As you can see, how it works out for the speculator (the coach) or the hedger (the ball guy) totally depends on how many balls and how many coaches needing balls will be at the market on a certain day. No one can control how much something like a baseball will cost tomorrow, the next day or next Wednesday. This is why derivatives are considered useful.

Sellers like the ball guy want to be sure they get a good price for their balls at the market. Buyers like baseball coaches want to buy their balls for as little money as possible. They talk, come up with a price for baseballs that they both like and set a date for the balls to be delivered to the buyer. Maybe having a futures contract helps them both sleep better at night knowing that no matter what the price of baseballs is tomorrow, they have a deal.

Where a speculator or hedger might lose sleep or have nightmarish flashbacks to 2008 is when the contracts themselves are bought and sold on the derivatives market (this is not something that I can visualize yet) or when a contract comes due and there isn't enough money to pay it out (apparently when buying a derivative, you don't need to have the all the cash on hand, just a small percentage of the face value of the contract).

As you can imagine, my fellow financial illiterati, there is much more collateral lingo attached to derivatives that we can learn. But not today. I think we've done enough of a workout. I know I have...

For reprint permission contact moneyme@telus.net.

The Collective Canadian Pocket & Why Voting Matters

2011-05-02T12:37:00.000-07:00

I just finished writing a financial literacy lesson plan for preteens called "An Intro to Making Money." In this lesson I use a pocket to demonstrate what income and expenses are: income puts money in your pocket while expenses take money out.

With today being election day, I got to thinking about our collective Canadian pocket and how an election is all about deciding which party will be in charge of what goes in and what goes out. By the way, did you know that in the recently defeated budget our collective pocket takes in $235.6 billion in total revenue and pays out $276 billion in total expenses. That's a lot of loose change!

The funny thing (or perhaps disturbing thing) is that about half of us don't really seem to care about which party controls our collective cash. According to Elections Canada, only 58.8% of eligible voters turned out for the last federal election in 2008. Are we going to do any better this time?

I know the old complaint (often made by really smart people who are really good at managing their personal pockets) that the parties are all the same so there's no point in voting. Well, I'd like to challenge that truism with some examples of how significantly the parties differ in how they want to manage Canada's cash.

How the Parties will Manage OUR Money

Arts & Culture

The Conservatives will establish a Children's Arts Tax Credit of up to $500 per child. The Liberals will double the annual budget of the Canada Arts Council from $180 million to $360 million over the next four years. The NDP will increase public funding for the Canada Council and implement tax averaging for artists and cultural workers.

Education

The Conservatives will extend support for the Canada Youth Business Foundation which provides loans and mentoring to young entrepreneurs. The Liberals will establish a new Early Childhood Learning and Care Fund beginning with $500 million in the first year, rising to an annual commitment of $1 billion by the fourth year. The NDP will raise the education tax credit from $4,800 per year to $5,760 per year.

Families & Households

The Conservatives will establish a Family Caregiver Tax Credit, on the amount of $2000, to support Canadians caring for infirm loved ones. The Liberals will invest $1 billion annually in a new Family Care Plan. The NDP will improve Family and Maternity Leave Benefits.

Health & Health Care

The Conservatives will double the value of the Children's Fitness Tax Credit up to $1000 per child. The Liberals will invest $40 million over four years to implement a new Healthy Start program to help children from low-income families access healthy, home-grown foods. The NDP will introduce an intergenerational Home Forgivable Loan Program to help up to 200,000 families a year retrofit their homes to create self-contained secondary residences for senior family members...up to a maximum of $35,000 per family.

Yours, Mine & Ours

You can do more party platform comparisons online and I hope you do. I mean really, if you care about money at all, yours, mine and ours, this is a great way to show it. The winners today will be in charge of our collective pocket. And having your say in which party is going to have that control is worth a trip to the voting booth. After all, your personal pocket has a stake in it too.

And don't forget to drag the kids along. As with financial literacy and the language of money, you can start teaching your kids to speak democracy at any age.

For reprint permission contact moneyme@telus.net.

Love and Money

2011-04-28T13:08:00.000-07:00

Have you ever wondered what life is like when a thrill-seeking "High Roller" marries a risk-averse "Security Seeker" or when a sweat-pant-wearing "Dawdler" starts dating a research-crazy "Systematic Striver"? The five Vancouver women who make up the Smart Cookies financial self-help team have considered these and many other questions about love and money in their new personal finance book for couples. It's worth the cover price...especially if the idea of talking to the one you love about money makes you want to throw up or call off the wedding.

Overall, I really enjoyed reading the book. It was straightforward without being boring and had some good old fashioned you-can-do-it encouragement along with some solid money management advice that can help you get control over your finances even if you are currently flying solo or just dating.

My favourite parts are the two introductory chapters and the "Perfect Day" exercise on page 46. The first chapter was great because the Cookies spent some time talking about why money is so hard to talk about in the first place. There are some interesting statistics and insights to be found there. Chapter Two I liked as well because it got me thinking about how we learn about money from our parents, mostly by observation, and how what we see and hear about money growing up shapes the financial baggage we bring with us into relationships.

In the third chapter, which outlines some suggestions for personal and financial compatibility, there is an exercise called "Picturing Your Perfect Day Together." You and your partner are asked to imagine your life five years from now on a weekday and then use the Cookies' eleven questions to ignite a conversation about the financial reality that those fantasies entail. It's a fun exercise, well worth doing over a glass of wine or a cup of tea after you've both had a long hard day.

While these were my favourite parts of the book, the rest of the book does not disappoint. Whether you are planning to pay for your wedding or pay off debt, are buying your first home, starting a family, or learning to invest, you will find a lot of practical advice...and it's written for Canadians. Yay!

At $19.95 CDN, this book gets 5 out of 5 dollar signs for value and 5 out of 5 stars for readability. It's all about love and money, but you won't find any intimidating vocabulary on any of its 220 pages.

Moms and dads, if your son or daughter is old enough to fall in love but still has no idea what a RRSP or mortgage is, you may want to pick up this book and read it together as a family, which would be a great way for you (Mom and Dad) to talk to your grown up kids about how you handle love and money in your own intertwined lives.

For reprint permission contact moneyme@telus.net.

L'argent et Moi avec Agent Story

2011-04-27T06:40:00.000-07:00

Kevin O'Leary's Tough-Love Approach to Kids and Money

2011-04-21T12:05:00.000-07:00

Twice now I've heard Kevin O'Leary talk about about how he makes his kids fly coach while he enjoys the softer seats and sumptuous service of first class. He tells them that they can't sit up front because they don't have any money. If you're familiar with Kevin's work on Dragons' Den, Shark Tank or on The Lang & O'Leary Exchange you won't be surprised because you'll know that with Kevin "it's always about the money," even with his kids it seems! Let's call it O'Leary's tough-love approach to financial education.

BC HRMA Conference April 2011

While I don't agree with every aspect of Kevin's "business is war" philosophy, I do admire his realistic approach to talking to kids about money, which is why on April 13th I took my seven-year-old daughter to see him do a presentation called "Up Close and All Business with Kevin O'Leary" hosted by the BC Human Resources Association at the Vancouver Trade and Convention Centre. Actually, I didn't really take my daughter to the presentation, she had to take herself.

One Tough Mom Equals One Tough Kid
When we first heard about Kevin's talk, my daughter was anxious to go. She's a big fan of Kevin's sense of humour, especially when he is being tough on pitchers in the Den. I thought it might be fun to go, too. I've been hoping to interview Kevin for this blog for quite a while. But when I saw the ticket price was $57 plus HST I decided against it (parking would be another $25!).

My daughter persisted so I told her that if she paid for her own ticket, we could go. The funny thing is that even though she is a shareholder and has a healthy pile of cash in her ING kids account, she said that she didn't want to spend her savings. That left us with figuring out how she could earn $57 plus HST.

Ella-Rose's Tip #2

To make a long story short, she spent the second week of March break providing money-saving tips to a group of subscribers (which included David Chilton, author of The Wealthy Barber, family, friends and a few of my blog followers) at the rate of $2 a day for 5 days.

I helped her choose her money-saving tips and did the uploading and emailing (some of the tips were images, some were videos) but the creative piece was hers alone. There were days when she came home from art camp and did not want to "work" but she did it anyways and ended up raising $80, which was more than she needed.

I was proud of her and pleased that she was willing to work so hard to earn money to do something that she wanted to do. She didn't complain. She didn't argue with me about why I was making her pay for her own ticket. She was able to deal with this "tough-love" money lesson with a tremendous amount of fortitude. I imagine that Kevin's kids can do the same.

Up Close & All Business with Kevin O'Leary

It wasn't until Kevin mentioned the "I make my kids fly coach" story again at the presentation that I realized that I have been using O'Leary's tough-love approach to financial education without being aware of it. One of my parenting catch phrases is, "Sorry. Mom's job is to buy the stuff you need, not the stuff you want."

It seems to be working.

The cool thing about the tough-love approach to financial education is that it doesn't matter how wealthy your family is. Whether it's a first class plane ticket worth thousands of dollars or a front row seat at a Kevin O'Leary talk for $57 plus HST, the point is that you make your kids hungry to get there...and then you step back, do a little coaching and watch them go.

Copyright 2011. Laura Tomas. All Rights Reserved.
For reprint permission contact moneyme@telus.net.

Laura Thomas on Financial Literacy

2011-04-18T10:17:00.000-07:00

Moola Lingo: Corporate Tax

2011-04-13T13:09:00.000-07:00

Watching the leadership debate last night made me realize that politics is really just about about money. The May 2nd federal election isn't about ideas, it's about who has the power to decide how we earn, spend, grow and share our collective cash. And that was very evident when the word "corporate tax" was brought up last night. Should the corporate tax go up? Should it go down? Should it stay the same?

Which is why I thought to myself, hey, if this is such a pain-in-the-budget topic, I should probably take a minute to understand exactly what the word means before I cast my vote.

What is corporate tax?
Just as we the people have to pay tax on our income, companies have to pay tax on the money they earn as well. They pay tax on "profit income" and on capital (cash or goods used to generate income). And, just like us, corporations have to file a tax return, a T2. If you've ever wondered what a T2 looks like you can check it out here.

Who has to file a T2? Any corporation with a Canadian address (except registered charities) has to file a T2 every year even if there is no tax due. This includes non-profits, tax-exempt corporations and inactive corporations.

And, in case you wanted a history lesson, it seems that corporate tax has been around longer than individual income tax in Canada. Corporate tax was introduced at the end of the nineteenth century while income tax was introduced in 1917 as a "temporary" way of funding World War 1.

Corporate tax rates, by the way, are:
19.5% effective January 1, 2008
19% effective January 1, 2009
18% effective January 1, 2010
16.5% effective January 1, 2011
15% effective January 1, 2012

Individual tax rates in Canada for 2011 are:

15% on the first $41,544 of taxable income

22% on the next $41,544

26% on the next 45,712

29% on taxable income over $128,800

Our Parities & Our Pain-in-the-Budget
The Liberals vow to keep the corporate tax rate at the 2010 level of 18%. The NDP promises to keep the combined federal/provincial corporate tax rate (which is about 26%) below the U.S. federal corporate tax rate of 35%. This means that the NDP will boost the federal corporate tax rate to 19.5%. The Conservatives will keep lowering the rate to 15% in 2012. The Bloc Quebecois and Green Party do not have explicit plans to either raise or lower the corporate tax rate.

There is some additional vocabulary that comes up when individual and corporate tax obligations collide including: dividends, shareholders, tax credit, double taxation, capital gain, capital cost allowance and income trust. But I am not going to touch on any of that moola lingo today. The point of this post is to clarify what corporate tax is so that we can better decide which party's earning-spending-growing-sharing plan we want to support on May 2nd. Happy voting!

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

5 Tips for a Chubbier Savings Account

2011-04-05T13:59:00.000-07:00

Preet Banerjee wrote a piece for the Globe and Mail today about ways of saving that include voluntarily increasing your income tax deductions so that Revenue Canada acts as your banker by holding on to your money until refund time. He also suggested setting up an automatic savings plan at a real bank that pays interest while your money grows.

Though, as Preet also pointed out, there is something awfully tempting about both a growing savings account and a lump sum tax refund. Something that stops many people from letting their savings get chubby.

Last night after swim practice, I treated myself to a hot tub with some of the other moms. As we enjoyed the jets, bubbles and the soothing absence of children, one mom lamented that stores "around here" never seem to close. "In some European cities," she said, "it's almost impossible to shop on a Sunday. You can't even get groceries. I wish it was like that here." Her comment made me wonder how we can afford all this 24/7 shopping.

That's easy. It's called credit. Our economy says to us, "Don't worry about it, Mom! You can get whatever you want, whenever you want and you don't even need to have any money in the bank!" No wonder it's so hard to build a chubby savings account when it's so easy to keep letting the money pour out.

So if you are one of those people who struggles to keep the financial weight on, here are few tips from an avid (dare I say obsessive?) saver.

