“84% of college graduates wish they were taught more about money.” – Sally Mae: How Undergraduate Students Use Credit Cards
With Bill 15 “An Act to End Predatory Lending” before the Alberta Legislature, now is a good time to talk about financial literacy which has always been one of my key concerns. The payday loans industry actually preys on the financially illiterate segment of our population. Anyone who understands finances knows that paying $23 for a short term $100 loan would certainly understand the usurious nature of this industry.
Aside from payday loans however it is disconcerting that our school system does not pay more heed to such basic monetary issues as simple and compound interest and teach this most important skill in the regular curriculum.
Almost every student when they turn eighteen gets a rash of applications for credit cards in the mail. Unfortunately these young people look at these cards almost like a gift not realizing the responsibilities involved in managing credit. All too often they go on spending sprees finding out too late that they can’t pay off their monthly balance. They take the easy road out, accepting the offer to pay only the minimum ten dollars, without realizing that the excess builds up with an interest rate of 19% or higher. Soon they are in over their head and unless their parents bail them out they often end up with a huge debt load that they simply cannot pay off. This results in a bad credit rating, which often leads to other problems.
The sad thing is that some kids don’t know anything about saving money because their parents are ignorant of the concept of money management as well.
Very few of us these days had the fortune, or misfortune of growing up in the dirty thirties. I say fortune of growing up in the dirty thirties because our parents and grandparents who lived through those days had to learn how to stretch a dollar and save, often to put bread on the table. They were the thrifty generation.
Unfortunately we’ve lived through the best of times where there was always food on the table but as a corollary to that, we haven’t had to learn the thriftiness of our predecessors and have developed sloppy habits in the management of our finances.
This problem should be solved in our school system at an early age. The current curriculum however pays only cursory attention to the issues of financial literacy. The basic concept of money, saving and interest rates could however, be easily included in arithmetic and mathematics throughout the school system as it is a very practical method of combining arithmetic and financial principles.
The problem of debt, whether it be household debt, credit card debt or student loan debt is becoming a crisis. It is particularly acute in the current Alberta recession with high unemployment but we must slay this dragon.
Hopefully, because of this debt crisis, we will become more cognizant of the need to manage our finances better than we have in the past. Let’s work collectively to stamp out the need for payday loans by adopting responsible money management habits.
Ken Allred is a former St. Albert alderman and MLA.
