Why don’t we learn about personal finance in school?
Why don’t we learn about personal finance in school?
I don’t think I’m alone here when I say everything I was taught about money was either self-taught or taught to me by family members. I went into high school knowing almost nothing about money and came out “prepared” for the real life, knowing almost nothing about money. I mean I came out with some really useful life skills like knowing that mitochondria is like a power plant for your cells. Or that calculus sucks. Probably my most useful skill was learning how to break an egg from several floors up while trying to not break the egg…Seriously, did anyone’s egg not break or am I just a terrible engineer?
Upon my graduation, the whole money thing wasn’t a big deal, I was heading to University. I had some money saved up, was working 20 hrs a week and was living at home with my parents help. Sad to say but I wasn’t overly concerned or really even aware of my situation in life and I don’t think I was alone. Then one day some student organization put up some craft paper on a wall with the title “Debt Wall”. Students were encouraged to write how much in debt they were in anonymously. After a few days this thing was filled with insane numbers. There were a lot of $30,000+ numbers, hundreds of them all probably from only student loans and maybe some credit card debt. It astonished me that people had put themselves into this much debt this early in their lives, such a deep hole to climb out of so early in life when soon you should be buying your first car, house and getting married or whatever else we used to think we were supposed to do right after high school or after your post-secondary education.
But that wasn’t me, I had no debt and I thought they were fools; without knowing how much I didn’t know.
18 years old, studying to be an engineer and I knew almost nothing about money except how to get it and waste it.
Once I moved out on my own I started to realize I have to hire someone to do my taxes, at home they were always done by my father’s accountant. I never really looked at my summaries before because I just didn’t think they were overly important, just one of those adult things you have to do. So I went to H&R block, they have student specials, and taxes involve the government. The government was serious stuff so I just let the professionals handle it because I didn’t want to get in trouble, right?
Jump ahead to 2007 for my first work term, perfect timing since my bank account was almost empty. Three hundred dollars and I would have been completely broke. Luckily, this work term paid 21 dollars an hour and had tons of overtime. I also lived in a work camp during it so I rented my apartment in Halifax out and had no living expenses. Jackpot!
At the end of my work I had made over $20,000 dollars in 4 months. This was the first time my bank account was into 5 figures. So I did what every idiot would do in my position. I bought a new 42” flat screen and surround sound home theatre. I bought it on sale so in my mind it was a steal of a deal. I also ended up investing in stocks, I bought a book and read part of it and just decided to buy. I bought mostly penny stocks, only a few grand, but they all vanished in 2008 when the markets crashed.
Not too long after I was out on my own, one of my sisters had just started her new career as a nurse. She moved to the same city I was now living in for work. She landed a job and rented a nice apartment down the street from mine. After a year or so she ended up buying a condo. Purchase price of $180,000, interest at 3.99% and a 35 year amortization. Sure the monthly payments were now cheaper than her old rent but after 35 years she would have paid close to $332,000! I remember thinking how crazy that was.
That’s when I started to wake up. I don’t know why I didn’t realize what financing was before I guess I just didn’t care. Of course you’re going to pay more for it, the banks are businesses and they need to make a profit. Now that this finally clicked in my late blooming brain I started to wonder how I can avoid paying interest to other people.
Now that I’ve spent several years learning could about my own personal finances; I realized 90% of personal finance is actually pretty simple. It doesn’t take an engineering degree; anyone of us can learn it. It’s simple enough that we should learn all about personal finance in school, long before we’re supposed to be adults.
But are taxes really that easy? I don’t want the government after me.
First of all, let’s get something straight, the government isn’t going to come after you if you don’t do your taxes correctly. They’re just going to send you a letter saying we look at A and need B to support your claim. If you can’t provide B they consider A to be wrong and would like you to pay the taxes you withheld, with interest of course. As long as B is something like a T4, T5 or some form you actually have and not something you made up, you have nothing to worry about.
But yes, taxes are that easy.
Now let’s look at an example of being a student; paying 45 dollars isn’t a devastating blow to get your taxes done. When you realize that by gathering up all of the costs of school and information on your loans, scholarships, textbooks, and other costs is 90% of the work you might start to wonder what that $45 is really going towards. I put together a picture to demonstrate the level of effort required to do your taxes.
