Thursday, March 2, 2017

We Need More Personal Finance and Investment Education for Youth

A bit over a year ago CBC news ran this story on why children, youth and young adults should be taught personal finance in school and at home.  It is an important point, and one that has received far too little attention.

Most concepts are best learned through a spiral approach. The same topic is encountered at different ages, each time with a higher sophistication. This certainly works in the world of physics.  For example, a physics graduate will learn mathematically sophisticated abstract mechanics ideas in upper level undergraduate courses. But a few years earlier the student encountered Newton's laws in vector form in first year university, and before that the same laws in high school physics in simpler situations. Even earlier the student sees mechanics ideas in a more qualitative fashion in junior high.  At a qualitative level mechanics concepts are encountered even earlier in elementary grades. I talked about force and gravitation and orbits with grade 1 students last month.  As I see in my own grandchildren, children can experience a lot of mechanics in building block towers, rolling objects down inclines, playground equipment, and a number of other forms of play.

Financial education will be most successful if it is similarly encountered with increasing sophistication at different stages in life.  Young children can begin to learn with store and bank play, and a bit later they can be introduced to the concept of saving for something special, and making simple financial decisions. Some families successfully include children in annual family budget meetings or financial choices.  Once students are about to start university, they should have an active role in planning how to finance their post-secondary education.

So what should schools do? The Financial Post had a recent article that looked at how Canadian students in each province are exposed to financial planning ideas. While there are many promising initiatives, as some commenters have pointed out the reality is uneven at best. A key decision is whether financial education should be in stand alone courses, or integrated into other topics in the curriculum, or both.

As well as understanding concepts, such as the value of future money, handling credit responsibly, and building a personal budget, it is essential that students learn about risk and reward, investment options, diversification, and the difference between passive and active investment vehicles.

Various organizations offer resources that can be used by schools and parents for financial education. For example,, an initiative supported by Visa Canada, have games, information, and detailed class lessons with presentation materials and suggested activities on topics in personal finance and to some degree saving and investment.

While some universities offer financial planning as a course open to students in all programs, such courses are not yet widely available. Athabasca University offer by distance education a comprehensive personal financial planning course Finance 322.  It has, in my opinion, a nice balance of topics important to individuals for their personal finances and investments. The most recent version of the course is also approved as part of the Financial Planning Standards Council FPSC Level 1 certification.

The case studies at could be effectively used in junior high, high school or university courses dealing with these topics.  They also have a wealth of linked information on various topics.

Check through the article produced by the Higher Education Control Council of Ontario for a white paper with links to various organizations that have materials to support financial literacy.

In a future column I will be commenting on why the Canadian stock markets are somewhat light in high technology offerings, surprising in a country with high educational achievement and scientists and engineers who are internationally recognized.  As a small part of the solution, I feel that we need to more effectively integrate economic aspects into the science and technology curriculum. A few years ago I taught an undergraduate physics course on energy issues.  As well as the usual physics topics, students collaborated on the financial analysis of wind energy parks, and considered economic and scientific aspects in selecting good energy companies to invest in.

We see in elite athletes, accomplished scientists, distinguished writers, and others, the importance of engaging with a topic early in life.  I think we miss a huge opportunity by not introducing children and young adults, in an appropriate way, to investments. Warren Buffett apparently made his first investment, 3 shares, at age 11. Ideas of financial risk and reward, and the importance of using evidence in making choices, should be taught early and often.

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