5 Ways to Bulk Up

ONE Change your way of thinking. Fat is good when it comes to money. The more you amass in your savings account the more you can potentially earn in interest or in investment income. Seriously, passive income (that's when your money earns money) is totally where it's at.

TWO Respect free money. I'm 42 and I still get money in cards from family at Christmas and for my birthday. You didn't earn it so don't spend it. Put any free money (refund, gift, etc.) that comes your way directly into your savings account.

THREE If you suddenly decide that you want something, don't dip into your savings to buy it and don't use credit either. Figure out a fresh, temporary way to earn the required cash. Do an odd job for a neighbour. Do some childminding. Sell something that's been sitting around taking up space. Be creative.

FOUR Do a cost analysis of your favourite forms of entertainment and drop the expensive stuff. What do you do for fun? Create a list and beside each activity write down how much it costs, how many hours of entertainment you get and then figure out what your cost per hour is.

Example: A 3D movie night in the theatre for my daughter and I costs $28 (just for the movie, not including snacks and transportation) which works out to $14 per hour for a two-hour outing. On the other hand, a 500-piece puzzle costs us about $20 and give us more than 10 hours of fun at $2 per hour. For every 3D movie we decide not to see in the theatre, I put $28 into my savings account.

FIVE Passive income rules! I know this was tip number one but if there was ever a carrot for saving money it's this. The more money you have working for you, the more money you will have down the road. I hate to admit it but Kevin O'Leary's goal of going to bed richer at night than he was in the morning is smart. Every dollar that grows in your savings account makes you richer every day.

If however, you don't think that any of these tips are going to help and you are interested in the "Revenue Canada tax-refund savings strategy" or in setting up an automatic deposit, check out Preet's Globe and Mail article by following this link.

Moola Lingo: Disposable Income

2011-04-02T08:23:00.000-07:00

What do unicorns and disposable income have in common? Like most things, the answer to that question depends on language.

What is a unicorn? A unicorn is an imaginary creature that is usually depicted as a horse with a spiral horn growing out of its forehead.

What is disposable income? Good question. Here are a few definitions of "disposable income" that I found on the Web:

"The amount of income left to an individual after taxes have been paid, available for spending and saving" (InvestorWords.com).

"Gross income of an individual from which direct taxes have been deducted." (BusinessDictionary.com).

"The amount of money that households have available for spending and saving after income taxes have been accounted for" (Investopedia.com).

In money-speak, disposable income is a term that refers to your after-tax income. It's what you have left to spend on essentials and non-essentials (and to save, if you're lucky) after you pay your taxes. But getting back to our original question about what unicorns and disposable income have in common, let's break down the language a little bit further to find out why this misnomer, "disposable income," is so very annoying.

Money You Throw Away?

Disposable means that something has been designed to be thrown out after being used, such as a "disposable" diaper. You use it once, you throw it in the diaper genie. Income is money that comes into your life in any way, be it earned actively or a gift or some other passive form of positive cash flow. Literally, then, the term disposable income seems to mean: money that you throw away. Like unicorns, disposable income understood in this way is truly imaginary. Who, after all, has money to throw away?

But that's not what disposable income means in money-speak, as you can see from the above definitions.

Given the confusion created by the word "disposable" and the irritating specter of tossing cash into the diaper genie or other trash bin (which I have done accidentally), perhaps our after-tax money should simply be called "net income." But the term net income is already taken.

Net income is the amount of income we pay taxes on (gross income minus deductions and credits) so disposable income is what's left after you pay tax on your net income. We need another term.

Another option may be to call our disposable income, simply "my money." Once I pay income tax, the money that is left over is truly mine and that's an empowering thought, which is not imaginary at all.

So the next time you're talking to your accountant or financial advisor, and the term "disposable income" rears its irritating head, just remember that disposable income is not meant to be disposable...it's simply your money and you can do whatever you want with it. You can even throw it away!

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

The Harper Budget & Financial Literacy

2011-03-24T07:40:00.000-07:00

In the midst of the kerfuffle over the federal budget that was tabled on Tuesday (a kerfuffle that may dissolve parliament and turn the 352-page budget into a door-stop) it may seem fruitless to worry over the contents of those 352 pages. And for the most part it may be, except for one thing that really matters to people who are determined to help Canadians get smarter about money: does the federal government have the desire to spend money on financial literacy in 2011-2012?

You already know that I'm one of those "people" and so it will be no surprise that as soon as the budget was available online that I poured through the table of contents looking for anything to do with financial literacy, particularly the thirty recommendations made by the Task Force for Financial Literacy in their report, Canadians and Their Money, published on February 9, 2011.

I found what I was looking for in the first chapter, "Supporting Job Creation," under the subheading "Maintaining Canada's Financial Sector Advantage." On page 87 you will find the following statement under the title, "Enhancing Financial Literacy."

With the growing use of financial services by consumers, the importance of ensuring that Canadians have the tools and knowledge to be confident in their financial decisions cannot be overstated. The Government has received the recommendations of the Task Force on Financial Literacy, and it commends the important work that was done in support of this goal. As a first step, the Government is announcing that a Financial Literacy Leader will soon be appointed to promote national efforts, and is providing funding to advance financial literacy initiatives.

Budget 2011 proposes to provide $3 million per year, in addition to the $2 million per year already provided to the Financial Consumer Agency of Canada, to undertake financial literacy initiatives. Improving financial literacy is a long-term goal and a shared responsibility that requires all partners to work collaboratively to leverage the excellent efforts now underway across the country.

I realize that it's the Children's Arts Tax Credit that's supposed to get me all excited as a parent, however I find these two little paragraphs on page 87 much more stimulating as I do believe that by investing in the financial literacy of children and families today, we can improve the economic well-being of future generations.

While politicking is going to dominate budget news in the coming weeks, take a moment to do a little happy dance with me about the government's desire to appointment of a Financial Literacy Leader and to spend an additional $3 million per year on financial literacy. Whatever happens in Ottawa, it is a positive first step towards a more economically fit Canada.

For reprint permission contact money@agentstory.net.

Happy Consumer Rights Day!

2011-03-15T15:57:00.000-07:00

I'm in the final week of preparations for my city's first World Storytelling Day community celebration. Under my guidance, twelve amazing young writers in grades four through twelve are going to be taking the stage this Sunday to tell (not read) their stories to a theatre full of families. So what does this have to do with World Consumer Rights Day?

Nothing. Or so I thought until I received an email yesterday from Julie Hauser, Communications Manager at the Financial Consumer Agency of Canada (FCAC) about World Consumer Rights Day, which, like World Storytelling day is an interesting and educational yet largely unknown celebration.

CI Logo

World Consumer Rights Day
World Consumer Rights Day is a project of Consumers International (CI), an aggregate of 220 member organizations operating in 115 countries that was founded in 1960. The CI is a watch-dog group whose purpose is to "protect and empower consumers everywhere."

According to their website, WCRD was founded on a speech that President J.F. Kennedy gave to the US Congress on March 15, 1963. In this speech, Kennedy addressed the issue of consumer rights, which, according to the site, made him the first world leader to do so.

The eight rights included in Kennedy's speech were: access to basic needs, safety, information and choice, plus the right to be heard and the right to redress as well as rights to consumer education and a healthy environment. World Consumer Rights Day, which first took place in 1983, is a day in which groups organize to celebrate and show global solidarity around Kennedy's eight points.

Especially since the market meltdown in 2008 (and the last few days!) consumer rights in the financial services industry have become an increasingly important part of the celebration.

Your Rights as a Canadian Consumer
Did you know that you have the following rights as a consumer of financial products?

The right to open a bank account even if you don't have a job, do not have any money to put in the account or have been bankrupt.
The right to cash Government of Canada cheques up to $1,500 at any federally regulated financial institution without having to pay a service fee, even if you are not a client of that institution.
The right to know the terms of any loan that you take out at a federally regulated financial institution.

You can find more information online about your financial consumer rights in Canada at the FCAC website. And if, like me, you would like to know exactly what qualifies as a "federally regulated financial institution," you can find an overview of the obligations and voluntary codes of conduct on the FCAC website as well.

And as you consider how your family might mark these little-known celebrations, here's a suggestion. This Sunday, on World Storytelling Day (March 20th), tell a child a story about money. Or, even better, tell a story about Consumer Rights Day which is today, March 15th.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

Money Smarts for Low-income Canadians

2011-03-07T11:11:00.000-08:00

With the tabling of a new federal budget just around the corner, I've been trying to find out if any of the 30 recommendations made by the Task Force for Financial Literacy last month will be addressed.

Casey Cosgrove, CCFL Director

Though I haven't been able to find anyone who can give me the inside scoop, it gave a me good excuse to contact people who are deeply invested in financial literacy, perhaps none more so than Casey Cosgrove, Director of the Canadian Centre for Financial Literacy (CCFL).

The Canadian Centre for Financial Literacy

The CCFL is a division of a registered Canadian charity called SEDI (Social and Enterprise Development Innovations which, by the way, was the organization that advocated for the creation of a national financial literacy task force in the first place.) Its purpose is to deliver financial education to youth, newcomers, Aboriginal Peoples, women and families with children.

Recently, I was lucky to have a good long chat with Casey Cosgrove about his role as director of the CCFL. What I found particularly interesting about his organization is that partnership is central to their approach to financial literacy.

While the CCFL's goal is to "improve the financial knowledge and skills of over 230,000 people by 2013," it does not send its staff out to inner-city streets to find at risk Canadians one by one. Instead, the CCFL sends its staff to train front-line workers at a wide variety of social service organizations that are already serving vulnerable groups. CCFL workshops equip front-line workers to empower their clients in the area of personal finance by teaching them how to integrate financial literacy into their day-to-day operations.

Let me tell you a fictional story based on an example that Casey gave me during our discussion.

Fighting the Payday Loan Syndrome
Imagine a twenty-year-old dropout living on Vancouver's Downtown Eastside. Let's call him Zane. Zane is mostly unemployed but he's recently landed a construction job through his connections at a downtown service organization. Because of this upturn in cash flow, Zane is now able to rent a room. But the landlord needs a three hundred dollar deposit and it's a week until Zane gets his first pay cheque.

There's a payday loan store just around the corner from the service organization where Zane often eats dinner. He decides to go to the payday loan store and get his three hundred dollars after he eats.

He eats his meal and as he's about to head out to get his payday loan there is an announcement that there is a money talk starting in five minutes. Zane decides to stay because the talk is being done by one of the organization's front-line workers. In fact, it's the same worker who helped Zane get the construction job.

At the talk, Zane finds out that a payday loan will end up costing him a lot more than $300. He also finds out that the organization has a new "loan" program whereby he can get a $300 advance without paying interest. Zane chooses to take advantage of that advance and gets his room. He also begins to talk to his worker about money. He wants to learn about opening a bank account.

All of this happened because a month earlier the organization had a CCFL trainer come on site to run the front-line staff through their financial literacy workshop.

Meet Casey
Like I said, Casey, and his work in financial literacy and community market testing, is at the heart of the CCFL. Prior its formation in 2008, Casey put his business background to good use by traveling across Canada to encourage entrepreneurship in vulnerable youth. He estimates that he taught his program "Dollars and Sense" to more than 15,000 young people. Then about six years ago, Casey began training trainers to deliver his curriculum, which a year and a half ago (with SEDI and the TD Bank as a funding partners) blossomed into the CCFL.

As a side note, Casey did tell me that when it comes to training trainers, that it's sometimes easier to work with people who do not have a background in finance. They seem to be more "flexible." And when I asked him the O'Leary question (what three things would you teach a Canadian kid about money) this is what he said:

Don't be afraid of money.
No matter what you do for a living you have to deal with money.
It's okay to talk about money.

If you belong to an organization that serves vulnerable groups and would like have the CCFL help you incorporate financial literacy into your services, please contact the CCFL at info@theccfl.ca or phone 416-665-2828.

In the meantime, cross your fingers and say a prayer that there will be something in the March 22nd federal budget to address the recommendations made by the Task Force for Financial Literacy. And if you hear anything...email me!

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

Moola Lingo: Budget

2011-03-01T10:06:00.000-08:00

The Evolution of a Money Word

It was financial blogger Preet Banerjee who told me in a recent interview that if there is one money word every Canadian should understand thoroughly it's "budgeting." I had a hunch that the word "budget" has been around for a long time so I headed to the Koerner Library at my alma mater, UBC, and hefted a copy of the Oxford English Dictionary off the shelf. It turns out I was right...and what a history the word has. From leather pouches dangling around men's hips to proclamations of governmental accountability in British Parliament to womanly advice from Good Housekeeping magazine, "budget," and its meaning, has been around the block.

1432 A budget refers to a pouch, bag or wallet made of leather.

1618 Budget becomes a verb that describes the act of storing up money or another resource for a particular purpose or result.

1773 Budget (as a noun) is used in the British House of Commons to denote projected government expenses and revenues.

1945 The verb "budgeting" is used to describe the process of creating a budget for the purposes of personal financial planning. First recorded use was in an article that appeared in an issue of Women & Work, "Budgeting and shopping on a small income..."

