Money Skills for Teens
Most Canadian high school students are unaware how to manage their money and finances. This is concerning given that the collective amount of debt in Canada is already over $1.5 trillion. Parents are often unable to set good examples, as demonstrated by growing consumer debt across the country, and they are also not teaching teens financial skills that will benefit them as they become more independent.
Schools are falling short in teaching financial education as well. For the most part, schools are not implementing curriculum that teaches saving, investing and budgeting in place of something less practical like multiplying fractions. Financial literacy is not mandatory in the curriculum in Canada anywhere, except in Manitoba, where a personal finance course for students in grades 11 and 12 has recently begun. In Ontario, teachers are encouraged to sprinkle money lessons into other subjects, but they are not given training on the topic and are often not comfortable teaching in these areas.
As such, the majority of students graduate from high school or university without the training they need when it comes to money. Every day activities, such as using credit cards, obtaining loans and working, are issues of which Canadian youth are unprepared for. Some older teens are falling into a trap of credit card debt. Some teens begin adulthood by incurring hefty amounts of student loan debt when less spending may have been possible.
An end to vicious circle is needed, from students graduating university and college with an average of $25,000 in debt. Quite simply, consumers as a whole are overspending and over-borrowing, thus over-accumulating interest payments and dwindling further and further into the red.
Educating through School and Parents
Ideally, financial experts believe all provinces and territories across Canada should start learning about money management as young as high school so they are better equipped as soon as they can work and live on their own. The Canadian Foundation for Economic Education has developed a school program for teachers to draw from.
Some local teachers are attempting to get financial courses standardized in the curriculum and some are trying to teach financial literacy in their classrooms. Kyle Prevost, a high school teacher at a school near Winnipeg co-authored a book, More Money for Beer and Textbooks. He taught a course on simple financial topics for his class, such as on tax-free savings, insurance, investments and tax. His students were very surprised to see how much fictional debt they accumulate in their ongoing class project that compares their income with their expenses.
Parents have more resources available to them than in the past to expose to their children, including many books and games, attending a money fair, or participating in a week of summer camp on money skills. Parents can also help by encouraging their teens to get part-time jobs to earn income and teaching teens how to budget their allowance and wages. More families are providing an allowance, but are requiring their kids to split the funds up into amounts for saving, spending, buying gifts and any charitable giving. Showing your older teen your bank statement, credit card bill and mortgage statement, including interest rates that would apply, may further enable them to understand the inner workings much sooner.
What Teens Should Know
Teens would benefit from simple money matters, such as opening a savings account, understanding interest, and how to balance a budget to leave money for when it’s needed and avoid paying overdraft fees. Budgeting is perhaps the most basic and important lesson to impart, particularly if teens are involved with caring for some of their own expenses for items such as cell phone costs, entertainment, clothing, and possibly rent, food, transportation and utilities.
Among the many different financial products and services available, there are helpful online tools relevant for teenagers who are comfortable with technology, including BankIt!, an app that tracks your allowance as you spend it. Such tools can make it easier to track the money that comes in and out. Like many adults, teens will often make the mistake of spending too quickly rather than saving up for larger and more significant purchases.
Before rushing to get teens their own credit cards and student loans, it is recommended that parents assess whether their child is mature enough to handle the responsibility. Parents should teach their teens about how credit and credit scores work, using concrete examples as much as possible. Showing financial responsibility, including careful spending when out shopping, can also positively influence teens and help them put the lessons they learn into practice.
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In our current society where financial literacy needs improving and millions of Canadian adults lack the proper training themselves, teens may struggle with smart money management.