Bringing back home economics can improve financial literacy

Once upon a time, children learned the basics of cooking, sewing and personal finance in home economics class, either in junior high or high school. But as cooking labs gave way to computer labs, proper meal planning seems to have been neglected—and financial literacy has also suffered as a result.

Here are a few telling statistics:

·         In the 2011 National Report Card on Youth Financial Literacy, only 44 per cent of recent high school graduates said they keep a budget; less than one-third of 18-to 29-year-olds feel confident in the kitchen, according to Sobeys
·         Only 26 per cent of Ontario high-school students surveyed in 2012 said they were knowledgeable about money and made good spending decisions
·         71 per cent of high school graduates in Canada feel that more time should have been spent teaching personal finance in school

For those of us old enough to remember, there was more to home ec than just making a soufflé. Lessons we learned included how to open a bank account and balance your chequebook. And where they’re available, modern “Family and Consumer Sciences” courses (as home ec is now called), can teach students about financial topics like credit card fees, credit ratings, loans and taxes.

The problem is that we don’t have enough of these courses across the country. In the 2011 National Report Card on Youth Financial Literacy, only 45 per cent of recent graduates recalled taking a course that covered topics on personal finance. In Ontario, where three-quarters of students aren’t making good spending decisions, just 37 per cent of graduates said they took a personal finance course. That would certainly explain their lack of knowledge about money!

To help millennials make better spending choices, we need a national strategy. The Financial Consumer Agency of Canada (FCAC) offers three goals to improve financial literacy for young Canadians:

·         Goal 1: Provide young Canadians with the information they need to manage their money at key points throughout their lives
·         Goal 2: Engage young Canadians in setting financial goals, saving and planning for their financial future
·         Goal 3: Promote the practices that contribute to financial well-being and that protect against risk

They’re not the only ones calling for better financial education. I think TD Bank sums it up nicely in their report Dollars and Sense: The Urgent Need for Lifelong Financial Literacy: “The [Grade 11] course could reinforce basic financial skills, but also provide guidance on whether to attend university, how to finance education, how to do budgeting, how to manage credit card debt and the severe consequences of mismanaging debt.”

Ultimately, the goal is to prepare young people for life after school. When they go away to university, or start their first job, they’ll be faced with all sorts of spending decisions—whether it’s paying rent for the first time or deciding if they really need that new credit card.

While we wait for the school systems to get on board, it’s never too late to talk to your kids about basic personal finance concepts. Here’s one to think about: Do your kids really need a piggy bank when you put everything on your debit card? Perhaps you could give them a prepaid debit card instead.

Do you feel that you learned enough about personal finance in school? Can your kids create spending goals and stick to them? Share your thoughts with BDO by joining the conversation on Twitter using #LetsTalkDebt