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

  1. #1
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    Default 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. #2

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    ^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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    ^ 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.

  4. #4

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    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 at 11:36 AM.
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  5. #5

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    Quote 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.

  6. #6
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    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.

  7. #7

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    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 at 12:30 PM.

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    Quote 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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    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.

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    ^^ 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.

  11. #11

    Default 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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    Quote 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 at 04:31 PM.

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    Quote Originally Posted by moahunter View Post
    Quote 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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    Quote Originally Posted by Jaerdo View Post
    Quote Originally Posted by moahunter View Post
    Quote 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)

  15. #15

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    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 at 08:32 PM.

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    Lesson no.1: Live within your means and never try to keep up with the Jones

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    Quote Originally Posted by Cal76 View Post
    Lesson no.1: Live within your means and never try to keep up with the Jones
    And if you're last name is Jones?

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    I really wish most of you would take the economic debate to another thread.

    Back on topic:
    I certainly wish there was a mandatory course in personal finance when I was in school. I certainly could have benefited from an early understanding of banking, credit, investments, equity, assets, stock markets and such in ways that my parents could not (besides, I didn't listen to my parents when I was a teen). Me and some of my friends had a mentality of a credit card being extra cash instead of a loan you have pay back - if I knew better then I wouldn't have racked up a large credit card debt back then. After university then I listened more closely to my dad and encouraged me to buy a place and do RRSPs at the start of my working career.
    “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

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    100%

    Many many of my friends have been ruined due to poor choices based on a lack of understanding of basic finance.

    Things like minimum payments, budgets, interest rates. How about starting a small business? Paying taxes? In my highschool you had to take it as an 'option'.

    Hey kids you can only pick one option - "Gym, Drama, Band or Finance'
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    Quote Originally Posted by Komrade View Post
    Hey kids you can only pick one option - "Gym, Drama, Band or Finance'


    Finance teacher takes yearbook photo of Komrade - his only student.


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    I remember the teachers touching lightly on personal finance in school, but it wasn't until later on in life that I learned so much more after going through it first hand. I would definitely like to see a bigger commitment hammering home personal finances in schools, as it so important in life.

  22. #22

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    Quote Originally Posted by Sonic Death Monkey View Post
    I really wish most of you would take the economic debate to another thread.

    Back on topic:
    I certainly wish there was a mandatory course in personal finance when I was in school. I certainly could have benefited from an early understanding of banking, credit, investments, equity, assets, stock markets and such in ways that my parents could not (besides, I didn't listen to my parents when I was a teen). Me and some of my friends had a mentality of a credit card being extra cash instead of a loan you have pay back - if I knew better then I wouldn't have racked up a large credit card debt back then. After university then I listened more closely to my dad and encouraged me to buy a place and do RRSPs at the start of my working career.
    It's all related. In fact, personal finance courses are pretty dull and forgettable without a discussion of the real world. I know because I've taken a few courses plus read extensively on personal finance. One of the first books I read was Galbraith's Great Depression. Have kids read that in high school and they'll be craving personal finance education for the rest of their lives.

    My parents opened a savings account for me when I was around six years old. I didn't make a single withdrawal until I was around 18 years old. So I could see it grow and grow and dipping into it felt very unsettling. (The amount in there would be a pittance today but that's not the point, it's about learning to save and not immediately spend.) I also bought my first stocks as a teenager. Some money in the game helps build interest. That said, governments could do wonders by giving kids an account and some nominal amount of investable money and disallowing the right to withdraw any funds. Maybe a mandated investment in index funds.
    Last edited by KC; 14-10-2015 at 10:36 PM.

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