Did you know that money is often cited as one of the leading causes of stress?
Where does our relationship with money begin? And, how do we develop how we think about money?
I’ll tell you this: I have a bone to pick with the Canadian education system, because I don’t think they prepare young people with enough knowledge about basic financial information before they graduate high school.
There, I said it. It’s off my chest.
I know that how we are brought up has a huge influence on how we come to know what money means, but that should never be the only way to learn. Most of our parents’ generation have massive debt. This is not a great example!
I remember my dad teaching me about money through regular heart-to-heart chats. He liked to tell me that saving money was important, and that if you want something big, you’ve got to work hard to earn it. Pretty basic stuff, but it’s stuck with me.
I also remember my grandparents dealing only in cash. Yep, no credit cards to be seen, and before there were debit cards, it was literally just cash. They made going to the bank part of the daily routine, which is something I can’t imagine doing today. How we bank and what we do with money has drastically altered over time.
Case in point, just watching and learning doesn’t always benefit you. I didn’t know much about credit until I was racking up my student loans and had my first credit card as a student. I still don’t know much about how I should be investing for my future, and folks, I have a Bachelor of Commerce!
Getting back to the root cause and how to solve it, I have a short list of topics that I think the education system should be teaching kids about all through elementary and high school. They’ve cut so many programs over the years, that I have no idea where this would fit, but the national household debt level (among other information) tells me that a basic finance education is an absolute necessity.
1. Credit is not “free” money. Most people learn this through trial and error. Why not explain the types of credit and what they can do for you, instead of letting kids end up with credit cards and student loans without understanding what happens when it’s time to pay them off? Interest rates and payoff plans matter.
2. Saving for your future. Pensions have seen their day, and I doubt that many gen-y employees will stick at any one place to actually reap any benefits if they do exist. However, RRSPs and RRSP matching are easy to understand and should be capitalized upon. In fact, if young people started a fund earlier (say at the age of 16 when they get their first job), they’ll build habits that stick, and be able to make a massive jump ahead in their savings.
3. Budgeting and forecasting. Seriously. This is so simple, but so overlooked. I like budgets because I like numbers and that’s me, but not everyone learns this skill before it’s necessary and needed to get back on track from overspending.
4. Investing can be more than GICs and Mutual Funds. This is more about understanding your personal risk profile, but if you don’t take basic high school economics or learn this from a family member who is very adept and interested in the stock market, you might have to learn this one on your own.
5. Build a relationship with your banker. I think the first meeting I had with a bank was about my student credit, and my dad had kindly set everything up so all I had to do was sign the paperwork. Thinking back, I wish I had been taught to form a relationship with a financial professional earlier so that I could talk about my entire financial profile at once, and start building a relationship with a financial professional I could trust. It’s kind of like going to the doctor – you don’t always want to go, but you should go because you know it’ll be good for you. And banks are getting better at customer service, so it’s not so scary after all.
What finance lessons do you think should be taught to young people and the next generation?