Good Housekeeping 1955

1951 Good Housekeeping tells its readers, "The first essentials for budgeting are to keep weekly or monthly accounts."

1958 The word "budget" is used to describe something that is cheap for the first time in the November issue of Woman magazine. "This is just the drink to give party guests a glow -- at a budget price." In that same issue you find an article on, "Budget-wise dishes. Family recipes...that are easy on the purse."

1969 A "budget account" is a new noun that describes a type of credit account that customers can open at a department store.

2011 Investopedia.com. A budget is an estimate of the income (money in) and expenses (money out) that will flow in and out of a certain account over a set period of time.

My Take on the Word
If you asked me yesterday whether or not I do a budget for my family, I would have said yes. But now that I understand that the word implies forecasting cash flow in the future, then the truth is I don't do a budget. I do something else.

At the end of this month I will sit down and look through all of my receipts, bills and invoices and do a tally (in Excel) so that I know exactly how much money came in, how much money went out and what's left over. I use that information to see how I'm doing and where I should reign in or relax my spending next month. I never say things to myself like: I have $175 to spend on entertainment or I have $210 to spend on gas. That's what you do when you write up a budget...which I don't, apparently!

I have no idea what to call the "month end tally" that I do for my family but I'm sure there's name for it. If you know the answer, please post it!

For reprint permission please contact money@agentstory.net.

CGA Alberta Invests in Financial Literacy

2011-02-25T11:00:00.000-08:00

Okay...so maybe it's not a huge surprise that accountants care about kids and money, but there's a big difference between caring about the financial literacy of high school students and taking action to improve it! The Certified General Accountants of Alberta have done just that by launching a brand new campaign this month called My Money $ My Future.

The goal of the campaign is to improve high school students' ability to manage their finances. Their initial focus is on grade twelve students in public and Catholic schools in Calgary and Edmonton. But, if all goes well, according to Jeff O'Rourke (CGA and My Money My Future task force member) this is only the beginning. Down the road there will be more resources made available that will reach students of different ages. That said, here is a quick summary of the resources that are available today.

My Money $ My Future Resources
Student Handbook. The Financial Literacy Student Handbook is 43 pages of straight financial talk aimed at teens who are on the verge of making financial decisions that could have hefty implications if not made wisely.

After a brief introduction to goal setting and the consequences of accumulating too much debt early in life, the book covers the following topics: budgeting, wealth building through saving, earning extra money and spending less, the cost of moving out, debt management, and paying for higher education. The print copy is available to teachers and school boards across Canada at $10 per copy. The book is also available in a web edition.

Online. Further reading and resources that cover the same topics as the handbook are available at the My Money $ My Future web site. There is also a Facebook page which you can find on the left side of the landing page of the main web site.

Guest Speakers. For Alberta schools, there is a team of CGA speakers available to do school visits and talk about the topics in the handbook. Contact information for bookings is provided at the end of this article.

My Money, My Future (My Economy)
When I spoke with Jeff O'Rourke about the outcomes that his organization is hoping for, he replied that helping students make informed decisions about their future and manage their debt can have a stabilizing effect on Canada's economy. I agree. I have often wondered if the financial crisis may have played out differently if the average person managed their lives from a higher level of financial literacy. And though higher financial literacy levels may not have prevented the 2008 crash, we may have gone into it with an even stronger Canadian economy.

We went on to talk about the impact that low financial literacy can have on young people as they set out to build their lives from scratch. Jeff, a former student finance manager who has seen first-hand the terrible financial situation that many university students get themselves into, said that sometimes a poorly managed student loan can mean that a graduate's dream of owning a home will be deferred for many years.

Another pitfall for students is credit. Credit card companies are famous for setting up booths in student union buildings. More than once, Jeff has seen students get their card and head to pub to treat their friends to an expensive night out only to realize later that the interest rate on that balance can be well over 20%. As he said, "It takes two seconds to spend but years to pay back."

I closed the interview by asking Jeff my now famous O'Leary question: What three things do you think we should teach Canadian kids about money? Here are Jeff's answers:

Control your money. Don't let it control you.
It takes a second to spend but years to pay back.
It's not how much you make that matters; it's how much you spend.

For more information about the My Money $ My Future campaign or the CGA of Alberta or to order copies of the student handbook or book a speaker, please contact Magdalena Matracki at mmatracki@cga-alberta.org.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

Free Money for University

2011-02-20T08:16:00.000-08:00

Executive Director of The Omega Foundation in Toronto, May Wong, told me via Skype last week, "The exciting challenge for philanthropy is figuring out how to invest in people's self-sufficiency." Their new financial literacy initiative called SmartSAVER aims to do just that in 14 languages.

The SmartSAVER initiative has one purpose: to let Canadians know that the federal government is offering free money for post-secondary education through RESPs (Registered Education Savings Plan) and has been doing so since 2004. The problem, says May, is that hardly anyone knows about it.

How to Get the Free Money

1. Check your eligibility. Your child must be born in 2004 or later AND your household income must be below a certain level. If you receive the National Child Benefit Supplement your family will likely qualify.

2. Get a Social Insurance Number. Your child must have a Social Insurance Number. So must the child's parent or guardian.

3. Make an appointment. Choose an RESP provider and set up an appointment to open an RESP. You do not need to have any money to put in that RESP. Note that some providers charge an RESP set up fee but this will be reimbursed to you up to $25 by the federal government. These banks will set up your RESP for free: Bank of Montreal, TD Bank, Royal Bank, and Scotiabank.

4. Do the paperwork. At the bank you will fill out the paperwork to open an RESP, plus you will need to complete the application for the Canada Learning Bond and the "matching grant." With the matching grant, families that qualify for the Canada Learning Bond will also get the benefit of having up to 40% of their RESP contributions matched by the government. (If your family doesn't qualify for the CLB, the RESP matching grant is to a maximum of 20%).

5. Wait. After the paperwork is done, it will take up to 9 weeks for a deposit of $500 (plus the $25 to offset the cost of setting up the RESP) to show up in your RESP account. Every year, another $100 will be put in that account until your child turns 15. If you are starting today, your first deposit will be bigger because the government will contribute an additional $100 per year going back to 2004.

6. Contribute. When you can, contribute a little bit of your own money to your child's RESP. The government will match what you put in up to 40%. So for every $10 you contribute, the government will add $4. You've got to love free money! Just remember that this money has to go towards your child's post-secondary education.

For more information about the Smart SAVER program or to make a tax-free donation to The Omega Foundation and help them spread the word about this free money for university, please contact May Wong at info@smartsaver.org.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

National Report on Canadians and Their Money: Canada's Task Force on Financial Literacy Finally Releases Recommendations

2011-02-09T07:27:00.000-08:00

I first blogged about Flaherty's twelve-member Task Force on Financial Literacy shortly after they released their preliminary report in September. I have been anxiously waiting for the final draft ever since. How will the federal government "make" schools weave financial literacy into the curriculum when education is under provincial jurisdiction? All the recommendations in the world for "financial literacy education from K-12" won't mean a thing without the power (and resources) to make it happen.

So, of course the first page in the 106-page report that I turned to was the one talking about their recommendations for financial literacy in the formal education system, recommendation number three out of a total of thirty that states:

The Task Force recommends that the Government of Canada include financial literacy as an essential skill in its Essential Skills Framework.

The Essential Skills Framework consists of nine workplace skills that are "officially recognized" by the federal government including: reading, document use, numeracy, writing, thinking and continuous learning, interpersonal skills (oral communication and working with others), and applied skills like computer use. Apparently, this framework is used by educational organizations (from K-12 through post-secondary) as a curriculum guide so adding financial literacy as an essential skill may indeed be a catalyst for integrating financial literacy in elementary and high schools, which is part of recommendation number three.

We commend those authorities who are taking steps to address financial literacy, and urge all provinces and territories to move expeditiously to make financial literacy a part of their formal education system.

What I found interesting, and a little scary, is that BC was held up as an example of a province that has already done this by making financial education mandatory. But, the truth is that in BC our kids (the ones who don't take business or accounting courses in high school) get just four weeks of financial education in Planning 10 which is a course that is mandatory for graduation. I'm pretty sure that four weeks of education does not qualify as integration. Or, at least, it should not.

I would rather see my province follow in the footsteps of Manitoba where financial literacy is currently being integrated into the K-12 curriculum or in Ontario where they are weaving it into grades 4 -12.

Our finance minister, Jim Flaherty, will be making an announcement about these findings today. I'll be watching and wondering where we go from here and whether or the conversation will continue on a national level.

Further Reading
The chair and vice chair of the Task Force summarize the "five keys" of financial literacy in the Globe & Mail (Feb. 10, 2011 edition).

Rob Carrick warns the financial industry that a more financially literate population means more questions for the industry about disclosure of fees in the Globe & Mail (Feb. 10, 2011 edition).

"Guardian of the Chicken Coop stands firm," in National Post (March 2, 2011).

"New Book Helps Ontario Teachers Improve Financial Literacy and Personal Finances" Canadian News Wire press release, March 8, 2011.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

Preet Banerjee: A Penny Worth Picking Up

2011-02-01T11:22:00.000-08:00

Find a Penny
As I was walking home, after dropping off my daughter at school this morning, I did something unusual. I stopped to pick up a penny. Normally, I don't stop to pick up anything smaller than a Loonie and I actually walked three driveways down the road before I decided to go back for it. So what changed my mind?

It didn't have anything to do with the old adage, "Find a penny pick it up and all day long you'll have good-luck." I don't believe all that much in luck. The thought that made me stop in my tracks was this: we live in world that is so crammed with good stuff that it's really easy to walk right by something that is seriously valuable.

My latest interviewee, financial blogger Preet Banerjee, is kind of like that penny I picked up this morning. Here's why.

Meet Preet
I really can't do a better job describing this thirty-something Torontonian's background than he does himself in a bio on his blog, Where Does All My Money Go, that features a photo of himself potty training. In a nutshell, Preet has a wonderfully diverse background that's one part neuroscience, one part car racing and more than a few parts finance.

We first met through the camera lens on CBC. I was the poor soul in need of retirement advice while Preet played the wise "young" man on The Lang and O'Leary Exchange. That nine minutes on air was fun but not as fun as meeting Preet last week while he was in Vancouver.

Over orange-scented water at Giovane (one of my favourite downtown coffee spots) we spent a half hour talking about his blog, his new TV show on the W Network called "The Money Pit" and financial literacy.

Preet starting developing his financial literacy skills in his youth when his father gently suggested that he read a couple of books on personal finance. As a result, Preet started saving for retirement when he was fifteen, using income from his job at McDonald's to kick-start his nest-egg. He also recalled that when he was fourteen, he sat down and worked out just how long it would take savings and compound interest to make him a millionaire.

Another milestone in Preet's acquisition of money language came even earlier in a grade eight economics class where students had to fill out an entire income tax return from scratch. "I think every kid should do this exercise," he said. When I asked him about his thoughts on financial education in the school system, Preet said flat out, "There's not enough."

Financial Advisors as "Translators"
I asked Preet about the years he spent as a financial advisor. What's it like, I asked, for an advisor to talk to a client who does not really understand the language he is speaking? Preet laughed out loud and said that some advisors are good at translating and some are not and that the happiest clients are usually those who understand the jargon.

Having said that, Preet suggested that there is a broad spectrum when it comes to the client-financial advisor relationship. On one extreme there are clients who say "take care of everything" and walk away, while at the other end there are clients who are on top of every aspect of their portfolio and only use their advisor as an order-taker.

When I asked Preet about the secret of success in personal finance, he said that it comes down to the basics.

Disaster-proof your life (make sure you are covered).
Run a surplus (spend less than you make).
Aggressively pay down high interest debt.

Before we headed over to the Olympic torch where a cooperative construction worker snapped this pic for us, I asked Preet what money word he thinks every Canadian should understand. He said "budgeting." If you cannot save, you cannot be an investor. Financial well-being comes down to paying attention to money in and money out and it's better to have more of the former.

And now back to my thought that Preet is like the penny I picked up this morning. There are a ton of money blogs out there, so many that it's easy to cruise right by them like I almost did with that penny this morning. But you should stop and read Preet's stuff. Like today, he wrote a piece for the Globe and Mail about the benefit of spending $1000 for 10 minutes in a Lamborghini rather than buying one for $299,000.

Preet Banerjee's writing (like his background and personality) is lively, intelligent and worth at least a penny if you stop and pick it up.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

Active, Passive & Portfolio Income

2011-01-26T07:06:00.000-08:00

Do you talk to your kids about the three kinds of income? Do you know that there are three kinds: active, passive and portfolio? If the language seems a bit strange, take heart, you probably know what these words mean already and, guess what, your kids can figure them out pretty quickly too!

Agent Story Money & Me Workshop

This week I had the privilege of doing a one-hour Money & Me workshop on the topic of earning money with a split-class of 23 students in grades one and two.

(In my school-wide assembly shows I cover earning, spending, growing and sharing your money. But for the grade-specific classroom workshops I ask the teacher to choose one of those four topics.)

