Friday, September 30, 2011

Financial Education Impacts Economy

It's official. Financial education is good for the economy. The Boston Consulting Group has just released the results of an independent study on the impact of Canada's non-profit Junior Achievement Program (JA) on the Canadian economy. It turns out that teaching students in grades five through twelve about business and finance pays big dividends. Here are just a few of the tangible results.
  • For every $1 spent, JA Canada returns $45 to Canadian society.
  • $425 million dollars per year of economic activity can be attributed to JA alumni.
  • JA alumni are 50% more likely to start a business.
  • JA alumni on average earn 50% more than those who do not participate in the program.
  • JA programs reach 250,000 students per year and are delivered free of charge.
    What is Junior Achievement?
    I spoke with Chris Hindle, Marketing and Communications Manager for Junior Achievement BC, to find out what this largely volunteer organization is all about and how their activities fit into the financial literacy movement. Chris began by expressing one of JA's central messages: to build financially literate citizens you need to start with youth.

    "Youth are at the centre of the financial responsibility solution," said Chris, referring to a presentation that JA made to the Task Force for Financial Literacy in 2010. He added, "Our recommendation is that early intervention encourages positive financial behaviours." He also acknowledged that while financial education is important, our kids are just not getting it at school. JA, he said, has a solution.

    Their solution is to offer a selection free financial educational programs that are delivered in classrooms by volunteer business people. According to their fact sheet, more than three million Canadian students have participated in JA programs since 1955. Today, through it's seventeen charters in ten provinces, JA volunteers reach over a quarter of a million students every year. Their programs include: Business Basics for grades five through eight, Investment Strategies and Economics for Success for grades nine and ten as well as more advanced business programs for grades eleven and twelve.

    What I love about JA is its non-profit, volunteer approach to financial education. I've even met a few local entrepreneurs who volunteer as teachers. Their passion for business and financial literacy are inspiring. But, how do we get our ministries of education and school boards to pick up on that enthusiasm so that every student, not just the ones who happen to have a JA program come to their school, can be better equipped to deal with the financial realities and responsibilities of citizenship?

    Well...while we wait for our decision-makers to figure out that financial education makes a significant impact on the economy, please stop by the Junior Achievement Canada website and find out how to get involved as a volunteer, make a donation or book a program for your school.

    Financial Literacy News
    Copyright 2011. Laura Thomas. All Rights Reserved.
    For reprint information contact moneyme at telus dot net.

    Wednesday, September 21, 2011

    Getting Real About Personal Finance with a Money-smart Dad

    My interview with Som Seif, President of Guggenheim/Claymore Investments Inc.

    Som Seif
    A money-smart dad
    Som hit my radar this summer when he filled in a few times for Kevin O'Leary on CBC's The Lang & O'Leary Exchange. I was impressed by his analysis of the business news particularly because he focused on how blips and pitches in the economy impact the budgets of ordinary Canadians (by ordinary, I mean those of us who do not call Bay Street "home"). As it turns out, this Toronto-based investment banker and father of two is passionate about financial education.

    According to Som, being financially literate means having the ability to understand:
    1. your personal finances and balance your income and expenses.
    2. how much money you will need in retirement.
    3. how to invest to meet your future needs.
    These skills, he believes, are lacking today. "I don’t believe that families in Canada have the financial literacy they need to balance their own budgets," said Som, pointing to recent reports that personal debt and spending are out of control and that many Canadians do not realistically prepare for retirement. 

    Though he believes that families are responsible for their children's financial education, Som acknowledges that this may be a problem for parents and caregivers who are not financially literate or disciplined when it comes to spending. I agree.We need to get real about the state of our household finances as well as the state of financial literacy in Canada, especially when it comes to raising the next generation.

    Kids & Money
    Beyond "getting money to buy stuff you want," Som didn't learn a lot about budgeting and investing until after high school. It wasn't until university, and then later at his first job, that he learned the importance of having a balanced budget and investing for retirement. Som's hope is that Canadian high school students will start being taught the details of investment and retirement, particularly the benefits of investing early. For younger students, he believes that the fundamentals of balancing a budget should be part of the elementary curriculum as soon as possible.

    One of Som's contributions to the "talking to kids about money early" movement involves teaching his two-and-a-half year old daughter about saving. Som shared a story about the time he took her to the bank to set up her RESP account. In the advisor's office, they emptied her piggy bank (which had about $500 in it) and counted out the money. Then they gave the money to the advisor. His daughter was not happy about this. She had been diligently putting money in her piggy bank a couple of times a week for a long time. She cried for hours after they left the bank leaving he and his wife wondering, jokingly, if his daughter had picked up on some mysterious reason we shouldn't give our money blindly to the bank.

    Talk about getting real about money! Som's daughter freaked out because she was blind in that situation. She didn't understand why her money was going to the bank or what would happen to it there. We adults face that all too often when it comes to financial products. When I asked Som what word he wishes that we all understood better, he said, "fees." 

    Not surprising coming from an ETF guy, but he has a point. We have to get real about borrowing, spending and investing for retirement. And we need to get real about the fees we are paying as we do. The sooner we (and our kids) get money-smart, the less likely we will find ourselves crying for hours when we leave the bank...something that's not hard to do these days with all the blips and pitches.


