Many Canadians seem to be feeling lucky. But are they smart enough to know that feeling lucky isn’t enough?
As Senior Writer Anne Kingston reports, lotteries have become an integral part of Canadian life. So much so that almost a third of Canadians facing retirement recently told an Environics/TD Waterhouse poll they expect lottery winnings to support them once they quit working. Another poll by another bank showed more people were relying on lottery winnings for their golden years than on support from their children.
Whether all this is simply wishful thinking, or reflects the absence of coherent plans, it seems clear a substantial portion of Canadians have not put very much thought into their financial future.
In fact, there’s ample evidence many Canadians are making financial plans based largely on self-delusion and blissful ignorance. A recent report from Statistics Canada revealed that over half of Canadians planning to buy a house figure the only expense they face is a down payment. Anyone who has ever bought a house knows these folks are in for a big surprise. And while 70 per cent of Canadians say they are confident they will save enough for a comfortable retirement, only 40 per cent have a reasonable idea of how much money that requires.
With personal debt at worrisome levels and mounting evidence that governments will be less able to fund retirement in the future, Canadians need to reverse course and take greater control of their own finances. With this in mind, recent interest in teaching financial literacy in schools seems well-timed.
This week, Ontario announced a new set of student resources, developed in partnership with the Ontario Securities Commission and the Investor Education Fund, to promote financial literacy in Grades 4 to 12 for the coming school year. Alberta and Manitoba are making similar changes to their curricula. This provincial activity reinforces recommendations made last month by the federally commissioned Task Force on Financial Literacy that said “financial education needs to be provided in the school system” and called on Ottawa to help make this happen.
Also last week, the Organisation for Economic Co-operation and Development announced it is adding a financial literacy component to its closely watched tests of 15-year-old students around the world. This will provide a unique international comparison of financial competency. (While Canada usually performs well in these studies, we will not be participating in the new financial literacy assessment.)
This new focus on building financial knowledge into the school system seems reasonable. Crucial financial concepts such as saving, budgeting, investing and risk assessment involve a combination of math skills, competent research and personal judgment. While these individual components can be found in the school system already, a greater emphasis on their application to practical financial problem solving is a good idea, given the current state of financial knowledge among Canadians. British Columbia has included financial literacy as part of its high school career-planning course since 2004.
However, we should be wary of outsourcing our children’s financial education entirely to the school system. Unlike most subjects taught in school, financial literacy has an immediate and practical connection to home life. Families earn, budget, borrow, save, spend and invest on a daily basis. Unfortunately, many parents seem to lack the confidence necessary to make this connection with their children.
According to a survey by the Canadian Institute of Chartered Accountants (CICA) this past January, 60 per cent of parents who said they discussed money matters with their kids felt they were unsuccessful. As with discussions about sex or drugs, talking about money can leave many parents feeling uncomfortable or unprepared. This is a taboo in need of removal.
While it may make sense to leave teaching the concept of net present value to professionals, there is no good reason for parents to avoid discussing the basics of money and its management with their kids. Can we afford a vacation this year? What happens if dad loses his job? What do we owe on the mortgage? Should we get a new car or fix up the old van? Financial literacy is at the heart of these everyday decisions and parents ought to involve their children directly and deliberately. Life lessons are best learned at home.
When the CICA survey asked who should bear the greatest responsibility for imparting financial knowledge to children, twice as many respondents picked parents over schools, industry or government. While it is a good thing that schools are putting a greater emphasis on teaching financial literacy, parents still need to talk to their children about money and its importance in life.