Not All Financial Educations are Created Equal
Posted by Gail | Filed under Kids & Money
This is my final follow-up post to the Kids & Money Survey. As part of that survey I asked if you knew of resources that could be used to teach kids about money. Then I went browsing on the net. I found some interesting and some infuriating stuff.
“It isn’t uncommon for people to find that their income falls short of expenses. You may be able to adjust expenses to over-come this. Alternatively, and if the shortfall has been going on for some time, this can result in the need to borrow — go into debt.” Money & Youth – produced by the CFEE and Investors Group
Okay, who can spot the flaw in the above quote?
And if this is what The Spurts are teaching kids in Grades 9 and 10, what hope do we ever have of creating adults who actually believe in the idea of living within their means.
I’m all for coming up with curriculum that helps kids understand money, how it works, and how to use it to advantage. I have a big problem with material that promotes borrowing, so you can “enjoy/use something (for example, … new clothes) as you are paying for it out of future income.”
Or this doozie: “Credit can simplify the payment of many bills by enabling you to borrow one amount to pay them all off and then carry a single debt with a single payment.” In other words, don’t worry about paying your bills from cash flow… put it on credit! OMG!
When I looked over what the TD Bank has to offer at its Wow! Zone, I wanted to applaud the content it covers, but was a little uncertain that they had their stuff categorized in an age-appropriate way. Teaching kids about interest is great. Doing so before they’ve got their multiplication tables down seems a tad forced. Rather than warning instructors with notes such as this:
KEEP ALL PERCENTS AS DECIMAL AMOUNTS SINCE STUDENTS IN THE FOURTH OR FIFTH GRADE HAVE A NOMINAL UNDERSTANDING OF PERCENTAGE CONVERSIONS
…wouldn’t it make more sense to simply teach concepts that are both age and grade appropriate? And what’s with using the U.S. spelling for “chequing account” in this material? TD is a Canadian bank after all.
As is typical with some bankers, there’s some pretty patronizing stuff in the TD curriculum that I’d want to steer my kids clear of, like this: “Credit is when the bank agrees to buy a product for you and trusts that you will pay them back over time.” That is NOT what credit is.
Junior Achievement has a couple of programs including Dollars with Sense which is designed to help students understand personal financial management concepts. JA offers these programs free to schools, and if your children’s school isn’t currently offering any money lessons, this would be one way to get the ball rolling with little or no cost to the school board. One wonders why, if the resources exist, more schools/boards aren’t taking advantage of them. Hmmm.
One of the best resources available that schools, teachers, parents and even kids with some curiosity can use to get educated about money is The City, which was created for teens aged 15 to 18 years old by the British Columbia Securities Commission (BCSC) and then adapted by the Financial Consumer Agency of Canada to fit the school curriculum across Canada. Designed to help teens learn about the world of money, and learn how to make good financial decisions to support their future, The City is available through The Money Belt , a creation of the FCAC.
Your Money Matters also comes out of BC (hmmm) and is designed to offer new Canadians an insight into how money works and covers many of the basics our kids need to know as they set off on their journey into adulthood.
Resources abound in the U.S. for teaching kids about money. Organizations like the Children’s Financial Network provide resources that can be used in schools to teach kids everything from why money was invented to stories that demonstrate to kids that everything costs money and that they are economically connected to people every where. Be careful when you’re looking for information on the web that you choose a site that is specific to the country you are living in. In other words, if you’re Canadian, buy Canadian or be prepared to do some editing. The rules for money are different from one country to the next, and as with most things in kids’ lives, if they find something that isn’t relevant, they’ll throw the baby out with the bathwater.
If you’d like to add resources, feel free to do so in the comments section. And if you’re sick of FIs who create pap and then try to sell it as “education”, don’t tell me, tell them!
April 15, 2009 at 6:50 am
Some of it is worse than pap, it’s downright dishonest.
Go to the CMHC site and plugs in your stats to see how much house you can apparently afford. TD Bank’s was even worse. Apparently, given our gross incomes (for some reason they use gross, not net- the money we actually have to work with!), CMHC figures we can afford a 700k house. TD thinks we can afford an 800k house.
