Why kids should be taught personal finance in school - and at home

Every year, a Manitoba high school teacher asks his graduating students to create a budget for the next year. They write down their income and anticipated expenses, but they don't see how it adds up — and whether they're in the red — until the very end.

"Every single time I've done this ... they see that they're $15,000 in the hole for the year," says Kyle Prevost, a high school teacher and co-author of More Money for Beer and Textbooks.

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Perhaps the most troubling thing is that his students believe they're filling out "reasonable" amounts for their expected expenses.

"Many of them thought they were already taking a hit spending $2,000 or $3,000 a year on clothing, because that was less than they were spending now," he says.

Many youth are graduating unprepared for the financial realities of adulthood because they don't tend to learn financial savvy either at home or school.

Students need personal finance classes, according to Prevost and other personal finance experts, to prevent them from spiraling into a life of debt and financial insecurity.

Parents struggle with financial literacy too

"Canadians don't understand the basics," says Laurie Campbell, CEO of Credit Canada Debt Solutions.

Many adults, she says, struggle with simple concepts like spending less than they earn.

I believe that we can realize and recognize that parents haven't done a very good job of teaching their children.- Laurie Campbell, Credit Canada Debt Solutions CEO

Canadians' rising debt levels help prove her point.

Canadians collectively owe $1.568 trillion, including mortgages, according to a recent study from credit firm Equifax. That works out to roughly $21,000 per person. 

Put another way, Canadian households owe nearly $1.65 for every dollar of disposable income.

The average student graduates post-secondary school with about $25,000 of debt. At the other end of the age spectrum, about one out of every five Canadian seniors declares bankruptcy.

This growing consumer debt reflects a laissez-faire attitude to borrowing, and with many adults failing to manage their money well, it's hardly surprising that most kids don't grasp the fundamentals of spending, saving and sharing, financial experts say.

"I believe that we can realize and recognize that parents haven't done a very good job of teaching their children," Campbell says.

She's a firm believer that schools ought to pick up the slack.

"It should be a priority," says Prevost.

Mandatory personal finance course?

Last year, Manitoba's ministry of education approved a personal finance course Prevost created, and he taught it for the first time to Grade 11 and 12 students at Birtle Collegiate Institute, about 300 km northwest of Winnipeg.

He grabs students' attention by kicking off the semester-long class with an investing unit.

"My first lesson is: you could be a millionaire by 50 by investing the equivalent of a pack of cigarettes every day," he says. "That gets them thinking."

The course, Prevost says, covers "everything." Kids earn their class credit after learning about tax-free savings, taxes, insurance and other essentials.

The kids enjoyed the course, he says, and he's teaching it again this year. Ideally, he'd like every school in Canada to offer something similar.

"I have no idea why it's not getting done," he says. "I have no idea why it wasn't done 30 years ago."

Prevost, along with a small group of teachers in his province and Saskatchewan, have banded together to pressure their education ministries to standardize a personal finance curriculum.

Ontario requires teachers to insert financial literacy lessons into other core subjects, like math or history. But that falls far short of a required personal finance course, Prevost says, and he's unimpressed by examples of when teachers could include such lessons. For example, an English class reading Shakespeare's Hamlet could debrief on credit when they come across the line, "neither a borrower or a lender be."

To those kinds of suggestions, Prevost says, "no." He finds it frustrating that teachers would be encouraged to layer personal finance into other core subjects when "that's code for stuff that's tacked onto the end of my course that I'll never get to."

Kids want parents' help

Schools shouldn't be solely responsible for a child's financial education, according to Kelley Keehn, a personal finance author. She says kids want to learn the ins and outs of finances from their parents.

Parents should take advantage of teachable moments that crop up in their finances, she advises.

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"You have to look to your life every day and say, 'Where can I teach my kids about what I'm going through?'" she says.

At mortgage renewal time, for example, parents could explain how borrowing for home ownership works. When a credit card statement arrives, they could explain interest and annual card fees.

​Keehn and Campbell both sit on the national steering committee on financial literacy, which helps to implement Canada's national financial literacy strategy. Keehn recognizes that the strategy needs to better equip parents to be able to provide those teachable moments for their kids.

While Credit Canada's Campbell agrees that, in an ideal world, parents and teachers would share the task, it's clear schools need to prioritize teaching financial literacy.

"Let's face it, they're not going to necessarily use calculus when they come out of school," she says. "I'm not sure why we're not doing more in the area of money management."