By Ray Turchansky
Edmonton Journal
“Your Money” Section
Saturday, August 27, 2005
The registered education savings plan industry will be revved up as students head back to school next week, but there will be little talk about educating them about personal finances.
Adrian Mastracci, investment counsel at Vancouver’s ‘fee-only’ KCM Wealth Management, says, "It's never too early for children to start learning about personal finances because they have an appetite, not only for raiding the fridge, but also a pursuit of knowledge.”
It's a deficiency that irks Dave Salloum, vice-president of the Salloum Wealth Management Group with RBC Investments in Edmonton.
For more than a decade now Salloum has annually spoken to students about the investment business during Career Day.
"The first time I did it was in 1994, and the questions were, 'What does your job entail, what courses did you have to take?' '" said Salloum. "And then the last time I did it, late fall last year, the questions were: 'How much money do you make, what kind of car do you drive?' To me it was just this shift, it was the money, money, money part."
Salloum says he is amazed by the lack of formal training young people receive in personal finances.
NEED A COURSE
"I get the impression that while it might be available, very few people actually take it. There's got to be a compulsory course where one component is What's the Income Tax Act, another on What's an RRSP, another is What's the Time Value of Money.
"You get kids who don't understand the concept of compound interest, and to me that's scary.
"You need that just for your own financial well-being."
He explains saving and investing to them in terms of pop cans and beer bottles.
"If you put away so much money starting when you're 20, if you do it for eight years at two grand a year -- which is the equivalent of taking your empties in once a week -- by the time you're 65 you've got a million bucks."
He worries that not providing students with a sound understanding of saving and managing debt will cause great financial hardships down the road.
"To me it's a societal problem, because in 10 or 15 years we're going to have to be paying for these people."
Adrian Mastracci, of KCM Wealth Management in Vancouver, says it's never too early for children to start learning about personal finances because "they have an appetite, not only for raiding the fridge, but also a pursuit of knowledge."
He recommends starting a school investment club. Websites of the Canadian Shareowners Association (www.shareowner.com) and the National Association of Investors Corporation (www.better-investing.org) offer books, kits and forms to help start and operate a school investment club.
GLOBAL PROBLEM
In recent months there have been a few moves to improve what is seen as a global problem. An organization called FirstJobs Institute in the United States promotes economic literacy among young adults.
Asks media director Sarah Longwell: "How can we sufficiently debate the important economic issues of our time (i.e. social security reform, minimum wage, free trade, immigration policies, offshoring, etc ...) when economic literacy among Americans is so low? How can citizens be expected to offer informed opinions, let alone informed votes, on these matters if they don't even have a proper understanding of the interest rate on their Visa card?"
Speaking of which, another American program has started up called FIRM (Financial Independence, Responsibility and Management), which provides teenagers a 10-chapter course on budgeting, saving, managing credit, taxes, investing, insurance, negotiating, charity and life events. The program would be more honourable if it also didn't give teens a Visa debit card, but the website (www.firmprogram.com) is worth checking out.
You can get a list of 10 budgeting tips for going back to school, with a central theme of prioritizing your needs and wants, and watching as your money goes towards them.
Since most youngsters get only cursory formal education in personal finances, the ongoing onus is on parents and others to teach the basics of getting and using money in everyday life.
As Mastracci puts it: "The trouble with teaching a child the value of a dollar is that you have to do it almost every week."
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