What Do Teachers Know about Financial Literacy?

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Hello fellow personal finance readers. I go by the pen name “Teacher Man” due to the fact that I recently graduated from university and am in my second year of teaching high school. About 9 months ago my partner and I started a website called My University Money. It is aimed at helping young people (with a specific focus on post-secondary students) and just talking about financial and student lifestyle issues in general. Young & Thrifty was one of the first bloggers to really reach out to us and give us a little recognition when we were just starting off.

Attacking the lack of financial literacy in Canada and the USA has become the norm these days, and with good reason.  In my opinion there is a direct correlation between not knowing how to properly handle money, and the problems caused by excessive debt in the marketplace right now.  The vast majority of people agree that something should be done, and the public school system appears to be the best medium for delivery.  At least, it appears that way until you factor in the makeup of the average teaching staff.

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I am routinely amazed by the lack of financial literacy within the ranks of teachers.  I often talk to my fellow educators and many of them have no clue about how much we pay in union dues, how our pension fund is handled (luckily it is actually handled pretty well, not as good as simple ETF or index fund, but still far better than most mutual funds), or even how to do their own taxes.  When I told people I was doing my own taxes last year just because I liked to know exactly where my money is going and why, I drew a lot stumped looks.

 

It’s Not Our Bag

So why can teachers teach everything from Shakespeare to the Pythagorean theorem and not personal finance?  Well, to start with, we have educational backgrounds in many of the subjects we teach.  My university’s Faulty of Education did not allow economics courses to count towards a “teachable major and minor.”  This means that you couldn’t get into the faculty if you focused on financial areas in school.  Furthermore, if you look at any poll of teachers, by far the weakest area overall is math skills.  Math teachers generally know something about geography, while humanities teachers generally avoid math like the plague.  You don’t have to be NASA employee (re: rocket scientist) to get the basic calculations required in personal finance, but it still helps to be comfortable with numbers.

 

Aren’t The Answers At The Back Anyway?

This lack of base knowledge could probably be remedied by a couple of hours with a textbook and the infamous “Teacher’s Edition,” but the problem runs deeper than that.  Teachers are the epitome of financially spoon-fed public employees.  This isn’t necessarily a bad thing or a good thing, but it is relevant to creating an effective financial literacy course.  It seems most teachers have realized they are better off having someone else worry about their finances, and that they are willing to give up a ton of personal choice in the name of paying someone else to take care of personal finance for them.  It’s not as if teachers don’t pay for their benefits, it’s that they don’t have a choice, so they can’t really make bad ones.

 

Seen Many Starving Teachers Lately?

To begin with, teachers make a wage that is far above the median in Canada.  My wage is public knowledge, and as a second year teacher I make about 53K a year.  In Manitoba, teachers with 10 years’ experience generally make around the 80K mark.  Anytime you make that much more than the average, life gets a little easier.  Going out for supper a couple of extra times a month, or buying a coffee everyday doesn’t have the same proportional effect on someone who is guaranteed a good salary.  Teachers also disproportionately end up marrying other professionals, which further augments the idea that personal finance gets easier with more discretionary income.  Most teachers also never worry about creating an “emergency fund” because our unions give us such unbelievable job security.  I have literally witnessed teachers who work maybe 1-1.5 hours a day, and they don’t even get talked to.  As long as they give students great marks, and don’t do anything terribly objectionable, they are fine to cross days off of the calendar and fly under the radar.  There are very few jobs that have that job security in the world.  How do we in good conscience tell kids to save money because they could lose their jobs some day when the thought rarely crosses most teachers’ minds?

The Drawbacks To Superb Benefits

The other reason that teachers can get away with ignoring their emergency funds is our excellent benefit packages.  If you get hurt (mentally or physically) you are often covered for 70-80% of your net wage (probably still more than the median wage for Canadians), plus you have a very large amount of sick days every year (I get 20).  Our benefit packages mean we don’t have to worry about comparing life insurance, or understanding whole vs term because it will always be there for us through our mandated union plan.  Not only that, but our premiums for extended Blue Cross, life insurance, dental insurance, and long term disability are all fairly low because of the huge number of us under the same plan.  This takes away a lot of the decisions that other people have to worry about, but it also makes us experience-poor in terms of material that can be drawn on for teaching a personal finance course.

Why Can’t Everyone Have “Freedom 55” Again?

