Teaching teens to be money wise
Page 1 of 4
Teaching teens to be money wise
Becoming financially literate is an important part of growing up
Waseem Malik didn't think he would be an accountant, but that's exactly what he's studying to
become.
The 20-year-old thought he would pursue science until he took advantage of extracurricular
business programs in high school.
“Growing up, I never really had business exposure or any financial exposure, which is something I
really wish I'd had,” says Malik.
“Kids don't really understand that money doesn't grow on trees.”
Malik wants to help change that. He's become a student ambassador for We Day, an annual event
organized by Free the Children that reaches 160,000 Canadian students from more than 4,000
schools.
You can't buy a ticket; students gain access to the event through service. This year, events across
Canada are highlighting financial literacy as a theme. Malik says driving the message home is all in
the delivery — not in a textbook, but in a practical lesson that's relevant to teens.
That's why Malik now shares what he has learned with high-school students and community
groups. “If we bring in that personal touch, where students see the benefit in their own lives,
they'll take accountability,” he says.
http://www.thestar.com/life/modernmoney/2013/09/19/teaching_teens_to_be_money_wis... 08/04/2014
Teaching teens to be money wise
Page 2 of 4
He says it's important because “once they enter the real world, they're going to deal with bigger
issues immediately.”
Many Canadians lack the skills and confidence needed to make responsible financial decisions. A
2012 survey by the Chartered Accountants of Canada found even when extra money was available,
Canadians were more likely to spend than save. It also found more than 70 per cent of households
don't feel building wealth is important.
Household savings have taken a nosedive — from almost 20 per cent in the early 1980s to 3.8 per
cent at the end of 2012.
Debt accumulation is a major issue in Canada. According to TransUnion, a credit-monitoring
bureau, the average Canadian has $27,131 worth of consumer-related debt, excluding mortgages.
Investor Education Fund (IEF), a non-profit organization founded by the Ontario Securities
Commission, says 70 per cent of high school students in Ontario believe learning about personal
finance is very important. Yet only 42 per cent have ever created a budget.
To help the next generation become money-wise, financial education is being rolled out in schools
across Ontario.
Students won't get a dedicated personal finance class; instead, the Ministry of Education is
integrating the topic into all classrooms.
The Canadian Foundation for Economic Education suggests this is good news, as compulsory high
school courses may not have as much impact as practical lessons.
Tom Hamza, IEF's president, says full integration will take years.
“Right now, you couldn't look at the curriculum and say, ‘Oh, that's what my child will graduate
with.' Instead, you get bits here and there,” says Hamza.
The goal is for students to get eight years of financial education through various courses, from
Grades 4 to 12.
There are many ways to teach a given topic.
A classroom's curriculum is influenced by what the ministry expects and what the school supports,
but ultimately it's designed by teachers.
Take the matter of compounding, for example. One teacher may decide to show its effects through
a finance lens, while another may be more comfortable using science as a demonstration.
Hamza says that if parents want their children to have financial know-how, “doing it yourself is
the only fail-safe there is.”
But there is an intimidation factor — parents may not be financially literate themselves. How are
they expected to teach a topic they haven't yet grasped?
http://www.thestar.com/life/modernmoney/2013/09/19/teaching_teens_to_be_money_wis... 08/04/2014
Teaching teens to be money wise
Page 3 of 4
There are a number of resources to help parents.
The City, launched by the Financial Consumer Agency of Canada, and Inspire Financial Learning,
created the by Investor Education Fund, are two excellent online resources for parents. Both sites
provide age- or grade-specific lesson plans and discussion ideas.
Banks and other financial institution are also good resources. Many of them now have dedicated
financial literacy sections on their websites.
Teens experience a significant amount of firsts. The future driver's licence, the soon-to-be credit
card, the upcoming post-secondary plans — each of these lessons comes with a financial
component.
“It's the first time they're actually handling their own money and they're starting to plan for the
future,” Hamza points out. “So you have something you can sink your teeth into, where actions
and consequences are real.”
By Grade 8 or 9, most teens understand the mechanics behind complex matters such as housing,
transportation and investments, three of the largest financial decisions you'll make. However, they
should be broken down into simple, applied lessons.
Education as an investment is a tangible, high-cost item that will matter to teens. Transportation
is another. What does a car cost? Multiple lessons lie in this simple question. How much can you
afford? How will you save? How long will it take? Should a car require financing, what are the
associated fees?
This is a good opportunity to weave in the impact of interest, an invaluable lesson as it applies to
all future loans.
Lessons through the ages
Grade 9
Cash flow: This is a good age to learn basic budgeting, along with the consequences if a budget
isn't followed. Talk about why so many people don't obey their budgets. Discuss the impact of
sales, advertisement and peer pressure. Talk about living expenses such as food, clothing and
entertainments and then list needs versus wants. Consider creating a cash flow chart to
distinguish income, expenses and affordability.
Credit cards: These are payment tools, not an income source or free money. Go through how
credit cards work, from presenting your card to a cashier to receiving statements electronically or
by mail.
Credit card payments: Applying for a credit card takes mere minutes. Paying for a purchase
can take years. This can be expensive if you don't pay off the purchases by the due date. Review
your statements with your teen. Check each purchase for accuracy. Point out the yearly and
monthly interest rates on overdue balances.
http://www.thestar.com/life/modernmoney/2013/09/19/teaching_teens_to_be_money_wis... 08/04/2014
Teaching teens to be money wise
Page 4 of 4
Grade 10
Compounding: Teens have the benefit of time on their side. If they start saving early enough,
the payoff can be huge. Tell them about the four factors that affect compounding: principal,
interest, rates and time.
Maintaining good credit: Credit cards can come with benefits if they are used responsibly. But
what does that mean? Spending habits today can affect future financing. Tell them about credit
ratings and the importance of maintaining a healthy score.
The 10-per-cent rule: Pay yourself first. A good rule of thumb is trying to set aside 10 per cent
of your income before you pay anyone else.
Grade 11
Investment 101: There is an abundance of choice when it comes to investing. Before you build
an investment portfolio, you'll need to build an investor profile. This will help distinguish your
level of comfort for risk.
Dollar value: Currencies fluctuate daily. Review foreign purchasing power, world currencies and
discuss what happens when our loonie increases or decreases in value.
Grade 12
Investment 201: You may reduce investment risk if you mix different groups of investments,
known as diversifying. Run through the numerous options, from speculative investments,
moderate risk, low risk to cash equivalents. Compare each and consider the risk versus the rate of
return.
Well-being: At this point, teens will have the skills to appreciate the correlation between
decision-making and welfare. Reinforce the benefits of saving versus spending. Show them the
benefits of automatic savings and the value of setting up an emergency fund. Create a spending
journal and talk about future goals and expenditures. Examine future planning, including budget
surpluses and deficits.
http://www.thestar.com/life/modernmoney/2013/09/19/teaching_teens_to_be_money_wis... 08/04/2014