So I did some reverse math. Looking at our budget, calculating condo fees and approximate property tax, I came up with a per month and bi-weekly mortgage payment we could afford. Turns out we could actually afford a house closer to the 350k mark.
What galls me about the CMHC calculator is that you’re inclined to trust them- they’re the government, right? They’re not a ‘big, evil bank’. It all looks so official.
April 15, 2009 at 7:47 am
According to the etymology, the spelling “cheque” was adopted for reference to financial instruments as the preferred spelling in Europe, the UK and the commonwealth in 1800s. Check was adopted as the preferred spelling in the US.
April 15, 2009 at 9:30 am
I heard the author of “The Four Little Pigs” on CBC the other day. It’s a book designed to help parents teach kids about money. I checked out her website, http://www.fourpiggies.com/ and it seems pretty good. I haven’t read it myself, but it won a children’s book award, so external experts seem to like it! It’s a similar system to the jars, but the way the woman was describing it, it sounded quite palatable for children, and it seems to be working with her own young’uns.
April 15, 2009 at 9:41 am
Wow…here’s something I just read…
Taht’s all that matters at the end of the day is that we’re personally satisfied,not about how much money we do or don’t make.
this is the mindset that will teach our next generation…I hope this person does not have this responsibility!
…it turns my stomach!
April 15, 2009 at 10:25 am
Michelle…I don’t think the quote is all bad, as long as the context is defined. Meaning, personal satisfaction should have little to do with what you can or can’t buy. More of a spiritual thing, is how I like to think of it.
April 15, 2009 at 11:34 am
TD talks about interest they pay?? Wow – because on the kid accounts they don’t actually pay any! I would love to teach my kids about interest and how when they save their money in the bank they make interest – I just haven’t found a “savings” account (with a bricks&mortar bank) that actually pays kids to save!
Having been a little more involved with our school board over the last year I can totally understand why they don’t teach kids how to budget, save, cut back or spend wisely……the school board trustees haven’t learned so how can they teach it! When ever they say they can’t afford this or can’t afford that I am tempted to ask to see their spending logs – I bet Gail could find some places to cut back!
April 15, 2009 at 12:23 pm
Kate,
CMHC is a for profit crown corporation just like Canada Post. The government is greedier than them all. Why else can you go to jail for not paying taxes on drug dealing, but if you claim it on your taxes, they won’t report you to the RCMP?
April 15, 2009 at 12:31 pm
I just wanted to say how frightening the quotes you’ve included are. This is exactly the mindset that gets so many people into trouble. How upsetting to know that ‘financial experts’ are actually promoting this to teenagers.
April 15, 2009 at 1:00 pm
I coordinate an investor education program in Alberta and part of what we do is help teachers in our province know about the unbiased initiatives and resources available for increasing financial literacy with their students.
We promote The City and work with Junior Achievement as both were developed by non-profit organizations or departments. We also have our own factsheet listing helpful financial websites, books and games that can be used by parents with their kids. You can find this, as well as other helpful links, on our website, http://www.albertasecurities.com, in the For Investors section.
The Financial Fitness Challenge (www.FinancialFitnesschallenge.ca), developed by the Canadian Securities Administrators is a great impartial site for youth ages 15 – 21 years with fun and interactive tools to learn about budgeting and saving. There’s also a Teacher & Parent Resource Centre with more info and worksheets.
Aside from that, when parents take the time to learn more about budgeting and investing themselves, it is easier for them to teach their children. We offer several free resources and tools that can help, including a new one called Who’s Taking Care of Your Money? that explores the implications of using (or not using) the help of a registered financial adviser.
-Lorinda, Senior Advisor, Investor Education
Alberta Securities Commission
April 15, 2009 at 1:16 pm
Sally, How about using the kid’s bank account to transfer to a savings account with ING?
April 15, 2009 at 1:38 pm
There are also a bunch of books out there on the subject, whether it is something like The Wealthy Barber, or my own book, Following the Goods. Don’t underestimate the power a good book can have on getting people to understand why they need to care about managing their finances and how they should start doing it.
I also agree that a good place to start is in the home. In fact, one of the best things you can do is start a conversation about financial management at the dinner table – explain why you need to save money, why you need to understand how you spend your money and why you need to plan for the future today.
