Financial Literacy Lecture Notes

Introduction

• Financial literacy is the ability to make smart financial decisions to achieve your desired lifestyle.
• Important due to the financial struggles caused by the pandemic.
• November is Financial Literacy Month in Canada.

Importance of Financial Literacy

• Better financial decisions lead to more wealth.
• Ability to manage income, budgeting, debt, savings, and investments.
• Poor money management can lead to wasted income and time.

Understanding Money

• Money is traded for goods and services; involves earning income.
• People often inefficient with money due to lack of financial literacy.

Earning Income

• Foundation of personal finances.
• Types: hourly wages, salary, commissions, tips, bonuses.
• Consider lifestyle, job benefits, career demand, and personal interests.
• Diversifying income through multiple streams:
  • Earned Income: Traditional jobs, limited by time and skills.
  • Profit Income: Business ownership, scalable but risky.
  • Interest Income: Lending money, passive and risk-free.
  • Dividend Income: Shareholder earnings, passive.
  • Rental Income: Renting assets like property or equipment.
  • Capital Gains: Selling assets for profit (stocks, real estate).
  • Royalty Income: Earnings from intellectual property use.

Investing

• Key component of financial literacy.
• Stock market entry points: self-directed investing or robo-advisors.
• Types of brokerage accounts: Cash, TFSA, RRSP.
• Real estate investing and REITs for those unable to buy property.
• Investing in businesses: starting or buying businesses.

Saving Money

• Essential for reaching financial goals; spending less than you earn.
• Budgeting helps track spending: needs, wants, debts, savings.
• "Pay yourself first" strategy: automating savings.
• Savings vs. investing for short-term and long-term goals.
• Importance of emergency funds (1-2 months' expenses).

Spending Wisely

• Methods: cash, debit cards, credit cards, prepaid cards.
• Credit card benefits: build credit, rewards, but risks debt.
• Debit cards offer security without building credit.
• Prepaid cards help manage budgets, don't build credit.

Managing Debt

• Differentiate between good debt (investment) and bad debt (consumption).
• Building credit to access better financial products.

Financial Protection

• Types of insurance: car, home, life, business.
• Asset protection: CDIC for cash accounts, CIPF for investment accounts.

Learning Financial Literacy

• Utilize free resources: YouTube, blogs, podcasts.
• Invest in books, courses, and mentorship.
• Importance of practical application and learning from mistakes.

Conclusion

• Financial literacy provides freedom and maximizes your time.
• Encouragement to continue learning and applying financial knowledge.

For further learning, explore videos, blogs, and financial tools, and practice consistently to improve your financial literacy skills.