Why The Next Generation Needs Proper Financial Literacy Now
Planning For The Future It is important to prepare our youth with real expectations and the skills needed to manage them. They are, after all, the future of the this country and their decisions will affect the future economy as a whole.
The expectations and realities on financial standings among Canadian youth are often far different than many of them expect it to be.
As a parent, I know that teaching kids to be realistic about expectations can seem impossible at times.
I’ve seen tears over the wrong Halloween costumes, birthday cakes that were the wrong flavour, and other tragicomic ‘problems’. But as our kids get older, we find ourselves trying to strike a greater balance between big dreams and basic reality. There’s no truer example of this than when it comes time for our progeny to become adults and face adult financial issues with long-term implications. At some point, the bite of reality will be felt and we need to prepare them for that moment.
“Students and parents need to prepare for the future by acting today.”
A 2011 British Columbia Securities Commission study of 3,000 recent high school graduates across Canada confirmed that many of our kids haven’t quite gotten their heads around what it’s really like out there. The survey found that teenagers expected to earn a salary of $70,000 within ten years. The reality? Canadian post-secondary graduates aged 27 to 30 make an average of less than half of this amount. Here’s some more cold water: the average post-secondary student debt is roughly $26,000. This means that not only will young people be making much less than they think they will, many will be starting their careers in the red.
Living within your means
While having debt and a relatively low income aren’t a great starting point, being prepared to manage these challenges effectively is a critical skill that will pay endless dividends. The first step is cash flow management and planning. There are several free downloadable budget worksheets online, and some student budget worksheets specifically have fields for items like tuition and books. Knowing how to manage your cash flow is essential to living within one’s means — the true key to financial health.
It’s critical for young people — especially students — to limit borrowing as much as they reasonably can. Requesting the minimum amount of student loans, applying for scholarships, and taking on a job while in university or college all help young people graduate with as little owing as possible.
Other tools young people can use include debt calculators that show how interest adds up overtime (and how much you’d save by paying off debt quickly).
Students and parents need to prepare for the future by acting today. Take a look at the online tools that are out there to get a handle on what’s coming down the road and prepare for the financial realities of tomorrow.