||Volume 18, Number 5, March 2006 |
Why we need to teach financial and consumer education in our schools
by Patricia Douglas
For many teachers, the monetary consequences of our 10-day strike in October are still being resolved, which raises the issue of how little most of us know about budgeting, saving for emergencies, and dealing with creditors and other financial institutions. How does it happen that such a well-educated group of citizens can so easily find themselves in such a predicament? Perhaps the absence of consumer and financial education within our educational system is at least partly to blame.
Since 1995, when Consumer Education 12 was removed as a graduation prerequisite, there has been no requirement for students to learn about financial and consumer issues within the curriculum. Planning 10 has added a few hours of financial planning but it is the smallest segment of the Planning 10 course and some teachers are ignoring this section since they lack the knowledge or expertise to teach the material adequately.
According to experts in the field, such as the Credit Grantors’ Association of Vancouver, the Credit Counselling Society of BC, and representatives of bankruptcy trustees, more detailed and in-depth financial education must be taught at a senior level when students are more mature, are preparing to leave high school, and at a time when they will require the information.
To quote some statistics that give insight into this problem:
- In 2005, the average Canadian carried a debt load equivalent to 115% of their gross annual salary. This compares to a debt load equivalent to 50% of their salary in the early 1980s when interest rates were running up to 20%.
- The average BC consumer who approaches the Credit Counselling Society of BC for assistance has a consumer debt load of $25,000, not including their mortgage or car payments.
- This same consumer has an average of 7.3 credit cards in their possession.
- Nationally, half of all Canadians pay off their credit card balances each month and half do not.
- There are 52 million active Visa and Mastercards in circulation in Canada at the present time.
Students who take the Essentials of Mathematics in Grades 10 through 12, do get some grounding in basic consumer and financial issues. However, our brightest students, who do not take Essentials of Mathematics, go on to college and university without any training in, or thought about how they will be paying for their post-secondary education and how they will manage their debt load after graduating.
Has anyone ever:
- suggested to students that they might delay the start of college or university for a year or two so that they will not need student loans and they can graduate without an enormous debt load?
- explained to students that putting money into an RRSP will decrease their personal tax payments so the extra money saved can pay for schooling and that $10,000 per year can be pulled out of an RRSP tax free (for a period of 10 years) to pay for education costs?
- told students that they are not able to declare personal bankruptcy as a result of their inability to pay off a student loan for 10 years after graduation? If they do declare personal bankruptcy, they will not be able to get credit for another 6 years–a total of 16 years after graduation during which time they will not be able to buy a house, own a credit card, or purchase a car, or even groceries, on credit!
- taught students about the strategies and the compounding effects of starting to save for retirement as early as possible?
- discussed with students the problems of owning a house or condo, putting money into RESPs for their children’s education, or saving for retirement when they are still paying off student loans in their 40s?
- explained to students that in a global, technology-based economy, there are very few, long-term, secure positions with good medical and retirement benefits available? Most young people will work for a number of different companies, with few, if any, benefits. Many will work on a contract basis or be self-employed and they will be responsible for their own medical and retirement benefits. They also will need to budget for a number of periods of unemployment during their working years as they look for new employment or upgrade their skills and training.
Teachers have learned some life lessons in financial management from this strike, especially new teachers, who had no savings and lots of credit-card debt and student-loan payments. Many of them had no reserves to even pay for food, let alone rent. Now is the time to think about how our students can also benefit from our experience.
Students need to learn about financial issues and unfortunately, this has always been an area that parents are reluctant to discuss with their children. That leaves it up to the educational system to offer students some support and training in these matters. We need to advocate for more financial education for all students as a requirement for graduation from secondary school and we need to do it now.
Some real-life stories of credit management
• A young couple in their late 20s, who bought a house within the past year, are carrying a total debt of just over $95,000, as well as their mortgage. Their debts include $36,000 in student loans for a post-secondary degree, $16,000 for a car loan, $43,000 in unsecured credit card loans and line of credit, mostly for furnishings for their new home.
This well-educated young couple, despite their desperate credit situation, borrowed more credit this past Christmas to buy themselves a new laptop.
• Another couple in their early 30s, who is carrying a total debt of $131,000, is hoping to declare bankruptcy as of January 2006. They simply spent all the money that they made and more. Their debts consist of $32,000 for a car lease, $38,000 for student loans, $61,000 for home and living expenses purchased on credit.
This couple, who recently purchased a workout machine for $3,400 on credit, have sought interest relief for the entire eight years since the husband, a school principal, graduated from a post-secondary institution.
• A very busy senior manager in the public-service sector accumulated over $125,000 in debt using mostly credit cards and lines of credit. He lacked organization and did no monitoring of his spending. Since he did not know how to budget or control his spending, he just ignored the whole financial area. Luckily he recently found a partner and is well on track to clearing up his debts.
• A young couple, who married last year after they both graduated from university, were given the down-payment for a house as a wedding present from their families. A year later, both of them are working in well-paying professions but they are selling the house to help pay off their student loans and moving in with her parents. Their student loan debts total $158,500.
is available from Credit Counselling Society of BC, 1-888-527-8999, www.nomoredebts.org
Speakers on credit
for Grade 11 and 12 classes are available from Credit Grantors, 604-320-2333 (leave a message) or www.creditgrantors.org
Patricia Douglas is a business education teacher, David Thompson Secondary School, Vancouver and editor for the BC Business Educators’ Association PSA.