My goal was to introduce these youngsters to the idea that there are three ways to earn money: active income, passive income and portfolio income. And with the help of a take-home craft and a memorable story about three little ferrets who have to figure out how to earn money to put in their pockets, I'm hoping that at least one of the kids will bring up the topic of income at the dinner table. "Hey, Mom, do you have any portfolio income?" Wouldn't that be cool?

Now if you are not entirely familiar with the terminology, here's your cheat sheet.

Active Income
Think about what "active" means. It means moving, doing, being in action. When you earn money by working (either for yourself or someone else) that is what we call active income. You are working and you get paid. In a child's world, allowance is active income. Me do chores, me get paid.

Passive Income
It's really almost the opposite of active income. If you rent out a room in your house to an overseas student, you are making passive income. If you get an inheritance, that's passive income as well. Monthly cheques from the government like the Universal Child Care Benefit fall into this category of income. For kids, a good example of passive income is getting money in a card from Grandma. You don't really "work" for this kind of income.

Portfolio Income
This kind of in-coming money is both passive and active: you are largely passive, while your money works for you. Interest, capital gains, dividends and other forms of investment earnings fall into this category. The term portfolio comes from the practice of keeping track of one's investments in a portfolio or record book. If you have an investment that fits this category, show your kids your monthly statement. Point out the money that you have saved and invested and the amounts that your money has made for you. They'll get it.

Teacher Feedback for Workshop

And maybe they'll want to start saving so that they can build a portfolio of their own. My daughter uses an old exercise book as her portfolio and she does all her entries in pencil. It's a great math exercise, plus she's learning that while we don't really "work" to earn portfolio income, we have to supervise our money and make sure that it is indeed working for us.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

The Language of Retirement

2011-01-22T23:52:00.000-08:00

Confession of a Financial Illiterate
Money smarts really begin and end with vocabulary (says the writer). No it's true. I was on The Lang & O'Leary Exchange last week as the "viewer-who-needs-retirement-advice" and it was quite an experience in financial literacy, I mean illiteracy. What on earth is an OAS and a GIS? I wondered as I strained into my earpiece to hear number-one ranked personal finance blogger Preet Banerjee.

First, let me tell you that Preet was great, and by great I mean seriously knowledgeable, so you should definitely check out his blog Where Does All My Money Go? And if you want to see the instant replay of my moment of financial ignorance you can watch here. The segment is about 9 minutes long but be warned that we don't really finish the discussion.

However, Preet and I hope to fix that this week when I interview him for this blog. I want to know where his passion for personal finance came from and how young he was when he started picking up the vocab.

But back to the retirement vocab that I now know I need to know. I mean, how can I talk to a financial advisor (as Preet suggested on the show) about retirement planning when I don't really know the money words that make up the language of retirement?

OAS, GIS & MORE
OAS stands for Old Age Security pension, a monthly income that comes to you from the federal government. You must apply to receive it. You may qualify if you are over 65 and have lived in Canada for at least 10 years since your 18th birthday. This is taxable income and can be reduced if you are bringing in too much income from other sources such as investments, RRSP, workplace pension, etc. The government recommends that you apply for OAS 6 months before you turn 65. Maximum monthly benefit $524.23.

GIS stands for Guaranteed Income Supplement. You have to already be receiving OAS and the amount you qualify for depends on your income and marital status. It's designed to help low-income seniors. Maximum monthly benefit for a single person is $661.69.

CPP stands for the Canada Pension Plan. If you have paid CPP as an employee, you can apply to start recieving monthly payments between the ages of 60 and 70. If you are self-employed I'm not sure exactly what you do...I'll have to check with Preet or my financial advisor (when I get one).

RRSP stands for Registered Retirement Savings Plan. The idea behind this is that you are earning a higher income now than you will when you are retired. So this program has been set up to encourage you to sock away income, tax-free, in an RRSP when you are younger and richer so that it will grow (hopefully at a rate higher than inflation) and you can take it out and pay less income tax on it when you are older and earning less.

For even more retirement planning fun and to test your retirement vocabulary try the Canadian Retirement Income Calculator on the Service Canada website. It will get you thinking about what you know (and don't know) about how government money is going to come to you (or not) in your old and crusty years. And, if you buy into my idea that money smarts begin with financial literacy, you'll find the calculator a fun way to brush up on the language of retirement.

And please, if you comment on this post, please refrain from cautioning me about the dangers of street-crossing and, please, say nothing about pizza, of any kind!

For reprint permission contact money@agentstory.net.

The FCAC: Helping Canadians Get Financially Fit in 2011

2011-01-12T14:22:00.000-08:00

The Financial Consumer Agency of Canada was set up by the federal government in 2001 to protect the rights of consumers of financial services and monitor the financial services industry. Part of the FCAC mandate, of course, includes basic financial education.

This week I had the opportunity to speak with Julie Hauser, mother of two and FCAC Media Relations Officer. Not only did I find out her thoughts on kids, money and financial literacy, I was also briefed on the great resources that the FCAC has lined up for us in 2011.

Never Too Early

Julie, who told me that a grade-twelve business education course helped her learn the basics of personal finance, says that she has witnessed how stressful mismanaged finances and consumer debt can be. Not wanting her kids to ever have to go through the trauma of being harangued by creditors, she has been talking to her daughters about money since they were toddlers.

She started by using treats to teach basic math concepts like division: if I get twelve smarties and I have two friends over, how many do I give each of them? She also had them counting and sorting coins so that early on they knew little facts like: there are five pennies in a nickel and two nickels in a dime.

Not only has this early introduction to money, counting and the language of money helped her now-teenage daughters do well in math class, it has also laid the groundwork for some interesting family discussions at the dinner table about things like the hidden costs associated with gift cards and other money topics that come up in Julie's work at the FCAC.

The O'Leary Question
I have a question that I first asked Kevin O'Leary of Dragons' Den back in July of 2010, which I pose to all of my interviewees: What three things do you think we should teach five-year-olds about money? Here is Julie's answer:

1. Learn about money.

2. Remember that money is only part of your life.

3. Saving money is important because you might need it later to buy something special.

Money lessons for kindergarten kids aside, Julie suggests that, "We all need to learn enough about money so that we can manage it in the way that best meets our needs and wants." She also feels that having our finances under control is critical to our well-being. She suggests that even if we hire a professional to manage our finances, we should still educate ourselves so that we know how the financial system works.

FCAC "Workouts"
One thing you need to know about the FCAC is that it has resources to match every learning style: videos for visual learners, interactive tools for hands-on learners, etc. They also have an interactive financial learning "game" called the The City that is geared for youth and educators.

You will notice on The City registration page that you can join as a "student" or "teacher." Julie assures me that as a parent, you are welcome to register as a "teacher" (after all, we are teachers...aren't we?). And be sure to input your province because the game will automatically adjust the financial landscape to reflect the cost of living in your area.

Teachers and students who register and participate in The City before March 31 will be eligible to win some great prizes. Teachers can win a Smart board for their classroom and students can win a laptop. In this case, I'm not sure that we parents would qualify as teachers, however, I think it's a great incentive and I intend to sign up for The City and let you know what I think about it in a future post.

One last thing, Julie is shipping me a copy of the FCAC's Financial Basics workshop delivery kit. If you would like to boost your financial fitness in 2011 (or help others do so), you can order the workshop materials or find out how to host a program by visiting what might be the most helpful financial literacy portal in Canada, the FCAC's Money Belt.

I do believe these are federal tax dollars well-spent and I plan on using the site, and Julie's expertise, to continue building my financial fluency in 2011.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

Birthday Gifts that Give and Get

2010-12-31T10:33:00.000-08:00

Down with "Junk" Spending

What is the first thing that comes to mind when your kid gets an invitation to a birthday party? If you are like me, then it's the gift. And, if you really are like me, nine times out of ten you don't know much about the birthday boy or girl and can't count on your child for any direction whatsoever.

So, shopping for the right twenty-dollar present usually costs ten dollars in gas and an hour or two of your life that I'm quite sure is not being well-spent. Really, I'm feeling quite done with this whole ritual, the spending for no-good-reason ritual. And yes, I know that we just finished Christmas and that I'm perhaps hyper-tuned in to "junk" spending, but hear me out. I have a great idea that could revolutionize the birthday party as we know it.

Now, those of you who read about my attempt to kibosh chocolates in my daughter's advent calendar are probably cringing at what's about to follow. But I assure you that while I am certainly not a candidate for mother of the year, my daughter has actually found some pleasure in her money-conscious mom's newest crazy idea.

Ten Dollars, Please
For better or worse, my daughter's birthday is just a few days before Christmas and every year we do a big party with between twenty and thirty guests. That means at the end of every party my daughter has a mountain, literally a mountain, of gifts to unwrap. For six years I have allowed her to enjoy the madness. But for her seventh birthday, I wanted to do things differently.

In October, over her mountainous haul of Halloween candy, I suggested that she do a fundraiser for her birthday. She was aghast at the idea so I left it alone for a few weeks and then broached the subject again, this time while we were planning the theme for her party: pets. I suggested that we ask her guests to bring a cash donation, half of which could go to the local animal shelter and half of which she could keep.

She was still reluctant (mountains of presents loomed large in her imagination) until we crunched the numbers: 30 guests times $10 equals $300, of which she could keep $150. Plus, she could buy whatever she wanted with her part of the money. And, when we talked about the not-really-her-thing presents she had received at past parties, the deal was done.

Then it was my time to worry. How would parents react to our request for cold, hard, impersonal cash instead of some lovely toy wrapped in those familiar ribbons and bows? What if some of them still brought gifts?

Getting and Giving
As it turns out, I was worrying about nothing. Many parents appreciated not having to do the gift runaround. Others liked putting ten dollars in a card because it gave them a chance to talk to their kids about what a donation is and why it's important to share your money.

As for my daughter, she was happy too. We had twenty-four generous guests who gave a total of $305, $155 of which my daughter logged, tallied, put in an envelope and delivered to the animal shelter. She was very pleased to find out that the money will go toward paying vet bills for some sick cats.

As for her portion, she is saving $120 and spending $30 (on what yet, I'm not sure). And I should mention that someone from the animal shelter came to the party and did a twenty-minute dog safety program with the kids that was informative and enjoyed by all. This was so much better that the mountain of gifts and my hope is that other families in our circle of friends and classmates will adopt this new ritual of blending giving with getting.

For reprint permission please contact money@agentstory.net.

Happy-Meal Toy Angst & MCD Share Price

2010-12-17T10:33:00.000-08:00

The Evil Happy Meal Toy

With the hustle and bustle of Christmas making busy parents even busier, the odds are high that at least once during the holidays we will opt for a fast-food dinner. For many of us that means the purchase of a Happy Meal or two.

Yesterday, I read in the National Post that a Sacramento mom of two is suing McDonald's for using Happy-Meal toys to "lure" children into their restaurants.

The mom has teamed up with an organization that is connected with the American "food justice" movement called The Center for Science in the Public Interest (CSPI) to argue that McDonald's is using unfair marketing practices that violate California's consumer protection law.

This lawsuit is part of a bigger movement that's afoot in San Fransisco to ban restaurants from giving out toys with "low-nutrition" kids' meals. Back in November, when I first started following this story I asked my daughter, a McDonald's shareholder, what she thinks about the idea of banning the Happy Meal toy. She said, "Why are they punishing the kids?" Our discussion has since turned to whether or not the proposed ordinance, and now lawsuit, will influence the stock price and punish her as a shareholder, too.

Are MCD Shareholders Being Punished?

One of the first steps I took when introducing my daughter to the idea of "growing your money" was asking her to name her favourite companies. McDonald's, Tim Horton's and The Children's Place were at the top of her list. We took a look at each company's ten-year stock chart and decided, easily, that McDonald's had the best looking one, a steady climb upward, plus they pay a modest dividend.

MCD 10-Year Share Price - From MSN Money

But will that steady upward climb continue over the next ten years? My daughter and I have been watching the price of McDonald's shares, especially during those weeks when there has been bad press around kids and marketing. So far so good, though the share price has been tracking downward steadily since December 8th, falling from an all-time high of $80.94 USD to today's price of $76.79 USD. That's a bit of a worry as the main US market indexes have been tracking upward during this same period.

However, it's interesting to note that while McDonald's is getting flack from North American consumer groups like the CSPI, the company is expanding rapidly in China and announced on December 15th that the number of restaurants there will double by 2013. It has been fascinating watching this push and pull on the share price and talking about these influences with my daughter, who has decided (rightly, I think) to keep her shares despite the Happy-Meal toy issue.

McDonald's Commitment to the Well-Being of Their Customers

She has faith that the company will be able to adapt to our ever-evolving North American culture as well as to Chinese culture, plus she really enjoys being a shareholder. Our hope is that the company will continue to be profitable and pay her a decent dividend while she realizes some capital gains in the long run.

And healthy or not, she likes that Mom (from time to time) is an McDonald's consumer. As she told me this morning, "I'm still going to have a Happy Meal even if there's no toy." She does love those fries.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

Use an Advent Calendar to Teach Your Kids About Money

2010-12-08T12:11:00.000-08:00

Money is NOT Sweeter Than Chocolate
The last evening of November is a big deal at our house. That's the night the advent calendar goes up on the wall. And this year I decided to do things a little differently.

