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Why kids should be taught personal finance in school - and at home

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  • Why kids should be taught personal finance in school - and at home

    Why kids should be taught personal finance in school - and at home
    http://www.cbc.ca/news/canada/why-ki...home-1.3212530

    Many youth are graduating unprepared for the financial realities of adulthood because they don't tend to learn financial savvy either at home or school.
    "Canadians don't understand the basics," says Laurie Campbell, CEO of Credit Canada Debt Solutions.

    Many adults, she says, struggle with simple concepts like spending less than they earn.
    Last year, Manitoba's ministry of education approved a personal finance course Prevost created, and he taught it for the first time to Grade 11 and 12 students at Birtle Collegiate Institute, about 300 km northwest of Winnipeg.

    He grabs students' attention by kicking off the semester-long class with an investing unit.

    "My first lesson is: you could be a millionaire by 50 by investing the equivalent of a pack of cigarettes every day," he says. "That gets them thinking."

    The course, Prevost says, covers "everything." Kids earn their class credit after learning about tax-free savings, taxes, insurance and other essentials.

    The kids enjoyed the course, he says, and he's teaching it again this year. Ideally, he'd like every school in Canada to offer something similar.

    "I have no idea why it's not getting done," he says. "I have no idea why it wasn't done 30 years ago."
    “You have to dream big. If we want to be a little city, we dream small. If we want to be a big city, we dream big, and this is a big idea.” - Mayor Stephen Mandel, 02/22/2012

  • #2
    ^I have a masters degree in finance, and I have problems with debt (mostly result of lifestyle change). While I think finance education is a good thing for kids, I don't think its going to stop many people from doing, what they need to do, to survive / enjoy the lifestyle they want. At the end of the day, while debt sucks, I'm glad I did a lot of my spending when I was younger and could enjoy it more than I could now.

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    • #3
      ^ You are right. When I was in high school, we DID have a mandatory class that taught finance. Every student presumably came out with basic personal finance knowledge.

      Everyone knows what not to do. They just do it anyway thinking they can keep it under control, then it spirals out of their means very quickly.

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      • #4
        This is not a knowledge deficit. Its a deficit in delay of gratification and deferring immediate reward that a consumerist society sucks at teaching.
        WE want, we want, we want.

        We train kids to line up at Best Buy for hours to spend hard earned on the latest must have from a store that doesn't sell one item that you must have.

        The degree to which we train kids to spend is alarming. Unless perhaps a country adopts an economic perspective that consumers spending everything they possible can is a good thing. Which this country has also fervently embraced. Screw rainy day thinking. Spend it all now, now.

        This spending habit isn't going to be changing due to what takes place at school. Change what takes place at home, and in the missives of the Bank of Canada that encourage limitless spending and debt.
        Last edited by Replacement; 13-10-2015, 10:36 AM.
        "if god exists and he allowed that to happen, then its better that he doesn't exist"

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        • #5
          Originally posted by Replacement View Post
          and in the missives of the Bank of Canada
          There's not much the Bank of Canada can do. They can't raise interest rates, because that will kill jobs / business expansion, and inflate the exchange rate at a time when it needs to be low to offset low comodity prices. And, they can't restrict mortgages much more than they already are restricted, those are already guaranteed.

          We live in a consumer society - it drives our economy, it drives the economy in the US. Its nothing new, it is, what it is, it gives us material lifestyles the envy of the world. If you aren't that materialistic though, North America perhaps isn't the best place to live.

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          • #6
            The Bank of Canada shouldn't have let rates get so low in the first place.

            Think about how often you've read in the paper in the past couple decades about how a recovery was led by increased consumer spending, or how a decline in consumer spending was leading to a lower growth rate.

            The Bank of Canada and the big banks and their forecast guys, along with most of our media have been telling us for a long time that consumer spending is a unqualified good thing for the economy. Add that to saturation with advertisement for material lifestyle, including half of the "news" you see on sites like Yahoo and there's very little that mere financial literacy can do.

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            • #7
              Kids really need to be taught about the power of compounding. It applies to savings, knowledge, luck, and a whole lot of other great things in life. (And then about inflation, risk, stress and all the other the things that can take those great compounding things in life away from you.)

              In terms of personal finance kids also need to be taught a bit about how mortgages work (i.e. paying interest first and only later building equity). In the mortgage example I was taught (I forget any and all the rate assumptions, etc.) it was nearer the end of the amortization period than the beginning that principal exceeded interest.

              eg.
              It Takes 18.5 Years To Pay More Principal Than Interest With An Amortizing Mortgage

              During the first few years with an amortizing home loan (i.e. principal + interest), homeowners often feel like their entire monthly payment is going towards interest.

              Well, not all of it goes towards interest, the graph tells us. Just most of it.

