Are We Doing Enough To Educate Students About Finances?

Financial education in school

Hey everybody! Today I’m stoked to have a guest post for you by Matt from methodtoyourmoney.ca. Matt is a personal finance blogger a teacher and a fellow Canadian who is passionate about teaching the next generation how to handle their money. Enjoy!

We are living during a financial catastrophe. It’s not being televised minute by minute like the crash of 2008, but it’s a disaster nonetheless.

Don’t believe me? Check out this snapshot of how people are handling their money:

Learning about money in school

Statistics Canada recently released numbers that show the “average” Canadian owes $1.68 of debt for each $1 of disposable income (ex. if they have $1000 after spending on needs, they owe $1680 in debt)

What does this look like in actual dollars? According to credit information firm TransUnion, the average non-mortgage debt is $22,413.

This breaks down across 4 categories:

  • Average auto loan: $20,160
  • Average credit card balance: $4,085
  • Average instalment loan: $25,706
  • Average line of credit: $29,652

And perhaps the most staggering figure of all from last year:

This is just a tiny peek into what “average” looks like.  It’s bad. In fact, it’s dire.

Silent But Deadly

But unlike the financial collapse of 2008, this is a quiet catastrophe. This one is largely flying under the radar of the vast majority of people.

But make no mistake, the effects are being felt. A recent poll by a financial services consulting firm revealed unprecedented levels of financial stress. Of the 5200 people polled, 47% said that money concerns caused them extreme emotional stress, and 40% said they had lost sleep worrying about money.

These numbers are crazy. Think about your family members, friends, colleagues, or neighbours. Choose 10. Any 10. 4 of them are currently losing sleep because they’re worried about money.

Adults are clearly not handling this whole money thing very well.

What can be done about it?

There are currently calls for a greater emphasis to be placed on developing the personal finance skills of adults. Some programs have even been established. One of these, the National Strategy for Financial Literacy, seeks to “Help Canadians gain the knowledge, skills and confidence they need to make good financial decisions and improve their financial well-being.

Measures have also been rolled out, like CRM2, to improve the level of transparency when it comes to the fees investors are paying their advisors. The hope is that with this improved level of clarity, people will make smarter financial decisions.

While this is admirable, there is one extremely large missing piece in the strategy to improve the financial health of the average person.

What is it?

Kids.

This Missing Piece

I think you would agree with me that it is completely astounding that students of the public education system are graduating today without a solid foundational knowledge of personal finance.

financial education

And I’m not alone.

A while back Mike, the owner of this site, tweeted, “It’s astounding what I did not learn about money in high school. I graduated without even the most basic understanding of how compound interest can work against you and bury you.” He then wondered if things had changed in the 15 years since he had graduated or if kids were still leaving school financially illiterate?

There was a lively exchange of ideas from people all over the world. Some stated that it was being taught where they lived, and others said it was lacking.

With the numbers I referenced above from my home country of Canada, I think you would agree with me that there is still a lot of work to be done to establish the firm foundation of financial literacy necessary to pull ourselves out of this crisis.

What I’m Doing About It

For nearly 10 years now, I have had an extreme passion for personal finance. You can’t put a price tag on the freedom that comes from knowing that you are the master of your money and that you tell it what to do.

Early on in my journey, I couldn’t keep my mouth shut when it came to sharing with others what I was learning.  It’s a big reason why I started my blog.

As a teacher at heart, and a trained educator, it’s part of who I am to share what I’m learning in my life with others and to guide them to find these same truths in their own lives.

I’ve always wanted to find a way to integrate my love of personal finance and my conviction that it be taught in schools. I’ve taught a variety of different subjects in grades 6-9, but it never really seemed to fit in with my assigned courses.

The Course

This year, however, presented a unique opportunity for me to develop an entire mini-course focused exclusively on teaching personal finance to 5th and 6th graders at my school. It would run over 6 weeks, and I could create the curriculum however I wanted.

I was like a kid in a candy store.

I spent months thinking about what topics were foundational for students to learn, and which ones they would be most interested in. I found many online resources and games that I could use to help the students learn and to excite them about the topic of money. Yes, I wanted to teach them, but I didn’t want to bore them to death Ferris Bueller style.

Bueller

I even tried to brand the name of the course to inspire their imaginations. I called it Money, Money, Money.

In the end, I settled on 5 topics: Spending, Saving/Investing, Working, Entrepreneurship, and Giving. Within each of these, I was able to teach about a wide range of ideas: needs vs. wants, budgeting, compound interest, active vs. passive income, how to run a business, and why giving is so important.  (If you’d like full access to the curriculum I developed, follow me on Twitter @method_money or on my Facebook page @methodtoyourmoney and I’ll send you a special link.)

On the first day of class, the students entered the room to the funky beat of the O’Jays “For the Love of Money” (the theme song from the Apprentice). We dove right into talking about spending with me asking them what they would do if they had 1 million dollars. Their answers were creative and incredibly insightful. They showed a great depth of thought in their responses.

The show-stopper of that first class was when we broached the subject of investing and passive income. I told the kids that they could make money AS THEY WERE SLEEPING. This BLEW their minds, with one little guy remarking to me at the end of class with a deadly serious look on his face, “You’ve got to tell me more about this investing thing.”

Overall, the class has been a smashing success. I’ve also been able to partner with The Learning Partnership to run a program called Entrepreneurial Adventure.  The program gives students the opportunity to start a small business, market and sell a product or service, and then donate the profit to the charity of their choice. It’s a great culminating activity which allows them to put into practice the things they’ve learned.