Unfortunately this is a topic that is crucial to everyone throughout their entire life, but we often overlook the need to teach it or even just have a simple conversation about it.
April 15, 2009 at 3:47 pm
Greetings all,
I am an FSR with TD Bank so I have a couple of points to clear up…we have banks in the States now so on their sites you will see “checking” and on the Canadian site you will see “chequing” which is the Canadian spelling..unless there is a typo somewhere in the mix..lol..
Also, TD does indeed pay interest on youth accounts…and the kids can keep those accounts which do not have monthly service fees until they are 19 years old which can then be switched to a student account if they are still in school saving them the monthly fee…interest rates are currently quite low across the board for investing and borrowing but there is a rate of interest paid on the youth acct….and if your child is building up a fair bit in their youth acct come and see one of us for a better investment for some of that money…we can grow their money for them…give us a chance
I also did the mortgage calculator to determine how much mortgage I could afford…TD uses 40% gross income( I added in the mort payment they quoted me plus all the other expenses for housing) and Gail’s budget uses 35% of your net income to determine total housing costs…the difference was 25.00 so really a non issue….
We are not a big evil bank either…no bank is really…give us a chance and we’ll do what’s right for you…just come in and have a chat:)
April 15, 2009 at 3:49 pm
Hm, Kate… that’s strange – the max mortgage value that I get from the CHMC is actually pretty conservative. $158k, which judging by my current mortgage, I could pay off in about 7 years. (My current mortgage was around $140k and looks like it’ll be done in 5 or so, 3 years into it.)
Are you sure you put your monthly gross earnings in, and not your yearly? (I put my yearly at first and I was like “uh…no. No way I can afford a multi-million dollar house.”
April 15, 2009 at 4:05 pm
I’m really sickened by this so-called information being given to children by the banks. Looks more like badly written marketing materials to me!
April 15, 2009 at 4:20 pm
@Yvonne – I just checked your bank’s website. Youth savings accounts are paying 0.050 % (!!!) I get that interest rates are down but even Presidents Choice is paying 1.45%. And we don’t keep much money in the kid accounts because of the piddly rates TD pays. We do have RESPs there and they are even worse. Every time I go in to buy them (I don’t do a monthly plan) I get a different “sales”person who questions and disagrees with what the previous “sales” person sold me. I get that it is probably a problem with my particular branch but as a President’s Choice customer it certainly doesn’t make me want to switch any time soon!
@Wendy – thanks but I really want them to have a bank book and see the interest. I don’t deal with a bricks and mortar bank for most things because I strongly dislike every one I have dealt with. I just remember the good old days of taking in my money and my bank book and seeing my money grow. Too bad banks like that don’t exist anymore.
April 15, 2009 at 4:32 pm
I was under the impression that credit and mortgages were hard to come by these days, but I was astounded at what my boyfriend and I were pre-approved for recently. I still get credit card offers all the time. The car dealership had no problem offering me anything on their lot.
@Adam – congratulations on your book! I think we have a mutual friend (the photographer at your book launch).
April 15, 2009 at 5:50 pm
President’s Choice is an electronic bank…you can compare them with other electronic banks and you have a fair comparision…compare them with “regular” banks and you have apples and oranges… we actually aren’t sales people at all but rather we are advice people, and, as the markets, rates etc are changing daily our advice is changing too…we don’t necessarily disagree with what you did last time you were in but, rather, we are advising you on that day in accordance with the current markets so changes can make sense…that’s why it’s a great idea to visit your bank every quarter or half year…to update your portfolio and make sure you are getting the best you can get for your investments!…:)
April 15, 2009 at 5:57 pm
I re-ran the numbers, just in case, and I’m still getting the same result.
There’s a big difference between 40% gross and 35% net, at least in our tax bracket (I would assume the others as well).
If I use the CMHC numbers, 40% gross would make us eligible for a 700k house, 600k of which would be mortgage. 35% net would make us eligible for a 400k house, 300k of which would be mortgage. That’s a huge difference!