On the morning of December 1st my six-year-old shuffled bleary-eyed, bladder-full into the living room completely focused on one thing: getting the day's sugar fix, and nothing more.

Imagine her surprise when she reached her fingers into that soft felt pocket and pulled out a Loonie. She was not happy. In fact, she looked quite miffed. Now imagine my surprise.

My daughter has been enjoying the fruits of her savings account, stocks and income fund for a few months now. Since she started investing this fall, she has marveled at the fact that her money is growing and paying her every month, and that she doesn't have to do anything other than watch and grow richer.

The monthly inventories of her portfolio's holdings that we record in a lined exercise book left over from grade one have inspired her to habitually save a large chunk of any money that comes her way. Silly me. I thought this money-wise kid would love my new Loonies-in-the-Advent-calendar idea. No chance. "There's no candy, Mom!" is what I got for my creativity plus a sour face all the way to school. It was like I had somehow ripped her off. How ironic.

A Loonie a Day for 24 Days
Sour face aside, I've stuck with my plan: a Loonie a day for twenty-four days, with one little adjustment. I have put a Hershey's kiss in each pouch along with the coin. I have to admit that I was hoping to move away from the chocolates altogether, but I see this as a first step.

It's the eighth day of Advent today and this morning, my money-wise girl reached her fingers into that soft felt pocket and exclaimed, with a bleary-eyed smile, "Hey! Another Loonie!" She ate the Kiss, of course, but it doesn't seem to be the highlight anymore.

Today was also her day to record her portfolio earnings to see how much she has made since last month. She said (and I'm such a proud mom) that she is going to deposit her Advent Loonies in her savings account. She's thinking about buying more stocks.

Maybe money is sweeter than chocolate after all.

For reprint permission contact Laura at money@agentstory.net.

Episode 7 Money & Me Show: What is an advertisement?

2010-11-27T09:59:00.000-08:00

Teaching Kids the How & Why of Advertising

2010-11-19T11:39:00.000-08:00

I'm just about finished shooting the footage for episode seven of Money&Me with Agent Story and I have to say that it's been the most difficult video to make so far. Writing catchy poems and silly stories about money words like job, stock, sales tax, donation, credit card, and entrepreneur has been easy. Writing about the word "advertisement" has been more of a challenge.

How do you make a compelling ad? What are the components of an effective commercial? What is some of the important marketing lingo that goes along with the word "advertisement"? How do companies make sure that advertisements are worthwhile? Unlike the other concepts I've tackled so far in my show, I didn't know much about advertising when I sat down to write the script.

But, after more than a little online research, I can now answer all of those questions and more. And, to put it all together for the kids who watch Money&Me, I not only wrote a poem explaining the how and why of advertising, I also made my very first commercial. It's for my CD, Agent Story: Tales from the Briefcase. And, it's going to be part of the episode.

You know, I made my CD way back in 2009. It's a collection of the most popular stories and poems from my live shows. Funny how I never thought to make a commercial for it until I started telling stories about money. Isn't financial literacy a powerful thing?

And, by the way, this is a real commercial. I do have a two-for-one sale on now until Christmas day. Click here to get yours.

View video in higher quality on YouTube

Fearless! Robert Herjavec on Talking to Kids About Money

2010-11-17T07:17:00.000-08:00

Meet a Fearless Dragon

He's a self-made millionaire. He's a reality TV star north and south of the border. He's a best-selling author and marathon runner. He has more than one mansion and has chatted with Oprah about fiscal responsibility while giving her a ride in his golf cart. But what really impressed me during our brief phone call last week is that he is absolutely fearless when it comes to financial literacy, both his own and that of his three kids.

Do you come from a family in which talking about money can get you expelled from the dinner table? Robert does. Add that to the fact that he didn't take business courses in high school and that eight months into university he dropped out of Commerce to take English and Political Science and you have to wonder how he has become so fluent in the language of money. As Robert told me, it comes down to this:

There is no such thing as a dumb question. But once you have asked the question, you have to listen and learn.

Robert has taught himself just about everything he knows about money and, apparently, it's a never-ending journey. Just before we spoke he was having lunch with an important investor who mentioned a financial term that Robert was unfamiliar with. Instead of skipping over it and muddling through (like I have done way too many times at the bank), he stopped the conversation and unabashedly asked that scary and often avoided question: what does that mean?

I was actually quite surprised that he told me this story knowing that I would probably put it in my article. Clearly his pursuit of financial knowledge trumps any sense of embarrassment he may have at exposing the limits of his understanding. It's about learning the facts, not about protecting your ego which, as we all know, can really get in the way when it comes to talking about what we know (and don't know) about money. After all, money is not a taboo subject anymore. Or is it?

"Money Just Is"

Growing up, Robert learned that it's rude to talk about money. But he doesn't buy that line of thinking anymore. "Money is not a bad word," he said. "It's a resource. Money just is." And so when his teenage son said that he would like to study whales for a living and wanted to know how much marine biologists make, Robert did some research and found out that they make about forty thousand dollars a year.

Armed with this information, Robert told his son the facts: you can study whales or you can live in a mansion, but you probably can't do both. "The choices we make in life have a price." What a great three-part lesson:

When you don't know something about money ask.
Sometimes the truth about money is not always what you want to hear but you still need to hear it.
Our choices come with a price tag.

Now that's what I call giving your kids a healthy appreciation for the undeniably important role that money plays in our lives. And speaking of kids (and not just Robert's but all Canadian kids) I could not let him get away without asking what he thinks about the role of schools and government in financial literacy.

A Helping Hand for Capitalism
These are exciting times. Flaherty's Task Force on Financial Literacy is due to release its recommendations next month. In Manitoba and Ontario, curriculum writers are hunched over their computers furiously writing brand new financial literacy lesson plans that will be introduced in September 2011. When I asked Robert what he thinks about all this he brought up an interesting point: capitalism sometimes needs a helping hand.

Robert believes that our governments do a good job supporting capitalism by funding initiatives that build our economy. He mentioned the new Business Plan Competition that is on right now at Queen's University. The federal government will provide three $150,000 interest free loans to students, or faculty, who start a business. "This is a great use of public resources," he said.

Robert also thinks that including financial education in schools is another good use of public resources and he has a wish-list for the new curriculum that includes teaching kids about spending wisely and about entrepreneurship. He hopes that kids will learn that "when you spend a dollar on this, you can't spend it on that." He also hopes that kids will be introduced to the possibility of earning a living as an entrepreneur because, as he's read, eighty percent of entrepreneurs have a family member that is already an entrepreneur.

Robert's father was a factory worker. His mother was a secretary. "It's tough to take a chance when you don't see others doing it." Wow. Imagine an education system that teaches kids (every kid, not just the ones who take high school business courses) the difference between being an employee and an entrepreneur? That would be a great use of public funds. But enough wishful thinking...back to Robert.

A Fearless Learner
Robert is immensely successful in business and in life but what struck me the most during our short conversation is how much he cares about financial literacy. He is completely open and honest about money with his kids. He doesn't shut down or "fake it" when the limits of his financial knowledge are reached. He is fearless when it comes to learning the language of money. Isn't that just as impressive as owning mansions and knowing Oprah? I think so.

Not only am I going to keep talking to my daughter about money, I am going to talk to her about all the stuff I don't know about money. That way we can explore and acquire the language together. And, the next time I'm at the bank, I'm going to speak up when I don't know what a word means. I mean, seriously, if Robert Herjavec can admit when he doesn't know something about money, so can I.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission please contact Laura at money@agentstory.net.

Wants, Needs & Parenting for Fulfillment

2010-11-10T11:19:00.000-08:00

Wants & Needs
How often do you find yourself buying stuff that your kids want but don't need? I was doing it all the time, quite unconsicously, I confess. But ever since my lively discussion with investment counselor and father of two, Al Tynan, I have found myself saying "no" to my daughter's wants more often. This has not only been good for my family's bottom line, it's been great for my daughter's self-esteem and sense of fulfillment. But let me introduce you to Al first.

A former national-level rugby player and UBC Human Kinetics major and Commerce minor, Al joked about the fact the he was the only person in HK with a subscription to the National Post. Currently, Al holds a Chartered Financial Analyst designation and is an investment counselor at RBC Phillips, Hager & North. His clients have to have at least a million free and clear to invest before they can sit down and pick his brain. Not to mention his office is on the twentieth floor of a stunning waterfront building in downtown Vancouver. From the conference room window, I could just about touch Grouse Mountain's snow-bare ski runs.

So what was I doing in that multimillion-dollar setting talking to a rugby player turned financial advisor who deals in the millions of dollars? Well, I wasn't there on investment business. No, I dropped by to find out what a guy like Al teaches his kids about money. A lot of useful things, it turns out, and it all hinges on this idea:

Our job as parents is to take care of all of our kids' needs but not all of their wants.

Al learned this lesson early. His father, a lawyer, retired when he was just 40 years old. As it turns out, he had saved a portion of his employment earnings and had invested in stocks. Essentially, the family of five lived on the dividend income generated by those stocks. In his early years, there were months where Al and his brothers had their needs taken care of but not all of their wants. Al was okay with that because he saw that while finances weren't always easy for his parents, they truly enjoyed family life.

The other powerful lesson that came out of his family's unique financial situation was what Al calls the "get rich slowly scheme" or the power of owning stocks that pay dividends. As early as he can remember, Al got a nine-dollar dividend cheque in the mail every three months from Imperial Oil. This is something his father set up for him and something that Al would like to set up for his kids too but, these days, companies don't send dividend cheques in the mail. For a kid, looking at numbers on a computer screen just isn't the same thing as getting a cheque with your name on it in the mail.

Fulfillment 101
As much as getting a dividend cheque in the mail is a thing of the past, Al worries that the concept of working hard for what you get is going that way too. He brought up the point that when parents constantly buy full-priced "stuff" for their kids, such as pricey electronics and other luxury consumer goods, they run the risk of hurting their kids' satisfaction down the road. That made me think.

What if my daughter decides to pursue a noble job that only pays a modest income? What if she wants to be a pre-school teacher...or even a children's storyteller? If I buy her every expensive gadget that she asks for while she's living at home, this could lead to a decreased sense of satisfaction when she leaves the nest and starts living on a pre-school teacher's (or storyteller's) salary. I was impressed by Al's insight and asked him how he teaches his girls (ages six and eight) about the difference between needs and wants.

When Al's eight-year-old wants a new luxury gadget, he explains to her that it's not a "need" and therefore that it's not his job to buy it for her. He then encourages her to earn money to cover half the cost (he will pay the other half). When she has saved up the money, Al suggests that they shop around for the best sale price or even check Craig's List for a used one. That way she can save and grow some of the money that she has worked so hard to earn.

This is a practical idea that holds three great life and money lessons for our kids:

Wants and needs are not the same thing.
Needs are more important than wants.
Getting everything you want won't necessarily make you happy.

After all, when it comes to money, isn't happiness and fulfillment what we want for our kids? What I learned through my chat with Al is that helping our kids make the effort to earn money to take care of their own wants while they are living at home will go a long way toward helping them become financially independent and satisfied with their lives regardless of how much money they make.

Fulfillment. That's the word that I'm going to stand on the next time I say, "Sorry, sweet-pea, I'm not buying you that pink Nintendo DS-I. If you want it, you'll have to pay for it yourself. Let me show you how."

For reprint permission please contact Laura at money@agentstory.net

Dragons' Den & Our Unofficial National Financial Literacy Grade

2010-11-04T13:20:00.000-07:00

Ever since I started pouring my writing and storytelling skills into the world of financial literacy I have been wondering how I might find out how financially literate we are as a country. I haven't found an official statistic on this yet, but I may have an unofficial one.

I had the opportunity last week to chat by email with Sean Wise, Assistant Professor of Entrepreneurship and Innovation at Ryerson's School of Management and industry consultant to Dragons' Den. I couldn't resist asking Professor Wise what grade he would give Dragons' Den pitchers when it comes to their ability to talk money.

Professor Wise said, "I would give a C to most going into the Den, while they often know basic financial matters, that isn't enough when it comes to investment."

His comment inspired me to do a little research so as I watched last night's episode I made a list of all the financial and/or business vocabulary used in the Den. I noted who used that vocabulary and what the outcome was for the pitcher. And then, just for fun, I gave each of the pitchers a financial literacy letter grade.

