Should financial literacy be mandatory?
Let’s all be frank: when it comes to financial speak, we don’t know half of what we lead people to believe.
Before this whole economy began to rot, we’d never heard of terms like “futures markets,” “cost of debt ratio” and “net present value.” They were part of a vernacular reserved for derided Wall Street traders, and that’s where they ought to stay.
But if there’s to be one lasting casualty from the latest recession, it’s that the world – Canadians included – could greatly benefit from a lesson in Economics 101.
I stumbled across this interesting Op-Ed piece from the New Yorker’s James Surowiecki recently, and he agrees … with an interesting take on a possible fix.
Surowiecki argues that North Americans should benefit from a kind of money literacy program, “something more like a financial equivalent of drivers’ ed.”
“There’s evidence that just improving basic calculating skills and inculcating a few key concepts could make a significant difference (in the way people handle their money),” he writes on the New Yorker website.
Indeed, Surowiecki may be right. It’s not that we all need to turn into Gordon Gekko to promote wiser fiscal health, but requiring society to have a rudimentary understanding of base financial principles could be quite valuable.
It’s an interesting proposal, adopting a kind of financial “drivers’ ed,” as the writer puts it. But your average Tom, Dick and Harry isn’t likely to opt into one of these programs if it’s optional to the general public.
No, if we’re to consider a crash course on money, we’d have to make it mandatory – and why not start with high school kids?
As teens reach ninth or tenth grade, make an economics class – something optional to today’s high schoolers – a requisite course needed to graduate.
According to many experts, regions of the U.S. with mandated financial education in their high schools has a significant impact on local savings rates.
And, as Surowiecki concludes, “the difference between knowing a little about your finances (the base principles of mortgage and interest rates, for example) and knowing nothing can amount to hundreds of thousands of dollars over a lifetime.
“As the past ten years have shown us, the cost to society can be far greater than that.”
By Jason Buckland, MSN Money
Posted by: Grrrr | Jun 29, 2021 10:24:28 AM
I woul suggest Mr. Buckland could use some further education, like the difference between finance and economics.
Posted by: Laura Thomas | Jun 29, 2021 10:28:21 AM
Waiting until high school is a huge mistake when it comes to teaching kids about personal finances and fiscal responsibility. We need to start building financial literacy in kindergarten when their brains are sponges and they are excited about learning new things. In fact, yesterday I was at CBC Vancouver taping the following question for Kevin O'Leary for the Lang & O'Leary Exchange: If you had just three things that you could teach a five-year-old Canadian kid about money what would they be? I hope he helps get the message out that the earlier we start teaching financial literacy the better. Also, note that in BC schools kids have to take Planning 10 which does have a unit on finances. It's not enough in my books, not by a long stretch. Thanks a billion for raising the issue of kids and money!
Posted by: Prof Day's Former Student | Jun 29, 2021 11:36:43 AM
Earlier is better 4 sure. But the content is even beyond Eco101 stuff. In 1990 I took Prof. Day's Political Economy course @ UofT. Best course ever. It covers the intersection of econ/biz, polysci, and social issues...it's the centre of the venn diagram that is really important 4 people to learn. Back then I said that hgih school political economy was needed in high school. Today, we c "integrated thinking" espoused @ Rotman and similar concepts everywhere. Pleople need the raw material and the integration. So now we're @ a place where we need a series of courses that build from some form of digestible kindergarten money mgmt thru middle school core subjects (eco/poly/soc), to high school integration with something like Prof. Day's course (kudos Richard, BTW - best prof). This stuff is easily covered by someone with a teaching degree.
Posted by: Ken | Jun 29, 2021 11:47:00 AM
The problem with that line of thinking is it was the financial and economic geniuses that put us into the recession in the first place. So much for the fancy letters behind their names. Yes, many people live beyond their means, and I'll admit, if I were to lose more than two paychecks I'm in trouble, but it's the people at the top running the banks and financial institutions that are apparently in serious need of some more schooling. Although they don't really care, they walked away with millions upon millions while the rest of us were forced to struggle along because of their incompetence and greed.
