Lots of good coverage has been happening lately about the many dimensions to money and debt in the modern cellular-cybernetic world. From the Vancouver Sun comes an article supported by the Investor Education Fund Canada group that suggests half of all Canadian students aged 17 to 22 feel they should be better educated on how to handle money. The topic of youth money and debt certainly deserves more attention and action.
I couldn’t agree more with this finding.
I was delighted to hear about a young person’s association called the FLY Club (Financial Literacy for Youth). It’s so true that there is a lot of information out there, all scattered and sending different messages. Young people (not unlike older people) don’t know where to start or what advice would best work for them.
Certainly the more traditional approaches to youth, such as those that treat them like children, should be abandoned. The article cites Tinny Lai, one of the founders of the FLY Club, who reported, “The money management programs run by some schools are very shallow and don’t click with students.”
That, in my opinion, is the rub, the real conundrum. How do we get youth interested in money as a topic of serious conversation and dynamic dialogue – with educators, parents and themselves?
One of the nagging flaws with education programs about money management has been their academic flavour when money management is a life skill – something that must be tested in the real world. You can’t really learn about money with a calculator and your parent’s bank account.
For me, a part-time job in high school is fertile ground to become acquainted with money – how to make it, how to spend it and just maybe, how to save it. However, parents can either help or hinder this experience if they expect the children to support themselves with their own money. This really defeats the whole (money management) learning program. What some kids learn is that they are better off not to work. Let their parents pay for everything. Other kids might learn that a struggling family becomes dependent upon their income. Neither of these two experiences is positive.
If the parents support the learning model – that adolescent children should better understand the many underlying relationships of money like the employer-employee relationship (not always a fun or respectful one) – that working hard pays off – gaining independence from the parent-child relationship by being able to make financial decisions independent of your parents. These experiences build self-confidence and self-respect as well.
Another serious element to high school today is the fear of not gaining entry into a post secondary institution like university or a local college. Under these circumstances many parents are willing to do virtually ‘everything’ for their kids to ‘get’ a post secondary education. Although a noble agenda, this strategy leaves young adults stranded with solving many of life’s problems or acquiring effective skills to manage money and make good decisions. This phenomenon has a name: emotional intelligence. Children may have a first class honour degree in academic or technical training but are lost in life.
Sadly, for many young people, their first encounter with debt will be a student loan and they will not fully understand the meaning of this until the debtor-creditor relationship kicks in 6 months after they graduate. This is when they have to make their first payment.
“Some students pay for their whole post- secondary life with credit cards without realizing the interest rate, which keeps on adding up pushing them into a whirlpool of debt,” Daisy Chan, the author of the Vancouver Sun article reported. “People underestimate credit cards……….The root cause of financial crisis for students is that they are financially illiterate,” said Chan.
This is very powerful insight.
In addition to learning (having experience) with money, banking, shopping, and saving, we need to find a way for young people to experience first hand, the debtor-creditor relationship and the repayment of debt process before they take on something as huge as a $26,000. student loan debt. This might help garner deeper respect for debt and the consequences of overspending – and the repayment of huge amounts of debt over a painfully long period of time – possibly as long as ten years.
And, it just isn’t students who need to engage in a serious conversation and money and debt. We need a dynamic dialogue with educators, parents, young people and governments.