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Financial literacy

A free course to learn the basics of financial literacy

Montreal’s McGill University offers an online personal finance course open to everyone. Two of the instructors, including one CPA, reflect on the program’s tremendous success.

In personal finance, understanding certain key concepts and making informed decisions can have a profound impact on long-term financial security.  

Benjamin Croitoru, Associate Professor of Finance at McGill University, and his colleague Amanda Abrams, CPA and Director of the GCPA program, share this conviction, having been involved in the development of the personal finance course offered by McGill University, in partnership with Royal Bank and The Globe and Mail. 

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Comprising eight modules (online videos followed by tests), this free training covers the main aspects of financial life: budgeting, debt, investment, retirement, real estate and bias. Since launching in 2019, the mandatory component has been updated and two optional modules have been added (crypto-assets and responsible investing), says Dr. Croitoru, Academic Director of the course. 

Refuting certain beliefs 

The idea for the course came from an observation, explains Amanda Abrams: Many Canadians have serious gaps in their financial literacy. “Even if information is more accessible than it used to be, you still need to be able to filter and understand it. For many people who don’t understand the issues, retirement remains a black hole.” 

The same goes for certain myths surrounding home ownership, she continues. “Compared to buying a property, renting is often seen as a waste of money, whereas the course module The Realities of Real Estate shows that, taking into account factors such as initial costs, hidden fees or investment opportunities, this is far from always being the case.” 

It’s about changing your outlook, says the CPA, but also about adopting new habits, starting at an early age. “By starting early to educate themselves and make informed decisions about money, people can lay a solid foundation for their financial future.” 

Avoiding common investment errors 

Dr. Croitoru explains, “The impact of time in finance is decisive, but people don’t realize how small decisions can make all the difference over time.” He warns of three common mistakes that every investor should avoid: 

  • Paying too high fees: “Even though there are now many financial products available for investing at a reasonable cost, Canadians still pay some of the highest investment fees in the world, partly due to a lack of financial education. They don’t realize that paying 2% a year, which may not seem like much, has a huge impact.” (See example below.) 
  • Buying and selling at the wrong time: Allowing yourself to be guided by your emotions often leads you to sell at a low price (when the market has already fallen, or even plummeted) and to buy or buy back at a high price (when the market has been doing better for a while and it seems safe to invest). “This is what people tend to do naturally, but it’s obviously a disaster for long-term returns,” explains the finance professor. 
  • Not diversifying your portfolio enough: “Canadians tend to favour Canadian equities because they confuse familiarity with security, but to maximize potential returns and minimize risk, it’s crucial to invest in a wide variety of assets.” 

Dr. Croitoru also stresses the importance of choosing the right level of risk. While there is no one-size-fits-all solution, he encourages investors to carefully examine their risk tolerance and consider taking calculated risks to improve their long-term results. In his view, many people keep too much money in savings accounts with very low interest rates, which, over time, costs them a lot of money.  

In concrete terms, if you invest $50,000 earning 5% for 30 years, you’ll earn $173,387 in interest, making your total investment worth $223,387. But if your investment earns only 3%, the interest earned will be $72,842, and the total investment will be worth $122,842, which is more than $100,000 less. 

He ends with this helpful reminder: “Human psychology is not good for investing, because it leads people to repeat classic mistakes that, in the long run, are extremely costly. However, it only takes about half an hour to explain how to avoid about 90 per cent of these mistakes. That’s what I’m trying to do in the investment module.” And it seems that the message is getting through, since almost 300,000 people have already taken the course.