SUBJECT:
FINANCIAL LITERACY
PURPOSE:
This briefing note is a recommendation for changes in policy pertaining
to the administration of financial courses in high school.
ISSUE:
There is not enough action for the administration of financial literacy
prior to graduation at the high school level.
Background:
The financial markets are very intimidating
to novice and beginner investors. The
skills needed to learn the methods deployed by professionals to make profits
are valuable. Not only are financial
markets daunting, they are complicated systems by which a countries economy is dependent. The reason why finance is important is so
individuals can learn to support the concept of capitalism. Capitalism is the idea where industry is
owned by private interest and where government intervene only if the economy is
in peril. In other words, the government
implements minimal intervention. What is
important to note is that the financial markets serve to create capital. Capital really serves the purpose of allowing
potential investors to grow. There are
methods to obtain a surplus of capital, one such method is to go through a
financial institution and obtain a loan.
Another is to get a credit card.
The idea of taking a loan is not a new idea, it has served and benefited
many citizens. However, the terms and
conditions of these loans perhaps may be too complicated for those under the
age of 25. These agreements contain such
intricacies as insurance, liability, etc.
These concepts are far too complicated for people that have not received
adequate financial education. The
financial institutions have good intention on mind however, it is the execution
of the financial system which needs to be re-imagined. What has occurred so far is that people desiring
loans and credit often ascertain the support of these financial institutions,
many of these people are oblivious of the terms and conditions contained in
these agreements. As a result, the
majority of the people become stuck in a debt trap. This is a result of not the financial
institution but the ignorance of those that have incurred such debt. Other factors could also be considered here
as such that perhaps the person needed to support their family. Or perhaps he or she was tempted to
overindulge and bought a shiny new luxury.
Let us look at the actual reason why these occur. For example, the first situation where an
individual needed to support his or her family.
The fact that he or she had emotional attachments is the causation
here. It is these emotional attachments
that have served to trap him or her which resulted in debt. As in the previously mentioned case, we have
an individual who over indulged. This
individual overextended his or her desire.
The fact that his or her desire was higher than what he or she could
ascertain via practical means was the reason he or she fell into to debt. In both circumstances the problem lies with
desperation. The idea of desperation is
really why people go into debt. An
individual is desperate to support his or her family, an individual is
desperate for that new car or even an individual is desperate to start a shop.
Desperation makes people act in ways that are irrational. Desperation consist of making choices that
are not planed. It is once again desperation
that causes people to over extend their means.
What the financial institutions have done is created a credit system
whereby individuals can over extend.
What is wrong with the way this occurs is that the government has not
provided financial education to people before they become the age of
majority. Thus, the fault lies with the
government and not the financial institutions as people continue to rack up the
national debt to new highs. Although
desperation is explaining a negative light, there could be such desperation
that results in eustress. The key to
managing desperation is really balancing desires with expectations. Which is why we suggest that high school
students be taught about the financial markets as this would increase the probability
in which these people can be beneficial to the financial ecosystem.
Considerations:
The national debt in Canada has been
climbing to new highs. In 1987 nominal federal
debt was at $22.00 it was $ $19,733 by 1997.
As a result of policy, net debt per capita declined 11 consecutive years
to $14,951.00, down 24% from 1997 wherein federal net debt per capita grew for
30 consecutive years. This shows that policy makes a difference. During the 11 years decline government
introduced spending controls and measures to increase revenue. Today the national debt is currently at $
$1,003,294,000,000.00 which leaves each citizen a share of $30,000 each as per
the Canadian Tax Payers Association.
Fixing the debt issue is paramount as standards of living can be
implicated if not addressed.
Furthermore, this debt has caused inflation wherein prices of basic
needs as bread and milk have risen substantially. Canada needs to implement policy to maximize
exports and reduce imports which should create a surplus. They should also keep capital in the country
and prevent it from flowing to other nations.
By implementing policy to ensure a surplus rather than a deficit,
Canadians can look to a better future not only for themselves but their
children and their children’s children.
Canada is a place where the government is equitable. They have systems in place to protect the
interest of its citizens such as the medical system, legal system, social
support systems. Why is it that Canada has
not implemented a measure whereby high school students are educated about
finance? The idea of neoliberalism is a
concept pushed by Margaret Thatcher and Richard Nixon. It is an idea that supports capitalism. It is an idea which is considerate of the
welfare state. It is this idea that has
served to protect the interests of Canadians.
Through the financial education of high school students, Canada can have
yet another safeguard to these concepts.
It will then result in literacy which could then help to fix the
national debt issue here in Canada.
Options:
Option 1:
Change legal age to 25.
A possible solution we suggest is that
perhaps we as a society look at what is currently referred to as the, “legal
age.” Since science says that the brain doesn’t
fully develop until that age, it is only right that we perhaps consider to
question the legal age. Perhaps it is
necessary to keep certain parts of the legal age of 19 such as alcohol,
cigarettes and driving. But we do
question these young people’s ability to make sound legal judgements especially
when making legal decisions. Are young
people functioning at a capacity wherein they fully understand the
ramifications of their decisions? This
is a very feasible option and it would be very easy tom implement. The extra time will give young adults time to
mature. This option is considerate of
the equity in which people ascertain because each individual will be at a full
capacity when they are permitted to make legal decisions.
Option 2:
Administer a mandatory financial course at the tail end of high school.
If such a course was provided for a
semester, students would be more prepared to enter into the community. As it stands at the moment, students are
placed with heavy burdens as they graduate.
They must develop not only socials skills and intimacy skills in high
school, but are also expected to learn the foundation by which careers are
built and are also expected to enter into the work force via their first job. Adding a financial course could be beneficial
and supplement their learning as they attain entry into the workforce. This course should be administered in such a
way that students are given a probationary period of several years before they
become 25. Having such period will
ensure that these growing adults could ascertain the skills they need to become
financial contributors to our nation.
This option is not as feasible as the previous option but it is more
equitable as students are given the information they need to be successful in
the community. This option is the most
sustainable as it sill create a well informed public at large which could
evidently reduce indebtedness thus affecting the national debt load of Canada.
Option 3: Mixture of option 1 and option 2.
This is the least feasible option as a lot of
collaboration is required to pull through.
However, selecting this option would bare the best results to the
economy. Having a financially competent
community could be beneficial to the cause of capitalism. With a financially competent community,
private industries can ascertain the funding they need to continue the
progression of technology, which then will improve efficiency and evidently
increase the standard of living.
Option 4: Status quo, not working which is
why we have options.
This option is the most feasible however,
it does nothing to improve the situation of the national debt. This debt is going to continue to rise and
this trajectory will only result in more inflation. The prices of goods will continue to sore and
peoples’ quality of life will be reduced.
Therefore, this option is the least sustainable.
Recommendation:
Option three is recommended.
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