April 15, 2009 at 6:38 pm
Yvonne – I know I can’t compare online banks with bricks and mortar banks because online ones will always win in my books.
To have a bank employee say “that was a dumb idea” (direct quote) when I told her I bought what the previous employee suggested – that certainly sounds like she was disagreeing! I am there at least every 6-8 weeks and have dealt with over 10 different “advisors” in the last 2 years. It is obviously time to move the RESPs. I am just trying to find a savings account for the kids that pays interest and I am gone.
April 15, 2009 at 7:16 pm
Sally – I’m a fan of PC banking for day-to-day stuff. The downside is only when I need extra assistance (RRSPs, loans, getting drafts quickly for a downpayment on a house) but for kids chequing and savings accounts I would go with PC. Why pay bank fees on simple banking like that?
Kate – I tried it and noticed a huge discrepancy between CMHC and TD when I did their simple mortgage calculations on their websites… my favourite though is the Scotia site bedause they have the best pictures
April 15, 2009 at 7:23 pm
I went to CIBC’s website to see about their Kid’s Accounts, and I was actually impressed with what they have on there for Kids and Students (cibc.ca/ca/student-life/kidsandstudents.html). They have an Allowance Game to show kids how much money to save, and a budget for students. Not a bad resource (for a bank).
April 15, 2009 at 7:59 pm
Sally, it really is unfortunate you had such a poor customer experience with your branch…it is shameful that one employee would make such a comment about their co-worker…I wish I could get you in my office!:)..at the very least you would have a pleasant, informative customer experience!
April 15, 2009 at 8:55 pm
Thanks Yvonne – I can tell by your comments that you like your work and I know that makes all the difference to your customers. I spent a few years bank hopping and I know I am very picky.
April 15, 2009 at 10:08 pm
Thanks for the tip on the JA resources. I’ll look into that.
April 16, 2009 at 9:16 am
You know there is an option besides a savings account for children; consider getting them going on investing. You could do a 50% / 50% split for savings and equities to start (just invest their money in your name, it’s pretty easy to setup an account just for them) plus dividends are taxed at a much lower rate than interest. Just a thought.
April 16, 2009 at 10:48 am
Thanks Geoff – that is a little more complicated then I was looking for. I want the kids to be able to go in each month to a real live bank and add $10 to their bank account which sits around $100. It would be nice if after they put their money in they could see that they made $1.45 (President’s Choice rate) last month instead of $0.01 (TD’s rate). To them $1.45 is a lot of money! Especially if they did nothing but leave their money in the bank to get it. My understanding is that most institutions require a minimum of $25/month for investing. Either way taxes on dividends are not an issue. Any larger amounts of money go to their RESPs.
April 16, 2009 at 1:21 pm
There’s a great new resource available from the Manitoba Securities Commission called Make it Count, designed to help parents teach their children about money.
Read more here:
http://www.makeitcountonline.ca
April 16, 2009 at 1:58 pm
Sally, your children are only earning $0.1208 a month on $100. And in a “regualr” bank high interest savings account they would earn approximately $0.1041, and yes there is a difference, but the “evil” banks aren’t that far off, and they provide jobs to thousands of Canadians, which is also an important lesson for children.
April 16, 2009 at 5:19 pm
Sally I get what you’re saying. But you could withhold a certain amount of their allowance and when it meets that $25 threshold, invest it on their behalf. My position is that if kids can understand why interest exists, they should be able to understand investing. In other words, I won’t be teaching that interest is ‘magic money’ but rather that this is what the bank pays you for the right to take your money and use it to give to money to others. It’s a tricky concept but if you’re going to do it….
I also agree most bankers aren’t evil they’re just people. Lest we forget that banking is a for profit business and at least way if my son complains I can encourage him to buy bank stock and benefit from their ‘evilness’ rather than just whining.
April 16, 2009 at 6:27 pm
In 2000/2001 I had been able to have free interact transactions as long as my balance remained over $1000 in my chequing account. I had managed to maintain that. The bank sent me a letter informing me that in order to maintain that service with my student account, I would need to maintain a balance of $5,000 in my chequing account. Who keeps that much in their chequing? And what university student has that much money? I was at the bank the next day withdrawing all my money.