Allison Knee: Neglecting to properly teach financial literacy is doing young Canadians a massive disservice

Why is our education system neglecting skills fundamental to navigating the world?
People make their way past the Bank of Montreal (BMO) building in the Financial District of Toronto, Monday, Aug. 14, 2023. Spencer Colby/The Canadian Press.

When I was in school, economics and finance courses weren’t required, or even offered, despite there being a selection of elective offerings available to take. As a result, I didn’t know much about personal finance at the time. Or investing. Or economics. Or business. I had very little knowledge about these topics until university. The question is, when do people usually learn about finance? Do they ever? 

All Canadians feel the real effects of things like inflation, interest rates, credit, loans, and taxes, but many people have a limited understanding of how these things work. According to a survey conducted by TD, one in three Canadian parents aren’t confident they’re setting a healthy financial example for their children, and only 10 percent of them consider their household to be in “excellent” financial health. 

Are you familiar with the terms risk diversification, inflation, numeracy, and interest compounding? These four concepts are the foundation for Standard & Poor’s definition of financial literacy. If you weren’t taught about them or didn’t understand these things in school, you would not have been considered financially literate. When I graduated from high school, I wasn’t. Canada should seek to change this.

By implementing or enhancing financial literacy programs in Canadian high schools, more informed financial decisions could be made. The COVID-19 pandemic’s influence on the economy, including high interest and inflation rates, means that a focus on financial literacy is more important than ever for today’s youth.

Canadian high schoolers are taught financial literacy differently in each province. Some provinces, like Newfoundland and Labrador and Prince Edward Island, have career development courses that include some finance concepts. Others include these concepts in mathematics and social studies courses. Some provinces utilize “financial literacy days” as their main source of financial education. 

While these programs are a good start, more needs to be done; more uniform programs could be adopted Canada-wide, and finance should be a requirement like math, English, and science. These changes could take the form of additions to current social studies and career development programs or through the creation of new educational requirements through new finance courses.

Research also shows that when such programs are implemented, they work. A survey conducted in 2009 found that students who participated in required financial education programs were more likely to display positive financial behaviours such as saving and not maxing out credit cards. They were less likely to make late credit card payments, more likely to pay off credit card balances in full each month, more likely to take average financial risk, and less likely to become compulsive buyers. A study published in 2019 showed that mandating financial education requirements significantly reduced younger borrowers’ chances of accepting high interest payday loans.

Another study published in 2020 showed a significant link between financial education programs and fewer defaults and higher credit scores among young adults in the USA. This study states that:

The state’s policy allows affected students to consume more of their income in future periods and spend less on borrowing costs. These policies may potentially be a benefit for lenders as well, by allowing them to avoid collections and loan write-off costs.

There are other benefits to teaching young adults more about finance as well, such as the benefits derived from investing earlier in life via compounding returns. It is clear from the evidence that emphasizing financial literacy and offering these programs to people helps them make smarter financial decisions, and understand what they’re getting into when making choices on loans produces better individual and collective outcomes when it comes to household finances. In today’s environment of increasing interest rates, this is an important point: people should be informed of what these increases mean, and how they should affect their borrowing (and investing) choices. 

An important consideration when it comes to implementing financial literacy into school systems is making these programs interesting and relatable to students, as well as encouraging them to see the importance and applicability of it to their lives. It needs to be made into something that students will care about and pay attention to. Learning about current topics, using interactive learning tools, and tailoring the curriculum to geographic regions and the interests of individual students would be useful in this regard. 

Household economics and personal finance are important topics with day-to-day relevance. Inflation, interest rates, investing, cost of living, and borrowing are things that frequently change, are influenced in complicated ways by current events, and are massively impactful on everyone’s lives. Students should have the opportunity to ask questions and explore these concepts early on in a structured learning environment. They, and Canada overall, would greatly benefit from a more financially literate society.

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