Elite Living International

Ask: $100,000 for 10% of their business
Number of financial/business words used by pitchers: 7
Number of financial/business words used by Dragons: 11
Outcome: No deal
Financial Literacy grade: C+

Innovative Solutions Handy Tray

Ask: $100,000 for 1.5% royalty on tray sales
Pitcher: 17 words
Dragons: 17 words
Outcome: $100,000 deal with Brett for 50% of his business
Financial Literacy grade: A+

AgriConnect Farm-sitting Web Site

Ask: $72,000 for 40% of their business
Pitchers: 8 words
Dragons: 12 words
Outcome: No deal
Financial Literacy grade: C

Professional Weight Loss Services

Ask: $250,000 for 25% of their business
Pitchers: 3 words
Dragons: 9 words
Outcome: No deal
Financial Literacy grade: F

Beba Bean Designs Baby Clothes
$315,000 for 15% of their business
Pitchers: 10 words
Dragons: 11 words
Outcome: $315,000 deal with Arlene and Robert for 40% of their business
Financial Literacy grade: A

What this says about us...
My sofa-side research pretty much confirms Professor Wise's C grade for the pitchers. So what does this mean for my quest to find out our national literacy score?

Think about the fact that Dragons' Den is one of the most-watched TV shows in the country. According to the show's marketing fact sheet: Dragons' Den is the number one reality show in Canada; the show's website had over three million hits in 2009; and it's the most popular show in its time slot. Match these stats with the fact that as of this moment the show's Facebook page has 35,455 fans. These are big numbers in our small country. Do you see where I'm going with this?
Canada's "Unofficial" Financial Literacy grade: C

You can find out more about these pitchers and watch the show by visiting the Dragons' Den CBC website.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission please email Laura at money@agentstory.net

Meet a Money-Savvy Dad & Soulful "Inventor-preneur"

2010-10-28T11:51:00.000-07:00

Kevin Royes at CBC after his success on Dragons' Den
Image from MSN Money.com

I first heard about Kevin Royes, and his Debbie Travis-endorsed Kelvin.23 super tool, on Dragons' Den. Inventor and president of his own Vancouver-based company, Kelvin Tools, Kevin pitched in the Den earlier this year and walked away with a hefty amount of money to expand his tool company. This week, I was fortunate to spend an hour on Skype with this busy, forty-something dad and talk to him about entrepreneurship, financial literacy and what we should teach our kids about money.

Though he has money now, that wasn't always the case for Kevin. He grew up in a rough area of Toronto in a single parent family (something I can relate to as a sole parent). Financial literacy was not part of his upbringing during his elementary school years, but his inventor's spirit was alive and well.

When I asked him what he wanted to be when he grew up, he told me about the first time he saw a motor home in his neighbourhood. "I was nine or ten years old. I couldn't believe that someone thought of making a house on wheels and actually had it built." His desire to become an "inventor-preneur," as he likes to call himself, was piqued. But without guidance his dreams and passions were largely dormant until he met George Prez.

Early in Kevin's grade eleven year at a Mississauga high school, Prez visited both his marketing and accounting classes to deliver a fifteen-minute presentation about Junior Achievement of Canada, an entrepreneurial program that provides hands-on business training for students. Hearing Prez's spiel, not once but twice, hooked him.

Kevin eagerly participated in the Junior Achievement Program and by age 20 he had invented a locking device for snowboards that two years later was picked up by Burton, a major snowboard manufacturer. This allowed him to quit his mail room job at Kimberly Clark and go into business. I'm pretty sure that he has never looked back.

"I never really was a good employee," he told me with a smile. And when I asked him what the main difference is between being an employee and an entrepreneur, he said, "As an entrepreneur you get to follow your dream. As an employee you have to follow a dream that belongs to someone else." What could I say to that? I nodded my head and we moved on to talk about his teen boys, ages 13 and 15, and how he is getting them ready to deal with money.

At first, Kevin was pretty sure that he didn't have anything useful to share with me on the topic of kids and money. But as we got talking, he spilled this little gem of parenting wisdom. As his boys are getting older, he is consciously pulling back on the amount of stuff he buys for them. That way the kids will have to figure out how to earn money themselves and then manage it so that they can afford buy the things that Dad won't buy them any more. And that wasn't the only little gem that came out of our conversation.

When I asked him the same question that I had asked the Dragons' Den stars--If you had just three things that you could teach a Canadian five-year old about money what would they be?--Kevin said:

Follow your soul and money will follow.
Make as much money as you can "before you die" (a nod to Kevin O'Leary's response) because it allows you to express yourself in the world.
Enjoy it.

I wrapped up the interview by asking Kevin what he thinks about the absence of financial education in Canada's elementary schools. He stated bluntly, "It's a shame because everything we do puts us in contact with money." He added, "The sooner we learn to use money and integrate it into our way of thinking the more natural it becomes."

The idea of money feeling "natural" resonates with me. My approach to financial literacy in Money&Me, my You Tube show, is to teach young children personal finance and business vocabulary one word at a time. It's about fluency and confidence for me. It's about naturalness for Kevin. But we're really talking about the same thing: literacy or "the ability to understand and use information in daily activities at home and work and in the community" (UNESCO). To echo what Kevin said, money is part of just about everything we do and the younger we are when we learn the language of money the easier it is to become fluent in it.

Consider these other bits of wisdom that Kevin shared during our talk: "the more I tried to squeeze money, the more it would squeeze through my fingers;" and "there is no soul or satisfaction in the pursuit of money." This is powerful stuff coming from a powerful guy who, ironically, in the first minute of our conversation told me that he is not a role model for kids when it comes to money. Not true.

Photo by Michael Kalus

It may be that Kevin does not see himself as a financial role model because he is so entirely engrossed in the process of creation--creating useful products, creating a business, creating jobs--that he does not focus on wealth itself. Instead, Kevin seems to focus on joyfully expressing himself through the process of creating things that create wealth. As he told me, "There is soul in what I do." That was evident during the interview, from hello to good-bye.

It's not surprising that just as we were to end our Skype call, Kevin shared yet another creative and soulful idea with me: the idea that I am a "soul" parent, and not just a "sole" parent. Wow! Not a role model? Not money-savvy? I don't think so.

Copyright 2010. Laura Thomas. All rights reserved.
For reprint permission please contact money@agentstory.net

Asset & Liability: Take these Words to the Toy Store

2010-10-26T13:43:00.000-07:00

Last night, after the "tucking in," I put my feet up on the sofa and read Robert Kiyosaki's 2004 financial literacy book Rich Dad, Poor Dad for Teens. It's an easy read, an hour or two tops, and worth going through with your kids even though it was written for an American audience. And be prepared. The book will inspire some lively debate with your kids about the stuff in your lives: what is an asset and what is not.

Assets & Liabilities
As Kiyosaki points out in his book, the difference between an asset and a liability is this: an asset puts money in your pocket, while a liability takes money out of it. It's all about balance, or should I say imbalance. Ideally, we want to have way more assets than liabilities and getting there starts with understanding the difference between the two words.

What is an asset?
An asset puts money in your pocket. It pays you to own it. For example, your investment portfolio should be an asset that pays you income in the form of interest, capital gains or dividends (and if it's not an asset, get help!). A rental property is an asset when the renters pay their rent. And, your home can be an asset too, assuming that you don't lose money when you sell it. Collector's items and artwork can be can assets if their value goes up. Assets pay you. They generate income.

I have pointed out to my six-year old that "silly bands" (the latest trading craze for kids) are not, by definition an asset unless she saves them until she's my age and they become collector's items. I'm not optimistic that silly bands will be worth anything in 2046, but she, who owns 78 of these cheap rubber bands that sell at the insane price of 24 for $4.99, disagrees. "They're NOT a liability, MOM!" she told me while headfirst in a bin of silly bands at Toys R Us madly searching for a Western-themed package to go with her Halloween cowgirl costume.

What is a liability?
A liability is something that takes money out of your pocket. The truth is, almost all the stuff that we own is a liability. For example, my computer, my new TV, my car, my clothes, my books, my kitchen appliances, my daughter's Littlest Pet Shop collection and those silly bands, of course, none of these things can be sold today for a profit (not even on Craig's List). Debt is a liability too, although like your home it can be an asset if that money is being saved and invested to build wealth such as in an RRSP. But, in general, any money you own is a liability. And don't forget taxes. Talk about a personal liability; the 12% HST is killing me.

Getting back to Kiyosaki's Rich Dad Poor Dad, the bottom line is imbalance. You want to have more assets than liabilities in your financial life. I also appreciate his observation that the rich and poor speak differently about money. Kiyosaki says that the "rich dad" mentor in his early years taught him to spend his money on assets, while his real "poor dad" seemed to unconsciously focus on acquiring liabilities and then complain about them. It was "rich dad" who spoke about and taught him the difference between an asset and a liability. That is powerful vocabulary to pass on to our kids.

So while I'm not happy about my daughter squandering her pocket money on silly bands, I am happy that she is beginning to understand the difference between an asset and a liability. In the end, all I want her to learn from these early spending experiences is the vocabulary, this powerful, life-shaping vocabulary.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Valuation, Dragons' Den & The Wealthy Barber Returns

2010-10-21T14:06:00.000-07:00

Though I write a blog about money and do a children's You Tube show about money, and though I'm self-employed and entrepreneurial, what I really am is a writer, an artsy-fartsy writer. But as a writer who, these days, is equally passionate about money and manuscripts, I seem to be making some strange connections between the economic arts and the literary ones.

Like this one.

Is creating a company similar to creating a piece of writing? I think it might be and I write this with Dave Chilton, author of The Wealthy Barber, in mind. But more about Dave in a moment.

I taught four writing classes this week. And, whether I was working with adults or kids, teaching live or in my virtual classroom, I wanted my students to be super clear about one thing: the writing process and at what stage they should be asking for feedback.

When should a writer go begging for someone to read and evaluate his manuscript? The answer is: absolutely not until he has draft number one finished. As I said to my students over and over this week, "How can you possibly evaluate any part of a story, poem or article until you get to the end? You need to make your lump of clay before you can decide how to sculpt it!"

Could there be a connection between writing a manuscript and starting a company? How can you evaluate or assign value to a business that is not finished, that is not yet a lump of clay? It was last night's episode of Dragons' Den that helped me make this connection between evaluating a piece of writing and valuing a company.

Two pitchers from a company called Flu Goo (hand sanitizers for kids) came on the show asking for $113,000 in exchange for 40% of their company, which was strange because they had not sold one bottle of their product. Not one. The Dragons pointed out that there is huge difference between saying you need $113,000 to finish building your company and saying that your company is worth $282,500 ($113,000 x 2.5) even though it's not "finished" because it has no sales.

Without sales, a company is incomplete and of no value to anyone; the same is true of a manuscript that has no ending. You have to have all the parts of something before you can assign value to it. Which brings me back to Dave Chilton who is at this moment sequestered in his office and madly typing away at the long-awaited sequel to The Wealthy Barber, The Wealthy Barber Returns. I have some advice but it may be too late for him to take it: don't release any excerpts or early chapters until the first draft of your manuscript is done; make your lump of clay before you send it out into the world for evaluation.

But my advice may be too late. On the homepage of his website, Dave writes, "I'm hoping a number of published excerpts and the book's Introduction, below, will whet your appetite." I can only hope that unlike the Flu Goo people and their still-to-be-done sales, that Dave already has all of his chapters written, including the last one, which is always the hardest one to write, especially because you know that when it's done you are going to have to go back to the beginning and truly evaluate your creation...and get out the sharp tools. Sales are the same.

It's easier to do just about everything than get out there and make cold calls. But without sales, as the Flu Goo pitchers learned in the Den, you don't have a lump of clay that can be valued. A start-up company with no sales is like a manuscript with no ending, assigning value is impossible. There is still a lot of hard work to be done.

By the way, the Flu Goo people don't even have a website. I know that I'm just an artsy-fartsy writer, but it seems like the stuff that shakes loose and the focusing that happens during the process of creating a website is an essential part of building a new company, right up there with sales and making your business "manuscript" complete and ready for e-valuation.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Episode 6 Money & Me: Entrepreneur

2010-10-18T11:12:00.000-07:00

Savings Accounts for Kids: A Ranking of the Big 5 Banks

2010-10-13T14:25:00.000-07:00

Before I suggest where you might open an account for your kids, take a look at what the Big 5 banks offer:

#1 CIBC Advantage for Youth
0.50% interest
Almost no transaction fees

#2 TD Bank Youth Account
0.05% interest / 0.25% on balances $5,000+
Almost no transaction fees

#3 Bank of Nova Scotia Getting There Savings Program for Youth
0.05% interest / 0.10% on balances $500+
Some transaction fees

#4 RBC Leo's Young Savers Account
0.01% interest rate
Some transaction fees

#5 Bank of Montreal - does not have an account for kids

Interest rates that don't crack a full percent and no bonus for signing up? I'm surprised at how little interest (no pun intended) the Big 5 banks have in courting the next generation of consumers. So are there any banks in Canada that do want to have our kids as future borrowers and investors? Yes. There's one, that I know of, and that's INGDirect.

INGDirect Children's Savings Account

2.0% interest

$25 bonus when you sign up with a $100 balance
No transaction fees

That 2% interest rate is not a typo, nor is the bonus. "How can that be?" you might ask.

I had the opportunity of interviewing Meena Sandhu, the Regional Retail Manager at the downtown Vancouver ING Cafe, about their stand-out children's savings account. Essentially, she informed me by phone, this account is driven by two areas of the company: marketing, of course, but also their philanthropy mandate.