Finally, our vaunted gold-plated retirement (that I would give up in a heartbeat in order to handle my money myself by the way) means that very few teachers I know plan much for retirement beyond very standard ideas (made easier by their yearly salary).  As long as a teacher has their house paid off by retirement, and is not responsible for many dependants, they should be just fine.  Our teaching pensions are usually 70% of our best 5 years.  This means that most teachers that retire this year would draw 56K a year, and there is a slight inflationary adjustment (even if it doesn’t quite keep up).  When you add in our guaranteed CPP and our OAS (even though we make more than the median income – WHEN WE RETIRE!  This makes no sense to me at all, but god forbid we touch OAS or retirement benefits of any kind apparently).  Most teachers have to be near 65-70K.  Who can’t live comfortably on 65K if their house is paid for (which shouldn’t have been all that hard given the yearly salary).  All this to say, that most teachers don’t have to worry about the cardinal rule of “saving 10%” because it is automatically taken care of for them.  Once again, this presents a dilemma in terms of finding staff members who can credibly speak to the realities of the private sector most of their students will be entering.

 

“I Don’t Have A Solution, But I Certainly Admire The Problen” -Ashleigh Brilliant

So to recap, there are inherent problems with getting people who basically have 90% of their personal finance decisions made for them trying to teach other people about personal finance.  I don’t know what the solution is.  I definitely agree that we need to teach financial literacy in schools, but how to best accomplish this when we already have a difficult time finding competent math teachers?  Maybe we pay sessional business people who might not have Faculty of Education degrees?  I guess the unions would never allow that.  I could say the solution is allowing young teachers who have not enjoyed the privileged teacher/personal finance experience yet to teach the classes, but judging from our track record we aren’t exactly experts in the field either.

Readers, I’m interested to hear if anyone else has some solutions to put forth?

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Young is a writer and former owner of Young and Thrifty and the main "twitter' behind Young and Thrifty's twitter account. She lives in Vancouver, BC and enjoys long walks on the beach, spending time with her anxious dog, and finding good deals. If you like what you read, consider signing up for email updates.

35 Comments

  1. thewealthyicelander on March 14, 2012 at 9:09 am

    I don’t think the problem is that teachers don’t know enough about money.

    Money, at least the basics is a relativly simple subject and even if many or most teachers don’t know enough, the few such as yourself could teach this.

    Part of the problem is that the school system is primarily focused on making employees.



  2. Michael James on March 14, 2012 at 9:08 am

    You make an interesting point that the very things that should be taught to students about personal finance are things that don’t interest teachers much. Although, I’ve seen low financial literacy among people in other fields such as programmers as well.

    As for the problem of attracting qualified math teachers, it is clear that market forces would work, but that would go against the union mantra of pay for age instead of pay for talent and skills. I’m guessing that if teacher pay were cut 10% across the board, only a small fraction of teachers would quit for other occupations and the bulk of them would be math teachers.



  3. Schultzter on March 14, 2012 at 9:21 am

    In university I finally took a Personal Finance course – not because I needed one but because I’m a computer geek and it was one of the first courses offered online, to test the waters. So the aversion to personal finance literacy is not limited to high school, it permeates up to university as well (and I don’t remember there being any in CEGEP either).

    BTW, in the 3rd section (It



  4. krantcents on March 14, 2012 at 12:56 pm

    One of the problems in education is there are very few math and science teachers. On the elementary level, the lack of math skills will affect generations of kids. By the time the children get to high school, too many do not like math. One of the reasons is lack of skills.



  5. Joe on March 14, 2012 at 3:14 pm

    As a fellow public servant in a different field who has a defined benefit pension, I would not give up my DB pension in a heartbeat. Why? Economies of scale. Large pension plans, in the long run, outperform smaller pension plans, which in turn outperform individual investors (on average) and defined contribution plans. Defined contribution plans are over-glorified RRSPs. If you’re stuck investing in equities and bonds, you’re missing the majority of the market. The return for a pension plan that built a bunch of apartment buildings in the 70s, then rents them out and manages them itself are INCREDIBLE. Big plans can play around in venture capital, takeovers, etc (although the OTPP attempted takeover of BCE was SCARY leveraged). I, as an independent investor – even though I could be smarter than every single analyst at my pension plan – will never be able to achieve the same long term returns as my plan.



  6. squasher55 on March 14, 2012 at 3:41 pm

    This is a well written article. I am retired, but spent 36 yrs teaching mathematics in Ontario. The salary there after ten years is much higher than you quoted for Manitoba.

