Geoff Johnson: Students need to know the cost of credit card debt

A January 2022 report found that more and more Canadians are adopting “bad financial habits,” including making minimum credit card payments and borrowing money that cannot be repaid quickly.

A January 2022 report from one of Canada’s largest chartered professional accounting and business advisory firms found that more and more Canadians are adopting what Meyers Norris Penny calls “bad financial habits.”

Topping the list of bad habits are minimum credit card payments, followed closely by loans that can’t be paid off quickly.

According to the report, 45% of Canadians say they regret the amount of debt they have taken on, and 16% say their debt situation is worse than a year ago.

According to Equifax, a national credit bureau, Canadians aged 18 to 25 have an average personal debt of $8,333, while those aged 26 to 35 have non-mortgage debt that’s double that, to an average of $16. $801.

All of this leads me to believe that of all the life skills taught in grades 8-12, there’s a strong case to be made for a course on the financial monster that lurks in the swamp of too-easy-to-own credits. to obtain. map options.

The central theme and oft-repeated mantra of such a course would be “credit does not mean extra income”.

A second equally important understanding would be that credit does not mean more money to spend. In fact, simple arithmetic shows that paying by credit card or loan of any kind equals having less money.

The bottom line, takeaway from a grade 11 or 12 financial literacy course, should be that credit is a way to spend money that you don’t have, but eventually need to find somewhere, one way or another.

Keep in mind that although the minimum age for obtaining a credit card in British Columbia is 19, it is not necessary to demonstrate that an applicant has undergone specific preparatory training on what they what to do or, more importantly, what not to do, with a credit card.

Since for much of their pre-adult life teenagers have been bombarded with a “buy, spend, get” message, in what the advertising industry calls “Joy Marketing” (our product can much happier than you are now), one’s own credit card may seem like the immediate way out of the social embarrassment of juvenile impunity.

Of all the financial concepts that should be taught in the later years of upper secondary education, the first is the personal impact of compound interest on credit cards, the fiscal underpinning of the credit industry.

This alone would have the greatest impact on the future of our children.

Fortunately, help is at hand. For a teacher planning a grade 11 or 12 lesson on how to establish and maintain personal financial stability, the Financial Consumer Agency of Canada has some suggestions online.

Given the world our children live in, one of skyrocketing rents, food and fuel, high post-secondary tuition and jobs that pay minimum wage and offer no benefits, there is no There’s probably no better time to consider these suggestions.

There’s a budget planner that includes tips on paying down debt and setting savings goals.

Further information is provided on how to compare bank account interest rates, monthly fees, transaction fees and services, as well as how to compare credit card interest rates, fees annuals and awards.

Perhaps more useful for a 19-year-old accepting the long-term implications of a Visa or MasterCard shopping spree, there is a credit card payment calculator that helps the novice cardholder know how long it will take to pay off a credit card and how to pay it off faster.

The final topic of the financial literacy course offered for grades 11 and 12 focuses on the financial black hole of the student loan.

In BC, the average individual student loan debt after a four-year degree or other post-secondary program is, at the low end, over $30,000. In 2019, the government of British Columbia eliminated the interest charged on the provincial portion of the student loan, but the federal portion – the largest portion of a student loan – continues to earn interest over the repayment period, too. long as it is. In fact, the federal government charges the highest interest rate on student loans of any jurisdiction in Canada.

Tanysha Klassen, president of the BC Federation of Students, writes on the federation’s website that British Columbia has the lowest amount of non-repayable financial aid, such as scholarships, in Canada, adding that between the rise skyrocketing tuition fees and the lack of a comprehensive scholarship program, students and their families are “forced into debt before they even begin their lives”.

As the 19th century novelist and social commentator Charles Dickens explained through the character of clerk Wilkins Micawber in the novel David Copperfield“Annual income, twenty pounds; annual expense, nineteen pounds; result, happiness. Annual income, twenty pounds; annual expenses, twenty-one pounds; result, misery.

Geoff Johnson is a former Superintendent of Schools.

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