This savings program for kids helps ING meet its mission statement of improving financial literacy through education and tools. "ING," said Sandhu, "is a very hands on bank." She went on to add that it's important for Canada's economic future that we "empower through knowledge." The ING children's account, hand-in-hand with their online financial literacy website for young children called Planet Orange, helps the bank meet their philanthropic goals.

Philanthropy aside, I love the bottom line in this story. My daughter will earn 2% interest plus be rewarded with that $25 bonus for opening her first bank account. Correction, she has earned and has already been rewarded. Thank you ING, see you later Big 5.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Money-Talk: How Fluent Are You?

2010-10-10T08:45:00.000-07:00

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
bond
compound interest
dividend
inflation
ETF or exchange traded fund
gross income
liquidity
portfolio

return

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.
For reprint permission contact money@agentstory.net

Waiting for the Next Crash: Why "Meltdown" Episode 4 Freaked Me Out

2010-10-09T07:38:00.000-07:00

REVIEW

Meltdown: A Four-Part Investigation of the Global Financial Crash
Episode 4: After the Fall
Written & Directed by Terence McKenna

CBC Documentary
My rating $$$$.5

Images of empty, never-meant-to-be-occupied, skyscrapers in Dubai in the pre-meltdown boom and China's eerily similar urban skyline of today are vividly stored in my memory. McKenna has created in me a visual reminder that all is not well with the financial world and that I really need to step up my game if I want to ride out the next 50+ years of earning, spending, growing and protecting my money with any kind of grace.

What follows are just a few of the documentary's comments and conclusions that have renewed my commitment to not only being financially literate but 100-percent fluent in money-speak and to keep up with its ever-evolving dialects.

Here are some of the key words phrases that were used describe the behaviour of the bankers, traders, real estate moguls, executives, and even nations (like Dubai) who are seen as responsible for the meltdown: fraud, corruption, false rumours, secrets, drugs, sexism, immoral, criminal, insider trading, state-run pyramid scheme, flipping real estate "like they are playing musical chairs."

According to the documentary, the money guys "found suckers to invest" and "convinced people" to invest more money in bad deals and deliberately sold investment products "to unsophisticated investors...orphans and widows I met at the airport."

This episode is all about accountability. Governments have been trying to make sense of the real estate bubble and financial crisis. They desperately want to know what caused it so they can put public policies in place that will help prevent or at least minimize the effect of future meltdowns...which, it seems, are just around the corner.

With the help of that empty-skyscraper imagery, you will come away with a deeper understanding of our global situation: while western countries are envisioning a kinder, gentler, less risky capitalism, China and India are embracing the current more brutal model. Because the global economy has never been so complex and interconnected we are going to have another crisis.

But better to face it, freak out and then get on with building your financial literacy so that you can ride the next meltdown with more grace. Make episode 4, if not all four parts, part of that exercise.

Copyright 2010. Laura Thomas. All Rights Reserved.
To reprint contact Laura at money@agentstory.net

What the Dragons' Den Stars Think We Should Teach Little Kids About Money

2010-10-05T13:10:00.000-07:00

Kevin O'Leary
It began with a simple comment that Kevin O'Leary made on one of my favourite financial news shows, The Lang & O'Leary Exchange. In a heated discussion about government pensions and taking personal responsibility for our "old and crusty" years, Kevin said, "Fiscal responsibility-we should be teaching this to kids that are five years old."

I could not believe that a Dragons' Den star and all-round Canadian icon of entrepreneurship was talking my language: financial literacy for little kids.

I emailed the show with this question for Kevin: If you had just three things that you could teach a Canadian five-year-old kid about money, what would they be? The producer, Matt Fairley, asked me to go to CBC Vancouver to tape my question. I did.

Then I had to wait for my answer because it was G20-time in Toronto. But on July 6th the answer came and it has influenced my work as storyteller and entrepreneur, as well as lit a fire in my belly to become the best financial literacy educator in the country.

Here are the three things that Kevin thinks we should teach Canadian kids about money and he said it on national television:

Nothing matters more than money.
Make as much money as you can before you die.
See number 1.

My six-year-old daughter and I were watching Lang & O'Leary when it aired and, boy, did we have a good laugh...until we started to think about it.

My daughter and I are big Dragons' Den fans. What I love about the show is that it allows Canadians who are not business people or entrepreneurs to boost their understanding of how business works, plus learn some cool new vocabulary along the way. Words like "valuation" and "equity" were familiar but not comfortable for me before I started watching the show, which is why I started encouraging my daughter to watch with me. So what does this have to do with my question and Kevin's answer?

Inspired by Kevin's radical opinion, we set out to find out what the rest of the Dragons would say if asked the same question. We got replies from three and a half out of five (Brett Wilson gave me a half-answer), not bad for a storyteller and her six-year-old side kick, neither of whom have any connections whatsoever in Dragon-type circles.

Here's what Kevin's co-stars said...

Arlene Dickinson
I contacted Arlene by email through her Calgary-based marketing company Venture Communications. She responded within a day with a very polite and encouraging email. These are the three things that Arlene thinks we should teach little kids about money as she wrote them in her email to me:

Money does not buy you happiness. It's an old saying but it's true.
Money is good for freedom. It will give you the freedom to do what you want, when you want and help who you want.
Money is important, but not as important as doing what you love. I believe that if you do what you love you will be satisfied with the money and lifestyle that it provides you with.

Robert Herjavec
I tried contacting Robert by email through The Herjavec Group, his tech company, but I didn't hear anything back. I took a chance and tweeted my question to him and I happened catch him while he was online and he gave me this reply in Twitter-lingo almost immediately:

$ is not the key to happiness
u need $ to take care of those u luv
the more u luv what u do, the more $ u make

Brett Wilson
I also caught Brett Wilson on Twitter and, when I asked him what three things we should teach kids about money, he referred me to a series of six Mastermind YouTube videos to hunt for the answers. I found the videos and an hour later came up with this:

Wealth is not the true measure of success (from video 1 of 6).
People matter more than money (from video 3 of 6). Brett's priorities are health, family, friends, life-long learning, and community.
Follow your passion and talk to kids about the possibility of earning a living as an entrepreneur (from video 4 of 6).

I emailed Jim Treliving through the Boston Pizza Foundation, but to date have not had a reply.

I do hope to hear back from both Brett and Jim because I do believe that each of the Dragons are at this point in history (and more than any finance minister) the public face of money and all it means in Canada. They are playing an important role in getting teachers, parents and even little Canadians like my daughter excited and curious about learning about money. And while Kevin says that nothing matters more than money, these Dragons' views on money and financial literacy matter a great deal, maybe even more than money.

With its sixth season well underway I say hang in there with those long, dark twelve-hour taping days in the Den and keep teaching us about money.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Not an Entrepreneur? You Should Read this Dragon's New Book

2010-09-28T09:41:00.000-07:00

REVIEW

Driven: How to Succeed in Business and in Life
By Robert Herjavec
50 chapters
295 pages
$32.99 CAN / $19.49 at Costco
$$$$ out of $$$$$

When auditions for Dragons' Den came to Vancouver earlier this year more than a few close friends and family members suggested that I apply to be on the show. That was weird, I thought.

I'm a self-employed writer and storyteller. I don't have a boss. I am a ball of creative fire that has the ability to make contests, courses, workshops and stories go from idea to profitable reality in a relatively short period of time. I have sacrificed security for a risky, chaotic work-style that I would not trade for any amount of cash. The thought of settling for a job makes me want to cry. But I am not an entrepreneur. That word does not apply to me. Or so I thought until I read this book and had a classic "aha" moment.

It's funny how things converge when you work really hard at what you love. And a bunch of random stuff has happened in the last four months that has lead me to this "aha" moment.

That random stuff consists of: taking my storytelling skills into the arena of financial literacy with my new YouTube show, Money & Me; a brief appearance on the Lang & O'Leary financial news show; talking on the phone with David Chilton, author of The Wealthy Barber, about kids and gold coins; launching this blog; being invited to speak at the upcoming BC Business Educators Conference on the topic of using social media to develop financial literacy; and now reading and reviewing this book. Aha! I am an entrepreneur and a business woman...not just a writer and storyteller.

And what's so cool about this revelation is that it drives home the truth that language shapes who we imagine ourselves to be and how we imagine ourselves operating in the world. I don't come from an entrepreneurial family and I didn't take business courses in high school or university, so entrepreneurship, and all the business vocabulary that goes with it, had never really penetrated my imagination until I could put this convergence of random stuff in my work-life within the context of entrepreneurship as Herjavec describes it in this book.

And speaking of convergence, as I have been reading and reviewing Driven, I have also been writing a story for episode six of Money and Me which is all about teaching kids what an entrepreneur is. After all, getting a job (see episode one of Money and Me) isn't the only option when it comes to making a living and we should talk about that with our kids. But it's hard to do that when you don't know the language, which is why this book is such a powerful financial literacy tool for parents who might not be entrepreneurs themselves.

For parents who are entrepreneurs (like me, I'm happy to know), there is lots of great advice for taking your business to the next level no matter where you happen to be on your never-ending journey toward that hypothetical and highly subjective finish line we call success.

Indeed, whether or not you are chasing Dragon-like success, Driven is well worth the full jacket price when it comes to exposing your imagination, and that of your kids, to the language of entrepreneurship.

Copyright 2010. Laura Thomas. All Rights Reserved.
To reprint contact Laura at money@agentstory.net

Is Oliver Stone's New Wall Street Movie Worth the Price of a Sitter?

2010-09-25T07:59:00.000-07:00

REVIEW

Wall Street: Money Never Sleeps
This title does not fit the story.
Twentieth Century Fox
They spent $50 million on this sequel to the 1987 classic, Wall Street.
2 hours 16 minutes
Way too long!
PG for strong language
And you need to know at least some financial jargon or a little bit about the 2008 crash.
Stars Michael Douglas
He isn't in the film enough.
Written by Stephen Schiff and Stanley Weiser & Allan Loeb
Two writers who are not fluent in finance and a stock broker who can't write.
Directed by Oliver Stone
In 2007 he wasn't interested in directing the movie, but after the 2008 crash he changed his mind, a big mistake.

My rating $$ out of $$$$$

It's probably not fair to the producers that I went to the movie hoping for two things: one, that I would be entertained by an enthralling story and powerful characters; two, that I would improve my financial literacy a little bit by learning something new about high finance and the workings of Wall Street. Well...as the Beach Boys sang, "Help me, Rhonda! Help, help me, Rhonda!" It was a grueling 133 minutes of my life that I'm never getting back again. Never mind the waste of money.

Which got me wondering, how much did Twentieth Century Fox spend making this film? The final total: $50 million. That's not expensive as movies go and I suppose one could argue that it was money well spent as it employed hundreds of actors and production folk for a couple of years. But is the film worth spending your money on: $75+ for two tickets, snacks, gas, parking plus three hours of babysitting?

No way. Save your cash. Wait until it comes out on video. If you're hungry to see bankers freak out during the 2008 Wall Street crash, you can watch the Meltdown documentary series on CBC (see my reviews below). Put that extra $75+ in your savings account and move on.

On a side note, if you haven't already, rent the original Wall Street movie and watch it with your teens. It's meets my requirements of being both educational and entertaining, a $$$$ out of $$$$$.

Copyright 2010. Laura Thomas. All Rights Reserved.
To reprint contact Laura at money@agentstory.net

What They Heard About Kids & Money: Canada's Task Force on Financial Literacy Releases Summary Report

2010-09-23T12:19:00.000-07:00

In the wake of the financial crisis a light bulb went off in someone's head on Parliament Hill. "Duh...maybe there is a connection between financial illiteracy and the economy." And, ta-da! a task force was born.

In June 2009, our Finance Minister, Jim Flaherty, appointed 13 brave souls (including bankers, financial consultants, publishers, a journalist, and professor) to the Task Force for Financial Literacy and asked them to figure out how the government can "formulate a national strategy to strengthen the financial literacy of Canadians."

Yesterday, after months of zero activity on Twitter (FinLitTaskForce) and Facebook, they finally released a summary of what they heard from the public. They called it "What We Heard." Let's take a listen to the parts that relate to teaching our kids about money...

What is the Task Force's definition of financial literacy?
Having the knowledge, skills and confidence to make responsible financial decisions.

What did the Task Force hear from people about existing educational efforts?
That many outside groups (credit unions, curriculum developers, volunteers, some government agencies) are having some success bringing financial training to our schools. On the issue of turning financial literacy education over to the schools, concern was expressed for teachers "who are often overburdened with existing teaching requirements and who may feel uncomfortable teaching in this subject area, especially if they themselves are lacking in financial expertise" (p. 10).

What fundamentals do current educational efforts consist of?
Budgeting, consumer education, borrowing and, to a lesser extent, compound interest.

What did the Task Force hear about "when" financial literacy should be delivered?
"There was wide agreement that financial literacy should be offered throughout the elementary and high school years" (p. 11-12).

