A lament for the sad state of financial literacy among young people

It was not my finest hour. Some years ago, my partner and I were invited into our bank manager's office to discuss, in great detail, the remarkable elements of the mortgage we had applied for. As with Stephen Leacock, banks make me nervous. Especially when forced to deal with numbers in the six figure range. The manager began talking about amortization, monthly payments, accrued interest, payment speed up, principal and interest combinations. My partner began to question him. She was very good.

I suddenly found my mind drifting. I looked out the window. I tapped my feet. I wrung my hands. I blinked furiously. Quietly and inevitably, I fell asleep. I nodded off. After a moment or two, a sharp dig in the ribs. "Wake up," she said. "This is important." Indeed it was. A house is the largest purchase most of us will ever make. But talking about money I find can be tedious beyond measure. The reason for that is simple: I am a financial illiterate. I take no comfort in the fact that there are millions like me who don't understand the first or even the second thing about finances. I never have.

Once, as a member of the editorial board of a large newspaper, I had to sit through a lunch with the sitting finance minister. Every other member of the board was asking about trade deficits and current accounts. The editor ask me if I had a question for the minister. I said: "What's the difference between fiscal and monetary?" The minister, Edgar Benson, took a drag on the great log of a pipe and rolled his eyes. 

I was reminded - as if I had to be reminded - of how badly I deal with things financial when I read a piece in Forbes magazine entitled in bold letters: FINANCIAL ILLITERACY IS KILLING US. The story described the great canyons of ignorance about financial matters among teenagers. Said the writer: "That teenagers are allowed to drive, vote and parent, all while not knowing the difference between an asset and a liability, is nothing short of a travesty."

While the article naturally focuses on the United States, there are elements which echo the situation in Canada. In the US, efforts to improve financial literacy target high school students but even there surveys have shown that what is learned lasts a maximum of two years. I was taught nothing about money during a less than distinguished high school career. Nothing about mortgages, interest, pensions, profits, investments, insurance - nothing. Neither were my children.

I spent a lot of time in the chemistry lab doing God knows what. I sat through long descriptive explanations about physics and algebra, but nothing about personal debt and savings plans. The closest I came to understanding anything at all about money was a weekly allowance and opening what was called a Christmas Club account at our friendly, local bank. And of course learning to play Monopoly, probably the greatest financial educational tool ever created.

When I started a working life, my dream was for a salary of $10,000 a year and buying a house for $25,000. But I still didn't know the difference between a stock and a bond. Which is why it is encouraging to learn, as I did this week, that the Canadian government has an agency called the Financial Consumer Agency of Canada. It was set up in 2001. Part of its mandate is to oversee the operations of financial institutions, but part of it is to expand the financial literacy of Canadians.

It has held national conferences on the subject and conducted surveys on various levels of financial literacy. It issues reports from time to time. It even has its very own financial literacy month - November. As it points out on its website, financial literacy is critical to the prosperity and financial well-being of Canadians. And it is never too early to start acquiring it. Schools in Ontario have started to talk about money to children in elementary school, usually around grades four and five.

A series of surveys across the country show that financial literacy among young people is very low. For example, 95 per cent of young people interviewed knew what a budget is but only 20 per cent knew how to stick to it. Nearly 55 per cent of teenagers say they wouldn't pay off their credit card balance every month. And nearly 40 per cent of students said that how to save money was the most important topic in the school curriculum.

If I had gone through a rigorous course in financial literacy and management, I might now be in a position where I could balance my cheque book. Or...probably not.