As a business education teacher I have a small bias towards my subject matter, but I think it’s fair to say that students of past and even recent generations have left their K-12 experience sorely lacking in basic financial education.
A typical grade 12 earns their diploma understanding the quadratic formula, meiosis and mitosis, the causes of the French Revolution and how to order from a restaurant in French or Spanish (among other things). All valuable skills. But the typical graduate also doesn’t know what an RRSP is, the difference between an asset and a liability, how to file their taxes, how to avoid crippling personal credit card debt, manage students loans or pay a mortgage, and they also don’t know they don’t have to be an employee – that it is actually possible to start your own business. Personal finance is something we all will have to deal with, regardless of what career path we end up choosing. And it’s about time we started taking seriously the education of our youth in this respect.
Schools today are great at pumping out employees. Students learn how to take instruction, meet deadlines, produce work whose parameters are provided to them by a superior, and are all familiar with some type of chain of command. Conversely, encouraging entrepreneurialism is one of the best ways to push critical thinking skills, problem solving skills and creativity skills. Want to be an entrepreneur? You’re gonna need a good idea first. You’re going to have to solve some problems with respect to production, labor, marketing, etc. And you’re going to need to know how to communicate with and lead a team in order to fulfil your vision. If we want to encourage creativity, collaboration and critical thinking skills, I can think of no better vehicle than entrepreneurialism.
Personal finance is a second, and arguably even more important skill to master. People need to understand from an early age the dangers and pitfalls of credit. One only has to look at the 2008 financial crises to see what effect prolonged accessible and cheap credit can have on people. Interest rates fluctuate. My loan rate of today is not necessarily my loan rate of tomorrow. Credit cards are meant to be paid off each month. Pay Day Loan companies are financial wolves in sheep’s clothing. Just because I can buy something doesn’t mean I can afford it. ‘Frugality’ doesn’t have to be a dirty word. How are young adults supposed to learn this if it’s not taught in school? Especially when popular media is persistently encouraging consumption and materialism.
A basic understanding of the stock market, I believe, is also incredibly important. Whether or not you become an active trader of your personal portfolio or not doesn’t matter. Almost all of us will in some way be directly or indirectly impacted by the performance of the stock market. Do you have a company or government pension? Then you’re in the stock market. Do you have mutual funds, bonds or even just a mortgage? All of these can be affected by what happens on the stock market. If you have no idea of the basic functions of the marketplace, how can you be assured a competent understanding of your own personal economic future? How can you plan for retirement? We can put our heads down and work hard and just hope that it will all work out in the end, but I’d far rather see an educated public that understands what fundamental forces are at work behind the scenes. This, as far as I’m concerned, should begin in high school.
For many families finances are still not a conversation topic at the dinner table. How often have you discussed with your teenagers what’s left on your mortgage? Which credit card your family uses most often and why? How you save for family vacations? What retirement plans the adults of the family are invested in? These are all valuable conversations. Especially if the family finances aren’t perfect – what a powerful learning opportunity! And maybe it can even provide some impetus to spur the adults on to greater fiscal responsibility.
We ask students what they want to be when they grow up. ‘A doctor.’ ‘A teacher.’ ‘A lawyer.’ How often have you heard a student say, ’an entrepreneur’? Statistics vary, but roughly 48% of Canadian’s work for small business. It’s one of the life-bloods of the Canadian economy. To start those businesses someone at some point had to take an idea, combine it with a bit of courage and some basic understanding of business development and maybe even the help of a mentor. We need to encourage students to take a keener interest in business both for their own sake, and for economic benefit of us all. And even more importantly we need to be graduating students who know how to manage their own finances… to have them understand the importance of saving for a rainy day… that the best time to start saving for retirement was yesterday… how to take care of their financial responsibilities and avoid debt… what it means to pay a mortgage… and to appreciate the fact that the stock market touches us all. If they gain some collaborative, creative and critical thinking skills along the way I think our economy, our workforce and the financial stability of our families will all be better for it.