Posted by: Vee Pee | Jun 29, 2021 11:47:04 AM
Money is an emotional, as well as economic, issue. I agree with Ms. Thomas - the sooner we teach kids to have a healthy relationship with money, the better. If we wait too long, bad habits can set in. Don't just leave it to the schools – get parents involved too. A small allowance and simple budgeting can be taught to a kindergarten-aged child. Make it part of their lives, not just schoolwork. By the time they are adults, today's kids can be savvy spenders.
Posted by: Laura Thomas | Jun 29, 2021 12:53:33 PM
On the difference between "economics and finance" in education . . . Kids are introduced to money and systems of exchange starting in kindergarten in the "Economics and Technology" unit of Social Studies. In high school, students can choose to take Business or Economics electives. Like I mentioned, it's the personal finance side that is left out of the curriculum until they take the mandatory Grade 10 Planning course (at least in BC). Also, did you know that as part of our Economic Action Plan we've got a task force on financial literacy? They finished their public consultations in May and the report is due on Flaherty's desk at the end of the year. Here's the website: http://www.financialliteracyincanada.com/eng/index.php
Posted by: John Gaul | Jun 29, 2021 2:23:20 PM
Certainly financial literacy is important but financial regulation is vital. Allowing companies to operate with little of no real rules of conduct was the real cause of the recession and not ignorant consumers. After all some of the financial products were too complex for people within the financial community to fully understand. On top of that most were unethically packaged debt designed to deceive. Beyond regulation there must be severe penalties for those inside the financial community who behave unethically.
Regulation is more vital than financial literacy.
John Gaul
Posted by: Guy | Jun 29, 2021 3:12:24 PM
John Gaul is correct. We must fix the financial community by providing stronger regulations. Someone like me who understands economics very well, should not have lost 32% of my portfolio during the crash. I really did nothing wrong except for investing into the market in a conservative portfolio looking for 6% return. In terms of educating the public, it really astonishes me how the female gender within our core group of 20 couples really don't know the basics of economics and don't want to really learn. Yet, many of these ladies have excellent careers. They leave it to their spouses but when you speak to the men, many of them are not educated as well with any of the fundamentals. They look for me to explain basics but this education should have been available to them way before me. How do you teach at home when the parents don't have the knowledge. Grade 6-7 should be the latest when schools should provide basic info like the rule of 72, how inflation works and mortgage instructions.
Posted by: John Royer | Jun 29, 2021 5:49:05 PM
Why not start teaching kids in grade 3 the basics of budgeting? Then in grade 4 simple interest. Grade 5 compound interest. Grade 6 Various types savings accounts. Grade 7 How banks work, loans and mortgages. Grade 8 start on insurance types. Grade 9 Mutual funds. Grade 10 stocks and Bonds? Grade 11 Economics. Grade 12 TRADE! Sounds too simple right?
Years ago I met Bette Stephenson who was then the Minister of Education. I asked her why we didn't teach kids about money. She said they felt it was better to let the parents teach their kids? I asked her who taught the parents? No reply, dismissed. The real answer is the banks need you stupid. That way they can cherry pick you whenever they want. Same with Governments, an educated consumer is dangerous. An educated population is even more dangerous. Why do you think the Romans diverted the masses with the games? World Cups, Stanley Cups, World series anyone?
Posted by: Financial Planning | Jun 30, 2021 1:54:23 AM
Well, I am in favor of Financial Literacy. Everyone should have at least basic knowledge of Financial terms, like Tax saving, Mutual Funds, and about right investment places.
Posted by: Lisa | Jul 1, 2021 7:51:19 PM
Yes, finances she be taught. That's a given. It should be looked at seriously enough to be mandatory in high school. You should have to get a good grade in the course to pass also.
Why?? There are way too many people out there that don't have a clue about money and how to handle it, but they own homes and cars. I just don't get it.
Posted by: Bryan | Jul 9, 2021 9:46:08 AM
Yes it should be mandatory, watch this documentary to find out why. It's called The Money Masters.
http://video.google.com/videoplay?docid=-515319560256183936#
Posted by: Modelle milano | Jul 19, 2021 2:23:32 AM
Nice and informative article that state that the difference between knowing a little about your finances and knowing nothing can amount to hundreds of thousands of dollars over a lifetime, Thnaks for giving this blog.