    But everything you mentioned I agree with…including many slackers who know they can get away with doing very little, and still get paid. I am sure you know about the book ‘Millionaire Teacher’, by Andrew Hallam. This is an excellent book……and he is now teaching a High School course on money matters and investing…..it is in Singapore, but in an American private school there.

    I now live in the USA, and most teachers here would drool over our salaries and our pension. Your idea of teaching teachers about investing is a good one…good luck with that. Keep pushing your ideas….they are solid ones, but perhaps ahead of their time.



  7. Tusk Trader on March 14, 2012 at 7:40 pm

    A well written article. Bravo for discussing the pleasant and not so pleasant aspects of your profession. Not everyone would be so honest. I am curious why wish you could handle your own investment portfolio. The teachers pension plan basically converts your monthly savings into retirement income for you and does a relatively good job of matching the cost of living increases (better than most). Looking at the investing fees charged outside of pension plans and the ‘risk’ or lack of risk you have, I wonder where that motivation comes from.
    I agree that teachers are going to struggle with the new financial literacy curriculums coming their way. There has not been enough planning to provide assistance. Teachers are just as uninformed as the rest of Canadians.



  8. young on March 14, 2012 at 9:49 pm

    @TT-I loved the article too and that’s why I have TM as a staff writer here! 🙂 His writing is refreshing compared to my ramblings for me lol 🙂 Yeah, teachers, ANYONE are just as uninformed as the rest of us Canadians. No one is immune- even people who are doing relatively well for themselves are uninformed.



  9. young on March 14, 2012 at 9:49 pm

    @squasher55- Canadian defined pension plans are like the gold shackles as they say. 🙂



  10. young on March 14, 2012 at 9:51 pm

    @Joe- I have absolutely nothing to add to that except to say I agree! I could not match my defined benefit pension no matter how hard I try. I guess this is why public servants aren’t very attune to investing and saving, because we need not be. However, the defined benefit pension and its pot of gold is only there after you work a set number of years, right. There’s no guarantee that we can be happy with the same job for decades in order to secure that pot of gold.



  11. young on March 14, 2012 at 9:53 pm

    @krantcents- Great point. There aren’t very many people I know who went into math and then decided they wanted to teach after. I wonder why the government can’t just be a bit more lenient about who they let teach math. Do you really need a math degree in college level math to teach high school math?



  12. young on March 14, 2012 at 9:54 pm

    @Schultzter- Whoops, the editor should have caught that! I’ll correct it- thanks for pointing it out.



  13. young on March 14, 2012 at 9:54 pm

    @thewealthyicelander- Does this sort of go back to the topic of the book Rich Dad Poor Dad? 🙂



  14. jay on March 15, 2012 at 7:15 am

    I wonder how long defined benefit plans will last as well as union-supported positions. I am not promoting a right-wing view or anything! I am just saying that the author sounds like he has a job for life and benefits for life. But what is happening in Greece (riots, stripping of golden handcuffs, lifetime jobs, etc.) can happen here when there is huge pressure to cut fiscal expenses.



  15. Christine Wilson on March 15, 2012 at 8:41 am

    Excellent points. I agree that if everything is managed and you receive a larger income than most people, you’ll have a difficult time explaining how to manage your own money!

    As for a solution? Either the school board will have to attract finance teachers – people who majored in finance not math – math is like programming, it may take skill but can be completely removed from everyday life skills. To attract these people they’d have to offer a higher salary. Good finance people can get paid a lot of money in the private sector, they tend not to like unions and like to earn money directly from the growth of their portfolios because in the end this earns them more. The second option is bring in financial consultants to teach finance for a few sessions.



  16. popthoughts on March 15, 2012 at 2:23 pm

    Great post. I’m glad to see someone like Teacher Man realizes how good teachers really do have it relative to most in terms of pay, job security, benefits, etc. I don’t doubt for a second that it is a very tough job, but so is mine and as an entrepreneur, I have to worry about it still being there every year, and I have absolutely no benefits.

    I don’t what the answer is either about teaching financial literacy at an early age, but good saving and spending habits are learned at home from the parents. Well, at least for me it was. I guess having an accountant for a father didn’t hurt either. 😉



  17. Joe on March 15, 2012 at 5:50 pm

    Also,while I’m sure I’ll have a pension when I retire, I get nervous about 100% of what I’m owed will be paid out. Looking at my pension statement I see the projection that I’ll be getting 90K+inflation indexing (and full benefits) starting at age 56. This is a wonderful projection and considering how much I pay (plus how much of my compensation package is the employer’s contributions) I will be angry if it isn’t paid out in full. But is it realistic? Will it survive the housing bubble, government austerity,global economic shifts, that are all sure to happen (at least once, if not several times) between now and 2043? I don’t know. Considering a lot of pensions are, when you review even their official statements, underfunded, it’s kind of scary.