What did they hear about "how" it should be delivered?
Apparently there were conflicting opinions especially over whether financial literacy should be a stand-alone subject area or integrated into math, economics, social studies or home economics.

About "who" should deliver it?
Again their was conflict over whether or not it should just be teachers or teachers with the help of financial sector volunteers.

Overall, what did they hear?
That there should be more financial literacy education in the school system and that even though education is not the jurisdiction of the national government that Ottawa should nonetheless "lead or support the national effort to introduce financial education in the provincial and territorial school systems by identifying core, age-appropriate financial literacy topics" (p. 13).

It's hard to imagine what this is all going to translate to in the end when it comes to educating our kids about money. A national program in the context of our federal system seems to be a recipe for wasting tax payer dollars. A better idea might be an ad campaign aimed at families, something fun and provocative that gets us talking about money in the course of our daily activities. Or what about creating a Kids CBC show that builds financial literacy one word and concept at a time...hmmm...I wonder if Agent Story is available?

Copyright 2010. Laura Thomas. All Rights Reserved.

Episode 2 of Meltdown was a Let Down: Except for the Idea of Global Financial Interconnectedness

2010-09-21T07:03:00.000-07:00

REVIEW

This will be brief because there really isn't a ton of financial literacy knowledge that we can wring out of part two of Terence McKenna's documentary series The Secret History of the Global Financial Collapse: "A Global Tsunami." In fact part two is largely a rehash of the first episode, minus some of the cool graphics.

From the trailer at the end of the first episode, I thought that episode two would focus on unemployment and homelessness. But in fact the bulk of the hour is spent reviewing the "tsunami" allegedly created by US Treasury Secretary Hank Paulson when he decided on September 17, 2008 to let Lehman Brothers fail. McKenna's tsunami story almost entirely focuses on the reactions of financial districts, CEOs and finance ministers, not on that of regular people, as promised. Like I said, it was a rehash of part one.

That said, there was one thing that seeped up through the sometimes slide show-like documentary: the idea of global financial interconnectedness. Foreclosing homes in California led to Britain putting Icelandic banks on their list of terrorists (a list which includes Al-Qaeda) and to fifteen million factory workers in China suddenly becoming unemployed. Our money is seriously, profoundly connected with all the other money in the world. And that is something our kids need to know.

Global financial interconnectedness is an important concept. It's something that we need to talk about openly while were standing in line at the bank. I think it's critical that our kids understand that diversification is not a guarantee when comes to recessions and that we need to be picky when deciding which financial institution to do business with. Just ask all those people in multiple countries who lost their jobs or their savings in the meltdown.

And I do hope that in episode three McKenna will indeed bring us down from the lofty heights of Wall Street to the front lines where the rest of us are. I will tune in for sure, even if "Meltdown" episode three is another let down.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Can Compound Interest Make Me a Millionaire?

2010-09-17T10:07:00.000-07:00

I am a good saver, make that a great saver, but I am not great at growing my money and I really want that to change. Indeed, the four pillars of my curriculum as a financial literacy storyteller are: earning money, spending money, sharing money...and growing money. How great it would be if I could say at the end of my show, "By the way, I'm a moderately successful storyteller and a millionaire."

To that end (growing my savings to the million-dollar mark) I have been learning about compound interest, the interest you can earn over time on your savings + the interest on your savings. But being an "arts major" as my friends like to remind me, I'm not a math whiz so it's hard for me to visualize how compound interest works. So I am going to work through the math and see if I can answer my own question: can compound interests make me a millionaire?

Laura, age 41, hypothetical amount to invest $100,000, goal one million dollars

Let's say, I hear about a monthly income fund (a mutual fund that that pays you a set amount every month and may also, hopefully, grow in value over time) that costs 5 dollars per unit and pays 6 cents per unit every month for a total of 72 cents per unit every year (12 x 6 cents = 72 cents) or 14.4% annual interest.

With $100,000, I can buy 20,000 units. Over 12 months I am paid monthly to a total of $14,400 per year (20,000 units x .72 cents = $14,400). At the end of 12 months my investment is now worth $14,400 + $100,000 = $114,400.

Now even if I don't buy more units with "fresh" money and I just let the $114,440 buy more units, this is how long it will take me to be a millionaire. I am assuming that the value of each unit stays at $5 and that the monthly payment stays at 6 cents (this of course can change at any time and you need to stay on top of it).

Initial Investment $100,000 / 20,000 units
All earnings are reinvested to buy more units
No additional outside cash is added to the original $100,000

In year 1, I earn $14,400 and buy 2880 units for a total of $114,400
In year 2, I earn $16,473 and buy 3296 units for a total of $130,873
In year 3, I earn $18,846 and buy 3769 units for a total of $149,719
In year 4, I earn $21,560 and buy 4312 units for a total of $171,279
In year 5, I earn $24,665 and buy 4933 units for a total of $195,944
In year 6, I earn $28,216 and buy 5643 units for a total of $224,160s
In year 7, I earn $32,279 and buy 6455 units for a total of $256,439
In year 8, I earn $36,927 and buy 7385 units for a total of $293,366
In year 9, I earn $42,244 and buy 8448 units for a total of $335,610
In year 10, I earn $48,327 and buy 9665 units for a total of $383,937
In year 11, I earn $55,285 and buy 11,057 units for a total of $439,222
In year 12, I earn $63,246 and buy 12,649 units for a total of $502,468
In year 13, I earn $72,354 and buy 14,470 units for a total of $574,822
In year 14, I earn $82,772 and buy 16,554 units for a total of $657,654
In year 15, I earn $94,691 and buy 18,938 units for a total of $752,345
In year 16, I earn $108,327 and buy 21,665 units for a total of $860,672
In year 17, I earn $123,926 and buy 24,785 units for a total of $984,598

By this time my investment is paying me about $12,000 per month so in February of year 18, I will reach my goal of being a millionaire. And, I'll only be 59 plus my money will be making about $140,000 a year for me. Awesome and totally worth saving for. I wonder if I'll still be telling stories then.

That was a lot of math, but a good lesson, especially for an arts major. If you want to play with some numbers without the carpel tunnel, plus take into account the rate of inflation, check out the Bank of Canada website. They have easy-to-understand interest rate calculators. Have fun and don't forget to share the fun with your kids. If anyone has the time to compound their way to a million bucks, it's them!

Copyright 2010. Laura Thomas. All Rights Reserved.

Growing Your Money: How, Where and When to Buy Gold Coins

2010-09-15T12:54:00.000-07:00

Beyond having a small part of my portfolio in a precious metals mutual fund, I had never, until recently, thought about buying gold itself, as in a gold coin. But on September 3, 2010, the phone rang and I learned something.

The day before, I had the following investment question answered on the Lang & O'Leary Exchange (go to the last 3 minutes of the show): "How should a six-year-old invest the money she has in her savings account?" My question was answered by guest host David Chilton, author of the Canadian bestseller, The Wealthy Barber.

Chilton did not mention gold on the show but the next day he called me and suggested that my daughter consider buying a one-quarter ounce maple leaf 99% pure gold coin. I had to ask him where to buy one and he told me that Scotiabank under the name ScotiaMocatta sells them. So I called our local Scotiabank branch to get the scoop and here are the steps we are going to have to take to purchase a gold coin.

First, in order to buy a gold coin in her name, my daughter has to have photo ID (such as a passport) plus a social insurance number. Then we have to go to the branch between 9 a.m. and 1 p.m. (for those of us on Pacific Time) on a weekday while the markets are open. What happens is that when you arrive at the reception desk, they have to call in and get you a quote based on the current price of gold. Then you pay (cash only if you are not a Scotiabank customer) and place your order. The coin is shipped, at your expense, to the bank branch and you have to pick it up.

My daughter has not picked up her gold coin for two reasons. First, the price of gold is at an all time high (check the live charts here). Second, we have been toying with the idea of shopping around to get the best deal on the commission or service fees that you have to pay when you buy a gold coin.

Some friends have recommended certain coin dealers but I'm not overly confident about those. I think that in the end we probably will buy from the bank but when...I don't know.

Do we wait a few weeks and see if stocks go up and gold goes down? Or are investors really freaking out about the instability in the market and will the price of gold just keep going higher? It is possible that yesterday's high of $1276.50 USD (the price is always quoted in USD) will seem like a bargain a year from now.

Anyway...whether she buys her coin today, tomorrow or next year, the main thing is that my daughter is learning how to watch prices and read charts and to understand the instability and risk that comes along with growing your money.

Copyright 2010. Laura Thomas. All Rights Reserved.

Episode 5 Money & Me: Credit Cards

2010-09-15T07:09:00.000-07:00

Is "Meltdown" Documentary Series Worth Watching?

2010-09-12T08:19:00.000-07:00

Last week, the first episode of a new, four-part documentary series by Canadian writer and director Terence McKenna aired on CBC. The series title is Meltdown: The Secret History of the Global Financial Collapse. Episode one is "The Men Who Crashed the World." And it was about men, powerful men. (Where the women were is a question that I will tackle in a future post.) But it wasn't the names and faces of CEO's and government financial leaders that held my interest, it was the time line that I found fascinating and truly educational.

And it wasn't just the time line, which ran from the boom-days of 2004 through September 2008, that I found instructive. I really liked how McKenna takes viewers around the world documenting the journey of toxic (likely to default) American mortgages from the U.S. to the rest of the world. From Iceland to Dubai to Paris and London and back to New York, the documentary makes it clear that it was a global inability to value those toxic mortgage products (called "mortgage-backed securities" or "securitized debt") that caused banks to start bleeding cash when the real estate bubble popped.

There are tons of interesting facts, and a few shocks, to be had in this first episode and I look forward to watching episode two, which promises to turn the camera away from the money men to the fallout: unemployment, homelessness and the global financial tsunami that hit the world in September of 2008.

This is not a documentary that I would watch with young children. There is a lot of advanced financial vocabulary and the story unfolds at a rapid pace. However, I would feel very comfortable watching this with a high school student but I suggest recording it so that you can pause and explain at any time.

Note that Canada is not really a player in this story with one exception. Jim Flaherty (our Finance Minister) is interviewed briefly about a panicky phone call he received from Hank Paulson, the US Treasury Secretary under George Bush, in 2006. Paulson, apparently, was worried about the real estate boom and sub-prime mortgages (costly loans made to people with very poor credit).

Though we Canadians, are thankfully, not part of this story, I highly recommend that you check your CBC listings, watch a rerun of this episode and tune in for episode two.

Copyright 2010. Laura Thomas. All Rights Reserved.

Is Canada a "Tweet" Behind the U.S. on Financial Literacy Initiatives?

2010-09-10T09:49:00.000-07:00

I have been following someone or something on Twitter called "Fiscal Literacy." It's American, that I know, and every day there are half-a-dozen tweets with links to news about the activities of the Treasury Department's Financial Literacy and Education Commission. From what I have read, and not read, the U.S. seems to be leaving Canada more than a few tweets behind when it comes to financial literacy.

One thing that caught my eye recently was a call from the Treasury for public input on determining the core competencies that Americans should have when it comes to personal finances. The public has until September 12th to email or call in with their suggestions. Very cool--if you are American! (To get the details, you can read a good summary article in the Washington Post that ran a few days ago.) But back to our federal government and financial literacy. What are we doing to build financial literacy in Canada? And are we even talking about it?

As part of the Economic Action Plan, Jim Flaherty (our Finance Minister) created a Task Force on Financial Literacy. So, this spring, a small group of Canadian professionals set out on a cross-country journey to find out what Canadians don't know and need to know about money. They wrapped up their consultations in May and are set to report to Flaherty at the end of the year....and there hasn't been much news since.

I subscribe to the Task Force newsletter (and follow them on FB and Twitter) and during the entire summer I only received one update which is a link to the consultation document, an online appendix of all the letters that the Task Force received from business, educators and individuals. That was a month ago and, by the way, their last tweet was May 11th (FinLitTaskForce) and last Facebook wall post was May 13 (Financial Literacy Task Force). Not good. If the Task Force leaders aren't excited about tweeting and posting on this topic then I think we are in trouble.

With our ability to move through the recession with at least a little grace, and our position as a world leader in banking regulation, Canada shouldn't be a single tweet behind any nation when it comes to financial literacy or using social media to educate and spread the word. To our credit, our Task Force has more posts on its FB page than the U.S. Commission does, and our Task Force is on Twitter, while the U.S. Commission is not. But social networking only works if you network.

Are we behind the U.S. when it comes to financial literacy initiatives? It seems so. Then again, if the Task Force would send us a tweet once in a while...we might be pleasantly surprised.

P.S. I just sent the Task Force a note on FB and Twitter saying that I'd love to have an update. I'll let you know what happens!

Copyright 2010. Laura Thomas. All rights reserved.

Episode 4 Money & Me: Donations

2010-09-09T13:49:00.001-07:00

Episode 3 Money & Me: Sales Tax

2010-09-09T13:49:00.000-07:00

Money & Me with Agent Story: What are stocks?

2010-07-27T17:56:00.000-07:00

Money & Me with Agent Story: Getting a Job

2010-07-16T18:06:00.000-07:00