Canadian youth unrealistic about finances

Canadian high school gradates expect to earn over $70,000 and own a home within ten years. In reality, this is wishful thinking, according to the National Report Card on Youth Financial Literacy issued by British Columbia Securities Commission (BCSC).

The national youth financial literacy report, released as part of Financial Literacy Month, pointed out that both income and homeownership expectations of those polled were out of sync with reality. It said the reported income of Canadian post-secondary graduates ten years their age is, in fact, less than half and the actual home ownership rate is much lower, too. Over 90% of those surveyed were enrolled in post secondary courses.

“This is the first comprehensive Canadian benchmark study on youth financial life skills,” said BCSC chair, Brenda Leong. “We believe that the information and analysis in this study will help educators and policy makers develop and deliver financial literacy programs for Canadian youth.”

The study surveyed the impact of financial literacy courses on high school graduates and found those who took comprehensive financial literacy courses and had good experiences taking them, performed better overall on financial literacy outcomes (attitudes, behaviour and knowledge).

Simply having taken a financial literacy course has little impact on these outcomes and having a bad course experience is the same as not having taken a course at all, it reported.

“This information points to the importance of how financial life skills are taught in our secondary schools,” said Leong. “The study tells us that the more comprehensive a course is and the better it is taught, the more likely students will have higher scores on financial attitude, behaviour and knowledge.”

The study included a financial literacy test where B.C. and Alberta performed higher than the national average. Forty-two percent of B.C. graduates scored an “A” or higher followed by Alberta graduates at 37%, above the national average of 35%. The two provinces have comprehensive financial life skills courses in their high school curriculum.

Student debt was another area where the survey found a disconnect between expectation and reality. Half of those who carry debt, a student loan for the majority of them, said they plan to pay it off in five years, but the numbers tell a different story. Student debt has reached a record-high of nearly $15 billion, according to 2010-2011 actuarial report released by the federal government.

“The financial realities that we face as Canadians indicate that there is a lot at stake in educating young Canadians to be financially prudent,” Leong. “We need to build on the momentum created by the Taskforce on Financial Literacy and become global leaders in graduating students who are not only well-versed in languages and mathematics, but in personal financial management as well.”

Financial literacy, however, is only half the battle. Various studies, including this one, have shown that understanding financial concepts is a far cry from being able to apply them to personal situations.

Tom Hamza, president of the Investor Education Fund feels financial literacy committee needs also to focus on the application of knowledge, “which seems to be where the real problem is.”