Parents, not government, should teach financial literacy

Opinion

Hey there, time traveller!
This article was published 26/09/2014 (4028 days ago), so information in it may no longer be current.

Wasteful government spending on financial literacy is the epitome of irony, but it would appear that’s the case in Canada.

We Canadians are notorious for having low savings rates, high levels of debt, weak investment knowledge and an overall lack of financial education. Given the recent economic recession and our track record, it might seem financial literacy would be an important public policy issue.

Indeed, financial literacy is an easy public policy to sell. No one is an outright proponent of financial illiteracy.

In 2007, the federal government allocated $1 million to promote financial literacy. In the 2008 and 2009 federal budgets, the government allocated $2 million and, in 2010 and 2011, it allocated $3 million.

But the spending on financial literacy hasn’t really hit the mark.

First, such national efforts do not respect federalism, since education is provincial responsibility. And what are the incentives for a mix of bureaucrats and financial-service providers to deliver financial literacy initiatives, anyway?

According to a 101-page federally commissioned document, the main recommendation of the 13-person task force on financial literacy is to create a position for a financial literacy leader in Canada. But there is already a director of financial literacy and consumer education within the organizational framework of the Financial Consumer Agency of Canada. No justification is given for the duplication of this role. It seems the main purpose of federal financial literacy initiatives is to perpetuate its advocates and increase funding for reports.

Here is a clue: In that same report, the word parent appears five times and the word government appears more than 200 times. Provincial documents about financial literacy, on the other hand, tend to emphasize parents, schools and teachers. This makes sense. The more localized the initiatives, the better they can serve those for whom they are intended.

Despite the lengthy bibliography of the federal task force, there are no references to such leading personal finance experts as Robert Kiyosaki, David Bach or Suze Orman. Bureaucrats have their own class of experts, quite different from the experts to whom the average person turns for advice.

Kiyosaki, author of the bestselling personal finance book Rich Dad, Poor Dad says “the financial education taught in schools teaches kids to send their money to the government, retail banks and investment banks. True financial education teaches you how to have people send money to you.”

According to The Economist magazine’s debt map, Canada has a higher per capita national debt than the United States. This may inspire students to wonder: If the government is more indebted on my behalf then I am on my own behalf, what wise lessons on financial literacy could it possibly teach me?

To make an analogy, the financial services industry wants consumers to be literate enough to read advertisements and newspapers, but not literate enough to read philosophy: Literate enough to understand loans, credit and financing options, but not literate enough to understand tax laws, cash flow and the differences between true assets and true liabilities.

The value of teaching general lessons of personal responsibility through ordinary classroom subjects is more effective than teaching particulars such as how to balance a chequebook or how to pay a credit card bill. Teaching lessons that foster responsibility, curiosity, problem-solving, math and language skills, and reasoning can all contribute to a student’s true financial education.

There are many ways to integrate financial education lessons into ordinary activities of family life and into ordinary classes that already exist in schools. For example, something as simple as maintaining deadlines for assignments and having consequences for failing to meet them can teach valuable lessons. When students learn to respect deadlines for assignments, they will learn to respect financial deadlines as well.

For those concerned they are ill-equipped to teach their children financial education, it is important for parents to become financially educated.

Financial education is key to financial freedom. Financial freedom is about self-reliance instead of dependency. Self-sufficiency is good for individuals and good for communities. When individuals are at liberty to pursue happiness without being constrained by dependency, the opportunity for enterprising potential is increased. Citizens who choose not to pass the buck to government when it comes to their own financial education and to that of their children have already learned the first lesson.

 

Amanda Achtman holds a degree in political science from the University of Calgary. She is a frequent commentator on current affairs.