📷 McGill University
Journalist: Romina Mahinpei
Interviewer: Welcome to SciSection. I’m Romina, your journalist for this week’s episode. We are here today with Dr. Benjamin Criotoru who teaches Financial Economics at McGill University and is the Academic Director of McGill Personal Finance Essentials, an online course on financial literacy. Thank you for joining us today, Dr. Kooatoru.
Dr. Croitoru: It’s my pleasure.
Interviewer: To start, we do have two rapid-fire questions. Firstly, what is the most common misconception you hear about financial planning and management?
Dr. Croitoru: I think the number one problem that many people have is to assume that it has to be very complicated, and that’s not the case. Of course, if you want to become an expert, there’s a lot that you need to learn but what we try to show in the course is that there is not that much that you need to know in order to make a real difference. I would say that maybe with 10% of the knowledge, you can really make a good 90% of the difference.
Interviewer: And secondly, what is the most common mistake people make with financial planning and management?
Dr. Croitoru: I think it’s tough to single (out) just one. One thing I want to say is that people tend to repeat the same classic mistakes over and over. And I think by just learning about a few of these mistakes and avoiding them, it’s not that difficult to do but you need some discipline, by just avoiding the most classic mistakes, you can make a huge difference to your long-term financial security. Maybe I will give one example, I think it’s one of the biggest mistakes people make, at least as far as investing is concerned. People have a tendency to buy and sell and to get in and out, for example of the stock market, based on the dominant sentiment (or) the mood of the crowd. And that’s usually a very bad idea. So basically, people have a tendency to buy when everybody feels good and positive about the stock market and to sell when everybody is depressed and scared about the stock market. But if you learn, it’s a disaster because when does everybody feel good about the stock market? When it’s been going up for a while and it looks safe. And when does everybody feel depressed in the stock market? When it’s been going down. So, if you follow the pattern I just described, you’re going to be buying stocks when they are expensive because they’ve been going up for a few years and selling when they’re cheap because they’ve been going down for a few years. And of course, if you do that, it’s a disaster for your long-term return. So, that’s perhaps the number one thing, the most disastrous mistake that people make about the market: buy and sell based on the dominant mood (or) sentiment of the crowd.
And there are some other mistakes that people tend to repeat. You probably know the popular wisdom “do not put all your eggs in the same basket”. That’s good advice that applies to investing. A lot of people are not diversified enough (in their investing). They don’t have enough variety in their investments and that exposes them to unnecessary risk. One other thing is, and I think that applies especially to the crowd you’re trying to reach with this show, people don’t start early enough saving and investing. And I think one of the reasons for this is that people assume it’s very complicated and that scares them and that makes it more likely that they’re going to put off starting to take action. So I would recommend, and it’s a simple mathematical fact that people and students can learn about in our course, the earlier you start saving, the easier it is going to be to reach your financial goals. By starting to save just a few years sooner, you can make a significant difference to your long-term financial security.
Interviewer: For sure and hopefully, our listeners after hearing this interview will get educated on this topic and not make those mistakes. That’s the ultimate goal. And now, before we (further) discuss the importance of financial literacy, could you give a summary of your educational path and what led you to what you do today?
Dr. Croitoru: Sure. You may be able to tell by listening to my English that I’m from France. I did my undergraduate degree in business in France, and then I decided and became very interested in an academic career in the field of finance. Then, I decided and was able to move to the US for my PhD. So, I did my PhD at The Wharton School at the University of Pennsylvania in Philadelphia. And since year 2000, I’ve been a professor at McGill University’s Desautels Faculty of Management in Montreal. And I find it a very enjoyable place to live, especially for a European who lives in North America.
Interviewer: Yeah, amazing. And I know we’ve already discussed the McGill Personal Finance Essentials course, but could you give us a brief summary of the course and its purpose?
Dr. Croitoru: Of course. This is a course that does not require any preliminary knowledge. There are no prerequisites. It’s for everyone because I strongly believe that everyone can benefit from a certain amount of financial knowledge. I mean everybody deserves to get the feeling of financial security that you can get with a little bit of knowledge that makes it easier to make the right decisions. So, the course consists of 8 modules. These are video modules that last approximately 30 minutes each and that cover basically the different aspects of one’s financial life. So, for example, you have a module on the different ways that you can borrow money. You have a very interesting module about human psychology and how psychology interacts with people’s financial decisions. So, each module lasts about half an hour and at the end of each module, you have a test that you have to complete in order to move on to the next module. Now, I don’t want people to run away. I want to mention that you can take the test, it’s not a very difficult test, it's multiple choice, and you can take it as many times as you want until you succeed. And then, if you complete the 8 modules, you can download an attestation that will attest (and) document your completion of the course. I know a lot of people have actually included that attestation in their LinkedIn profile, and I’m very happy to see that. But I want to say, we’ve been very happy, very pleased with the success of the course, I actually don’t even have the latest figures, but the course was launched in November last year and we’ve had over 90,000 people, mostly in Canada but also many other countries. We’ve had over 90,000 with just their participation with some very good word of mouth about the satisfaction of the user. So, that’s a very rewarding thing to see for me.
Interviewer: And just out of curiosity, would you say that the course has a specific targeted audience?
Dr. Croitoru: No, I think that this is really for everyone. It’s primarily targeted at younger people. So I think that undergraduate students would be our prime target and I see at least two reasons for this. One reason is that people of your generation tend to be specially comfortable learning online with the format of our course. And now, for somebody who’s about to start a career, that’s the best time to get started making the right financial decision because the earlier you start making the right decisions, the bigger the difference it’s going to make. So, I would say (the course is for) people in their 20s. It’s open to everyone. I think everyone can benefit, but I would say people in their 20s and 30s, people in university or early in their professional careers, they’re the ones who are going to benefit the most from the course.
Interviewer: For sure and hopefully, this does motivate more undergraduate students to take the course as well. And I know we’ve discussed the importance of financial literacy quite a lot, but if you had to give one main reason to convince people, regardless of their age, to become financially literate, what would that reason be?
Dr. Croitoru: Well, it’s difficult to pick one but you know I’m a finance professor, but it doesn’t mean that I think that money buys happiness. But I am convinced that money problems can be a huge impediment to happiness and I believe that psychological studies confirm that. So, I think everybody deserves well a chance to at least to achieve financial security and of course it helps to have a great job, to have good income, to make good money, but you can also make a big difference by learning the mistakes to avoid and starting to make the good decisions. Maybe it sounds a little ambitious, but I think that with this course, we really have the potential of making a difference in people’s happiness and sense of security.
Interviewer: For sure and just because we are a bit short on time, I do have one final question for you. What advice would you give to students listening to the show right now?
Dr. Croitoru: I think it might be obvious but start educating yourself and start as soon as possible because, if you take the course, you learn about very basic mathematics and compounding and you will see that the decisions you make early in your financial life are the ones that are going to have the biggest impacts. So, that would be my number one advice. Of course, don’t rush because then you might make the wrong decisions but start learning as soon as possible. Of course, I recommend you take our course and there are also many excellent books that can help you a lot. That can make a tremendous difference.
Interviewer: And that does bring us to the end of this interview. Dr. Croitoru, thank you once again for joining us today and highlighting the importance of financial literacy.
Dr. Croitoru: It was my pleasure. Thank you so much.
Interviewer: Of course! And for everyone listening, make sure to check out SciSection’s podcasts available on global platforms for our latest interviews.