              If you're in the early years of mortgage, though,..."



              http://themortgagereports.com/441/pr...t-amortization
              Then work with kids through a life cycle or two or better yet - ten lifetimes. Show them different life scenarios and how wants and needs change in dramatic ways. Some of them will live to be 100+ years and experience changing priorities, changing wants, changing needs all their lives and others will get taken out in their teens and twenties and won't get to experience much of life at all. Above all, teach them that they are highly unlikely to be the "average" that is used in all those rather moronic and simplistic text books. Teach them that just because they don't follow the most societally desired high-income career paths (doctors, lawyers, etc.) that they can do other things to live well while pursuing their career dreams and building on there own strengths.

              Then kids also need to be able to see the things going on around them in a better context and with a greater historic perspective, so they feel excitement and hopefully see opportunity with change rather than just feeling stress and seeing only gloom and just bad times ahead and/or over spending and over committing during good times. Teaching them a bit about the Great Depression and the many great boom years, years of conflict and near nuclear doom, etc would do a world of good to help kids face and unpredictable future.

              Lastly, teach them that diversified indexing is likely the best long-term alternative when saving. If they think they will be hot stuff in terms of investing, then still put least 50% into indexes or funds. If they are any good, their discretionary 50% will soon far outstrip the indexed 50% and it will be an inconsequential amount serving as insurance.
              Last edited by KC; 13-10-2015, 11:30 AM.

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              • #8
                Originally posted by highlander View Post
                The Bank of Canada shouldn't have let rates get so low in the first place.
                They don't have a choice, we would be in an ugly deflationary cycle otherwise, like Japan has experienced.

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                • #9
                  Last year, CBC did a poll of high school kids and simply asked them how much money they figured they would be making 5 years after high school. The average reply was $90 000/year.

                  I think before we give the kids an education in personal finance, perhaps a course on simple reality should come first.
                  Time spent in the Rockies is never deducted from the rest of your life

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                  • #10
                    ^^ Are things really that bad in Japan, or do the traditional indicators just look bad because the population is shrinking? So long as the economy isn't contracting faster than the population, they are coming out ahead.

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                    • #11
                      World faces third deflationary cycle

                      ^its been ugly there for years, very ugly. The whole world economy is struggling with deflation right now, if our bank put up interest rates, it would be a disaster. GDP is already sluggish, it would probably throw us from recession into depression, unemployment is already going up, it would just be accelerated.

                      http://www.ft.com/intl/cms/s/0/11932...#axzz3oTnqniZp

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                      • #12
                        Originally posted by moahunter View Post
                        ^its been ugly there for years, very ugly. The whole world economy is struggling with deflation right now, if our bank put up interest rates, it would be a disaster. GDP is already sluggish, it would probably throw us from recession into depression, unemployment is already going up, it would just be accelerated.

                        http://www.ft.com/intl/cms/s/0/11932...#axzz3oTnqniZp
                        I have a little printed card with a table of numbers on the back of it. It dates from the 1930s and tells small business owners what the impact on their margins and profits would be from offering discounts. It basically discourages price cutting.


                        As an aside, one of my bigger allocations in my RRSP is Fairfax Financial. A company I've owned on and off for nearly 25 yrs. It's ceo prem watsa is hedged for deflation and could potentiall profit from it. That is, if you are into timing the market, yada, yada, yada...
                        Last edited by KC; 13-10-2015, 03:31 PM.

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                        • #13
                          Originally posted by moahunter View Post
                          Originally posted by highlander View Post
                          The Bank of Canada shouldn't have let rates get so low in the first place.
                          They don't have a choice, we would be in an ugly deflationary cycle otherwise, like Japan has experienced.


                          Yeah, but now we are going to experience the zero lower bound interest rate problem, which Japan has also experienced.

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                          • #14
                            Originally posted by Jaerdo View Post
                            Originally posted by moahunter View Post
                            Originally posted by highlander View Post
                            The Bank of Canada shouldn't have let rates get so low in the first place.
                            They don't have a choice, we would be in an ugly deflationary cycle otherwise, like Japan has experienced.


                            Yeah, but now we are going to experience the zero lower bound interest rate problem, which Japan has also experienced.
                            For almost 20 years I've brought up Japan as an example of how equity markets don't follow highly predictable paths. Something they should teach in schools is the example of a middle aged Japanese worker in the 1980s piling into the booming equity markets and then almost inevitably facing a forced liquidation of his portfolio in retirement at far lower than past peak pricing. Investors often get the idea that the long run is five or six year whereas peak to peak pricing often takes 15, 20, 25 years. (We're still waiting on the Nikkei)

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                            • #15
                              Our universal healthcare has its limits. It essentially diversifies some financial risk related to health issues, but it doesn't eliminate them - and what it doesn't eliminate can still bankrupt you.

                              Teach the kids that too. Teach them to say yes to a rethinking of our healthcare system to address prescription and other treatment hardships. I'd gladly pay a few nickels more for something or other in order to reduce the hardships that are being imposed on unsuspecting victims of cancer and other health issues.

                              Read this:


                              ‘Cancer never gives you a break’: the financial strain of serious illness | Globalnews.ca
                              http://globalnews.ca/news/2253458/ca..._campaign=2015
                              Last edited by KC; 13-10-2015, 07:32 PM.

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