    Watch for Som on my new financial literacy show Money Moment with Laura Thomas. And if you have a personal story to tell about dealing with debt or credit, check out the Credit Education Week website. There is an essay contest for Grade 12 students (maximum 1000 words) and one for adults (maximum 300 words). The deadline for both is October 21, 2011.

    Copyright 2011. Laura Thomas. All Rights Reserved.
    For reprint permission contact moneyme at telus dot net.

    Friday, September 16, 2011

    Surrendering to Money

    Surrender (verb). 1. to relinquish to another under duress or on demand: to surrender a city. 2. to relinquish or forego as a voluntary concession to another: he surrendered his place to a lady. 3. to give oneself up physically, as to an enemy. 4. to allow oneself to yield, as to a temptation or influence. 5. to give up.

    Surrendering to money means...

    Paying what you owe. It's possible to avoid creditors, for a while. It's possible to live on credit, until no one will lend to you anymore. It's possible to borrow endlessly from friends and family, until they start saying no. It's possible to burden your loved ones with your end-of-life expenses, if that is the legacy you wish to leave behind you. But wouldn't it be easier to surrender and pay what you owe?

    Sharing what you have with others. Beyond shelter, food, clothing and basic cost-of-surviving expenses, what else do you need? Instead of surrendering to your wants, could you give that extra $20 in your pocket to someone who is struggling or who would benefit from some heart-felt compassion? Giving up money when you don't have to is an act of surrender, a powerful one.

    Working hard, really hard. We give our time and talent in exchange for money. Respect that exchange. Embrace it. Give in to it. If you don't have much money, that may be because you have not surrendered to this fact of life. You have to get your body and mind out into the market place in order to make money.

    Giving up luxuries unless you can afford them. Surrendering to money means surrendering to a budget. If you are living without a budget or far beyond your budget, then you have not surrendered to money. It means that you have been tempted by marketing ploys or influenced by unrealistic expectations.

    Giving up the idea that you can live outside the economy. There is no outside. Michel Foucault, the French philosopher, was right. We are always inside society and always influenced by the powers and authorities that govern it. That includes the marketplace. You cannot escape money, not if you want to belong.

    Copyright 2011. Laura Thomas. All Rights Reserved.
    For reprint permission contact moneyme at telus dot net.

    Friday, September 2, 2011

    Use Back-to-School Shopping to Celebrate Saving

    It's the final few days before Canadian kids head back to the grind. On one hand, I'm cheering for all the kid-free hours I'm going to get back. At the same time, I'm weeping for all the money I'm supposed to spend to mark my triumphant return to Freedomville.

    At least, I was weeping. Today, I've come up with a plan to ease the pain of this expensive season and that plan is to throw a little education of my own into the mix.

    I'm planning to get more bang per buck by giving my daughter a money lesson. I'm going to show her how to save money when you have to spend it. And I'm going to use back-to-school shopping to show her how it's done.

    Make a list
    My daughter is going into grade three and for the first time she is going to have her own desk where she can keep her own school supplies. Up until now we have purchased the school's package of supplies because they have always been pooled for the whole class to share. This has meant that back-to-school shopping has been limited to clothes, a back pack and lunch bag.

    This year we are taking it up a notch. We are going to choose and purchase school supplies on our own with the aid of our handy supply list. Along with that list, we are making a list of clothing and other supplies that she thinks she will need for the first few months of school.

    Budget wants and needs
    Once we have our list, we are going to talk about how much money Mom has to spend for back-to-school stuff. Then, we are going to arrange the supplies in order: mandatory items at the top, wants at the bottom. I have set aside a certain amount of money to spend with a twist. I have promised my daughter that any money we have left over will be hers to put in the bank and save.

    Have a temperate shopping spree
    Armed with the idea that any leftover cash is hers to keep, we will hit the stores, the discount stores. Knowing that we live in a low interest rate environment (and may be doing so for a very long time) it's critical that I teach my daughter the importance of saving today's money so that it will grow for tomorrow. This incentive will help shape discussions about her choices as they arise during our spree.

    When she picks up a notebook with a funky design that costs $2 more than a plain one, I can smoothly remind her that the extra $2 could be hers if she makes the thrifty choice. The same goes for clothing. Is there really a difference between $25 gym shoes and $50 gym shoes? Very little, unless your child has special footwear needs.

    Eat ice-cream and celebrate the joy of saving
    Hopefully, at the end of our shopping spree, there will be at a few dollars left for her to put in the bank. If there is, we will make a big deal out of it. I will count out the amount in cash down to the penny, hand it to her in a special envelope and then we will go to the bank to deposit it during the first week of school. I may even offer a bonus of a few percent interest that she can deposit as well, a little something extra for every dollar saved.

    And then we'll go for ice-cream, of course. What would a celebration of saving be without a little ice-cream? Freedomville, here I come!

    Copyright 2011. Laura Thomas. All Rights Reserved.
    For reprint permission contact moneyme at telus dot net.