Even the kids of personal finance columnists would benefit from learning financial literacy in school.
My 19-year-old son is a great kid, but he’s a natural spender. I’ve taught him to put some money from his paycheques aside into a savings account, but he’s figured out that you can just go online and transfer the money back into your chequing account. We’re trying a tax-free savings account now, and it seems to be working. But it would have reinforced what we taught him at home if my son had learned some money basics in school. I didn’t expect him to emerge from school ready to run the Bank of Canada. But some help as a parent would have been nice.
I’m sure other parents would agree, especially the ones who realize they haven’t always made the best financial choices and want their kids to have an easier time. Of course there’s a role for parents in teaching financial literacy. But having a neutral authority like a teacher do the heavy work makes good sense. Teachers are outside the family dynamic. They can deliver simple financial truths about saving, spending and borrowing without having kids reply, “Oh yeah, then how did you afford that fancy car you bought, Dad?”
The need to teach financial literacy became clear in the aftermath of the 2008-09 financial crisis, which had complex origins that boil down to one overriding theme: Too many people had thought too little about how they save, spend and invest money. Since then governments, regulators, politicians, the financial industry and the media have all made attempts to improve financial literacy in Canada. So far, nothing has worked. Debt levels are near all-time highs, savings rates are modest by historical standards and we face a series of economic challenges specifically threatening young people:
- Rising tuition costs: The cost of university and college has been rising more than the inflation rate for years.
- High student debt levels: Roughly six in 10 students graduate with debt averaging $27,000.
- Weak job market: Unemployment and underemployment are both problems.
- Declining pension coverage: Statistics Canada says that not even one in three workers is covered by a registered pension plan today, which is to say they have nothing to fall back on for retirement beyond their own savings plus government programs.
- An aging population: One quarter of the population will be aged 65 or older in the next couple of decades, which suggests some reallocation of government spending to older people and away from younger people is inevitable.
Making young people more financially literate won’t magically produce jobs or careers, and it won’t guarantee a good income. But it can equip youth to make smarter money decisions in whatever financial circumstances they encounter in their lives. This is where schools come in. We’ve entrusted teachers since forever with making our kids understand words and numbers. Now, we turn to them for financial literacy.