Why Should You Care?

Now I understand that you may not be a teacher. In fact, most of you probably aren’t. And you may not have a school or school system that is teaching kids the basics of personal finance.

However, many of you are parents or will be parents in the near future. There’s no guarantee that your children will get this basic education at school. Even if they do, as their parent, you want to be sure your kids have all they need in order to be successful with money. The problem is, however, that most parents don’t really know where to start.

What Can You Do To Teach Your Kids About Money?

Here are 5 steps you can take to begin laying the groundwork for your kids to crush their finances:

1. Talk with your kids about money

Money should not be a taboo subject in your home. It’s something that you should talk about openly with your children. Look at everyday activities as opportunities to teach them about money. For example, in our house, we have to often say no to our kids when they ask us to buy something. When we do, we explain to them that we only have so much money and if we spend it on one thing, we can’t spend it on another. We never tell them we don’t have the money. We explain that we have the money, but we’re choosing to spend it on something else. This is a simple way to teach them to think in terms of what psychologists call Opportunity Costs. It reinforces to them that saying yes to one thing means saying no to another.

2. Teach them to work

In our house, we’ve started paying our 5-year-old daughter a commission based on the work she does in our home. Little M2M has a chore chart that has all of her daily chores spread out over the week. It’s pretty simple. In order to get paid, she has to work. No work, no pay. I don’t love the idea of giving kids an allowance just for existing. It’s not really how things work in the real world. I want her to make the connection between hard work and getting paid, so she’ll grow up to be industrious.

3. Teach your kids the basics of how to handle money well

The basics of personal finance fall into three categories: giving, saving, and spending. In our house, as soon as Little M2M gets paid, she puts some of her money into her give jar. Next, the largest amount of money goes into the save jar. And finally, she puts money in her spend jar. The message we’re reinforcing is that we don’t give and save from what is left over. Rather, we spend from what is left, and we give and save first.

4. Talk to your kids about investing

Compound interest is powerful. Crazy powerful. Like insanely powerful!! I’ve run the numbers for Little M2M and if she were to start investing at 5 how much she would have at 55. It’s nuts. Talk to your kids about this. They may not get the math. They can, however, learn to understand that a dollar today is worth way more down the line.

5. More is caught than is taught

As parents, we need to walk the walk when it comes to our finances. If we’re living above our means, spending like it’s 1999, and not saving for the future, it’s tough to teach our kids how to be good with money. The best thing we can do is to be an example to them about how to handle money responsibly. Money is a tool. And just like a hammer, it can be used for good, or it can make a mess of things. We need to live this out for our kids.

Children Are The Future

I think Whitney Houston summed it up best in her 1985 hit “The Greatest Love of All” when she said, “I believe the children are our future. Teach them well and let them lead the way.”

We all bear the responsibility to teach the next generation the skills they need in order to be financial successes. The mess we’re in isn’t going to get any better by just ignoring the trouble around us.

If you’re reading this blog, you’re one of the few people who have taken responsibility for their finances. You’re working hard to lay a solid financial foundation. The most helpful thing you can do is to pass along what you’ve learned to the next generation and to be an example to them. With that base of knowledge, and wise money mentors to guide them, they can then experience the peace that comes from mastering their money.

Is financial literacy being taught in your kid’s school? What are you doing to pass on your financial values to your children? Drop me a line in the comments or send me a message on Twitter @method_money or on Facebook @methodtoyourmoney.

9 thoughts on “Are We Doing Enough To Educate Students About Finances?

  1. What a great course! Live that you are educating the little ones on money, it’s super important! I’ve been saying for years that middle schoolers and high schoolers should be given at least one class that goes over the basics. Especially since they will be bombarded with loans and credit card approvals once they enter college.

  2. That is awesome, Matt!

    The talk about compound interest could really open a lot of people’s eyes.

    Not just in how much you could earn, but how much it can hurt you too.

    Young adults really need to know how carrying a balance on credit cards could hurt you 5, 10, or 20 years down the road.

    Probably not something for 5th or 6th graders, but I’d hope 11th and 12th graders would understand 🙂

  3. Hey guys,

    Thanks for the comments and encouragement.

    8th – totally agree that personal finance is more than just balancing checkbooks. If kids can learn early how to truly live wealthy lives and to develop a growth mindset when it comes to their finances, we will be setting them up for success.

    Nick – great point about compounding being a potential negative force as well. We don’t talk a ton about credit cards in 5th and 6th grade like you said (more needs vs. wants) but it is super important to lay the foundation for having those conversations as students get older.

    Thanks again for all the comments and encouragement!! -Matt

  4. I love that you’re getting a chance to design a program around this! In high school, they covered ‘budgets’ which really totalled a few days of find the average salary of the career you want, then check off what you want from a list. This had average prices and it showed you whether you had ‘enough’. Not much of a skills building.

    I think it’s really important to get financial skills (at least the basics) taught in schools. I also think it’s so important that they way is taught builds a positive relationship with money. Fear and negativity is great but too much can disable you. So much of our life learning about money forms a negative relationship with financials. So it’s something a lot end up avoiding if they can.

  5. Whymances,

    You bring up a great point about the relationship many have with money being negative. So many have a poverty mindset when it comes to money (never enough, need to work more, the rich get richer, the man is keeping us down). I’m excited that I get a chance to teach kids that their relationship with money can actually be a very positive one, especially if they form a solid foundation early on.

    Thanks for taking the time to check out the post and for commenting! -Matt

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