That’s it! The CRA has made it incredibly simple to do your taxes, because THEY WANT TO GET PAID! Seriously the CRA website is incredibly helpful. You can just search for a form and it’s available with a guide in several languages and formats. It almost couldn’t be simpler.
I get that it’s intimidating at first. I like to see or be told how to do things before I attempt them myself. But when you’re not a student taxes prepared by others will cost at least $100 at most preparers (at H&R Block and others they’re not accountants, they’re just tax preparers). For $100 or more I can take an hour or two to read and then know how to do my taxes for the next 80 years. So essentially by learning to do your own taxes you could be saving yourself upwards of $8000 over your life time.
So why couldn’t we be taught this as part of a mandatory high school course? Probably because teachers are just like you and I, they get other people to do their taxes too. This probably means they’re not knowledgeable to put together lesson plans and course work to teach their students effectively right? Wrong, the CRA wants their money! They made 6 hours of course work to help educators across Canada to teach people about taxes. There’s a 3 hour section call Teaching Taxes which includes the following topics:
- the history of taxes in the world;
- Canada’s tax system and the Taxpayer Bill of Rights;
- types of taxes and deductions and what they mean;
- tax obligations for new employees;
- tax benefits students may be entitled to; and
- how to prepare a simple income tax and benefit return.
Sure the history of taxes probably isn’t overly helpful, but it’s not high school if you’re not learning something you’ll never use again, right?
There’s also a second 3 hour section of this coursework called Responsible Citizenship and Canada’s Tax System, which really sounds thrilling! High schoolers will be lining up to take a course that examines:
- where tax dollars go;
- rights and responsibilities of taxpayers;
- issues related to the underground economy and its effect on Canadian society; and
- how this knowledge can be applied to practical, real-life situations and experiences
What’s that? High schoolers won’t line up for this? Well they’ll be as oblivious as I was when my parents helped with my tuition but they’ll be a lot better off than most generations before them.
Alright so the CRA tax course work is only 6 hours and for a high school course educators would need 120-180 hours depending on which link I choose on the first page of google search results. So what could they fill up the rest of the course with?
Anything is better than nothing!
Taxes are just a tiny portion of personal finance. If educators were to implement a well-rounded course they would have to include other facets like investing, loans, and debt management. There’s hundreds of topics that could be covered they just need to pick some.
Just a few off the top of my head would be:
- RRSPs – teach students about the contribution limits, penalties for withdrawing, the new home buyer plan, lifelong learning plan and everything else to do with RRSPs.
- TFSAs – The power of the TFSA and why it should be used as a long term retirement account and not just a save for a purchase account.
- RRSPs vs TFSAs – When is it better to use one or the other?
- Investing – Stocks, bonds, ETFs, GICs, etc – The above topics might be one or two classes each but investing could be its own course entirely. An intro course to cover the basics could easily be 4-6 weeks’ worth of content though.
As far as struggling to create lesson plans there are already tons of people who are passionate and create great content already. Fellow YYC PF blogger Money After Graduation just released her Master Class Money which is an in depth course for those wanting to learn how to invest in the stock market but don’t know where to start. I don’t know about anyone else, but that was me in high school. I asked my guidance counsellor what to pursue to become an investment banker; I’m now an engineer, so clearly there was a lack of guidance/knowledge somewhere in there.
There’s plenty of free software out there that could be used to help students develop budgets and plan their own finances. For a slightly more advanced class, they could create them from scratch in excel. Excel is a fantastic tool that most people don’t even begin to understand how useful it is especially when dealing with money.
There are several books that could be used for studies. My personal favorites The Wealthy Barber Returns and The Millionaire Teacher are Canadian orientated but there’s still plenty of great USA/International personal finance books out there that can be adopted into school curriculum.
So with all of this information available, why is it not mandatory in schools?
I wish I had an answer for that. Maybe it’s some giant conspiracy that corporations are keeping us ignorant so they can reap the rewards of high interest loans and high management fees? Maybe everyone is just too scared to start teaching it because it was never taught to them?
I honestly have no idea and I know the majority of kids in high school wouldn’t retain over half of this knowledge but they’d be aware it exists! Someday in their adults lives they’ll have a moment at the bank or waiting to do their taxes and something buried in their brains will remind them it’s not that complicated and they can do better than the current product/service that is being offered. We just need to make them aware these resources exist but we’re failing to do that right now.