By Iyvan Chandran
What is Financial Literacy?
Possessing competence in financial literacy generally means understanding and being able to apply saving, budgeting, and investing strategies. It also includes understanding the importance of saving and planning for your retirement and having a general understanding of taxes.
Keep in mind that being in good financial health does not necessarily mean being rich.
Building Healthy Financial Habits
The basics of good financial health can stem from:
- Not living beyond your means. Make a budget and stick to it! Your budget should account for your expenses (e.g. rent, student debt, food, etc.) and saving for your short and long-term goals. People often live above their means because they haven’t calculated the amount of money they need in the future to reach their goals.
- Create an emergency fund. Part of building healthy financial habits is to have a cushion for the unexpected. This means building enough savings to get you through 3 – 6 months worth of expenses in the case of an emergency. Do you have 3 to 6 months worth of rent and food expenses set aside in case you lose your primary source of income? If not, then now is a great time to start thinking about this.
- Save 10%-15% from each paycheque. This is the minimum amount I recommend to save from each pay cheque to be used towards future goals such as buying a house, or for a dream vacation. This may not be possible in all circumstances, but ideally this is the range you are looking to set aside.
I was fortunate enough to have the chance to interview Michelle Hung who is an author, Chartered Financial Analyst (CFA), entrepreneur and former investment banker. She gave us a few tips on how to kickstart your investment journey. Michelle will be conducting a masterclass to explore these topics in more depth. Details can be found at the bottom of this post.
What should students know about investing?
Educate yourself when it comes to investing. Education builds confidence. Following trends and news online can be reckless and dangerous at times. The news can create a FOMO (fear of missing out) effect which can cause stress and can lead to gambling. The more educated you are the more confident you will feel in your decisions to take calculated risks.
How can someone educate themselves?
Be careful who you get your financial information from. Some great ways to start learning include robo advisors (digital platforms that provide automated financial services using algorithms), following certified influencers, or reading books. You can also attend classes for personal finance from experts or schedule a fee only appointment with financial planners.
A list of books that are great to start with are:
- “The Sassy Investor” by Michelle Hung J
- “Beat the Bank” by Larry Bates (Canadian author)
- “I Will Teach You To Be Rich,” by Ramit Sethi
- “The Automatic Millionaire,” by David Bach
- “Retire Before Mom and Dad,” by Rob Berger
- “When She Makes More,” by Farnoosh Torabi
- “You Are a Badass at Making Money,” by Jen Sincero
- “Spend Well, Live Rich,” by Michelle Singletary
- “Your Money or Your Life,” by Vicki Robin
- “Get a Financial Life,” by Beth Kobliner
- “The Financial Diet,” by Chelsea Fagan and Lauren Ver Hage
- “Clever Girl Finance” by Bola Sokunbi
- “How I Invest My Money” by Joshua Brown and Brian Portnoy
How much money do you need to start investing?
You do not need to have a huge sum to invest. Even $20 is enough to get your feet wet and get started. Take that first plunge.
What will be covered in the Masterclass?
There are many different options available today. It all depends on the amount of risk you are willing to take and also the amount you are investing. During the Masterclass I will cover the topics below:
- Basics of investing
- The best strategy to invest and how to start
- The purpose of investing and aligning to one’s own values and goals
- Ethical implications of investing
My Own Journey Through Financial Literacy
As for my own journey through financial literacy, I was always interested in trading in stocks due to various success stories, but never knew how to get started. When I told my parents I was interested in hopes of receiving some advice and resources, I was shot down because they believed it was gambling. Unfortunately this was due to a lack of financial education which translates to anxiety and fear. According to GlobalNewsWire 85% of respondents in a study wish they personally had the opportunity to learn more about finance and the economy while in school (Joyce, 2018). I took initiative to educate myself and my parents about stock trading which gave me their blessing to trade.
Initially I started using WealthSimple Trade, but I switched to Questrade as it provides more trading options. A few weeks after getting started, I bumped into an old friend who founded a start-up to address gaps in financial literacy by gamifying financial education and making investing a social experience. I was instantly moved and told him about the struggles my parents had with financial literacy. After evaluating my technical skill set I was recruited to become the CTO and Director of DaisyLABS and am currently preparing the launch of our mobile application and pre-seed raise for Spring 2021. Feel free to check out my start-up Alpha Libertee and follow us on instagram @alphalibertee.
For more information with specific examples on how to get started on your investment journey check out our masterclass below:
Is Wealth Really Simple? (Financial Planning: Investing)
Date: Wednesday February 17th, 2021
Time: 5:30 PM – 7:00 PM
SME: Michelle Hung (Author, CFA, Entrepreneur and Former Investment Banker)