In Canada, most young people are not getting the financial literacy training they need. They are ill-equipped to make their way in the modern financial world. Yet, everyone needs to learn how to make effective decisions about money most places they go and on a daily basis. Throughout life, we all need to learn how to earn, save, invest, spend, borrow, give, lend and generally manage money. Learning economic principles will help our youth make better personal financial decisions and help them as citizens understand and make better choices about critical issues facing the nation.
One of the reasons many youth are ill-prepared is that financial literacy is rarely taught in the home. New Canadians may have language barriers or come from countries where there is little confidence in the financial system. Canadians living in rural or remote communities may have limited access to financial information and advice. Some parents avoid conversations about money altogether. Many parents lack confidence about discussing money if they are struggling financially themselves. They may be unsure of where to begin and may fear saying the wrong thing. Meanwhile, parents are spending much more money on children these days than in past generations. Young people have more consumer goods than ever before, with a lifestyle filled with the internet, cell phones, better TV, high quality entertainment and conveniences. Status-quo bias may result in young people, who continue to believe that their living standards will continue or rise in the long-run regardless of what they do.
Financial education is also lacking in the school system even though nearly all adults now agree that personal finances should be taught in schools. Teachers are already overburdened with existing requirements and many do not feel qualified to teach about personal finances.
Without supports in place, young people may be learning wrong messages about money from advertising, popular culture and peers. When children hear that rich people are lucky, they may believe that wealth is a result of luck and not hard work or that those who aren’t well off and don’t have connections will never succeed. They may believe that money can buy just about anything and that how much money you earn dictates your personal worth. They can also fall into a trap that you can “buy now and pay later” or “buy more to save more” of something they don’t really need. Part-time jobs help young workers to learn the value of money. Many young workers develop discretionary spending habits, however, before contributing to household non-discretionary expenses. With a poor inclination to save, many end up with rising debt and debt problems. They often learn the hard way from personal experience when living out on their own.
Recognizing the need to strengthen financial literacy for Canadians, the federal government has begun new initiatives in recent years. Discussions about how to approach financial literacy began through national conferences held in 2005, 2008, 2011 and 2014. In 2007, the Financial Consumer Agency of Canada (FCAC)’s mandate was expanded to include financial literacy and develop financial literacy for youth. A National Task Force on Financial Literacy was also created through the 2009 federal budget to make recommendations based on discussions with stakeholders.
The Financial Consumer Agency of Canada now has a $3 million annual budget, led by Jane Rooney as Financial Literacy Leader. A public awareness campaign for greater financial literacy has started, including the establishment of each November as Financial Literacy Month in Canada. A National Steering Committee on Financial Literacy was also created in 2014 from stakeholders to advise on financial literacy issues, promote a national strategy, and facilitate the coordination and collaboration of financial literacy programs.
Financial literacy information and programs are being offered through private and non-profit organizations such as the Financial Literacy Action Group (FLAG), which is a major coalition made up of several non-profit organizations that teach financial skills, such as ABC Life Literacy Canada, Canadian Foundation for Economic Education (CFEE), Credit Canada Debt Solutions, Financial Planning Standards Council, Ontario Securities Commission Investor Education Fund (IEF), Junior Achievement (JA) and Prosper Canada. JA Worldwide is the largest non-profit organization in the world that is dedicated to education young people about business, economics and entrepreneurship through volunteers who visit the classroom, host learning forums or provide information for new business startups. Further, since 2013, the Canadian Foundation for Economic Education organized an annual “Talk With Our Kids About Money Day” to occur on the third Wednesday in April, funded by BMO Financial Group.
While many programs are available, financial literacy efforts are currently somewhat disjointed and the provincial governments have not altered the curriculum to make financial education a requirement. Under the national strategy for financial literacy, age-appropriate financial literacy topics are to be integrated in the curriculum at the teacher’s discretion. To help teachers navigate through the vary array of program available from individuals, financial institutions, other businesses and voluntary organizations, the FCAC website established a resource database of financial literacy programs in 2014. Without government direction outlining curriculum requirements, however, it is questionable if overburdened teachers will reach out to the vast array of available supports.
Canada’s efforts in improving financial literacy for all citizens, including young people, are still in its beginning stages through the FCAC. We should look to the U.K. as a model, where new elementary and high school curriculum was introduced to teach children about budgeting and borrowing in math lessons. Since September 2014, U.K. students, at ages 11-14, are learning about the functions and uses of money, the importance of personal budgeting, interest, money management and a range of financial products and services. At ages 14-16, youth are learning about wages, taxes, credit, debt, financial risk and a range of financial products and services.
At Harris & Partners, Trustee in Bankruptcy, we assist Canadians needing debt help by bringing credit counselling and debt solutions. We view that helping youth today will avert greater need for consumer proposals and bankruptcy in future. If you need more information, contact our licensed insolvency trustees at Harris & Partners in Toronto or one of our nine other Ontario offices. Our head office is located in Markham.