  18. mycanuckbuck on March 15, 2012 at 6:44 pm

    Interesting post. I’ve heard things on both ends of the spectrum about teachers – that they are the best financial planners and they are the worst. My father is a retired teacher, and he’s always been pretty good about money. I have a friend who is currently a teacher – and she’s terrible! I don’t really have any suggestions – it’s hard to motivate people to take an active interest in their money when most of it is taken care for them!



  19. Value Indexer on March 16, 2012 at 7:55 am

    Sounds like all those alternative investments might be counterproductive at times! A lot of them are just ways for money managers to transfer assets from investors to themselves. Or maybe the pensions are underfunded and reaching for riskier investments to save themselves or die trying. I’ve seen instances where this turns at 40% shortfall into a 70% shortfall.

    The average stock investor has access to the stability of Berkshire Hathaway, the size of Wal-Mart, and the cash stockpile of Apple (I don’t know how big any provincial pension plans are but since the CPP is in the 100-200B range I’m guessing Apple’s cash levels reported last year rank pretty well). Plus REITs if you want real estate, or risky small-cap stocks if you want to take a chance on something that could be big.

    I don’t think there’s any lack of decent returns from a self-managed portfolio. Don’t forget that anyone who has access to a really special investment opportunity should be charging a lot to let others in, so the benefit isn’t that great unless you’re the one who does decades of research to figure it out. The services of great professional managers usually amount to filtering alternative investments so they provide returns similar to equities and bonds.

    And if a pension plan’s management isn’t so good they can really make things exciting (exciting as it going to the casino and betting your retirement on red). I’m guessing the current managers retire before you do!



  20. young on March 16, 2012 at 2:30 pm

    @mycanuckbuck- I think teachers and other public servants come with different personalities… I know a few teachers who are absolute spenders, and some teachers who don’t know anything about personal finance. At the same time, I know financial advisors who are absolute spenders and others who are really good with their money. I wonder if its more about personality than generalizing a profession/ occupation?



  21. young on March 16, 2012 at 2:32 pm

    @Joe- Do you anticipate working for the next 31 years full time with the same company? Does the company anticipate employing you for the next 31 years? I’m happy with my gold-plated pension too, but being shackled to one job because of the pension is a bit limiting for me.



  22. young on March 16, 2012 at 2:39 pm

    @popthoughts- Seriously- teachers have it good and yet they’re striking! (Well I can’t lay blame on them because I don’t know enough about the conditions of their work), but a good pension, weekends and prime holidays off to spend with kids etc. How awesome is that? I learned most of my good spending and savings habits from my parents as well. Maybe we just need to focus on teaching parents to teach their kids!



  23. young on March 16, 2012 at 2:41 pm

    @CW- I think that financial consultants are a good idea. They could come twice a year or even three times a year. And each student could track their budgets and perhaps even report back when the financial consultant comes again. This way long term progress and monitoring will hopefully reinforce behaviour changes and beliefs in regards to money.



  24. young on March 16, 2012 at 2:42 pm

    @Jay- Yeah, with the aging population who will be there to support us when we get older? This is why although I’m happy with my pension plan, I’m not going to fully depend on it.



  25. Julie @ Freedom 48 on March 16, 2012 at 8:10 pm

    Teachers tend to teach what they know. I learned a lot of fantastic financial rules & strategies in my Grade 11 Accounting class… and not a lick of personal finance in any other class.
    There really should be a “personal finance” class that’s mandatory – focusing on managing money, saving, investing, retirement planning, debt etc.



  26. Larry MacDonald on March 17, 2012 at 4:15 am

    Great post. Hadn’t thought of that angle.

    Lends more credence to the voucher system of education. Perhaps solution for this and other issues is to introduce more market forces into the system.

    www.canadianbusiness.com/blog/…alls-short



  27. Gigi on March 17, 2012 at 10:29 am

    Just stumbled upon your blog and love the post. I am a teacher who just recently became somewhat “financially literate” and have spent my Mat Leave reading a number of books, magazines, and blogs on the topic. I agree that many teachers are financially illiterate but like Julie, I think we focus and teach what we know. I do however disagree with you on the point that teachers are less financially literate than other professions; we earn decent wages and have defined benefit packages which help, but as David Chilton points out in the Wealthy Barber Returns, we are also “good with our money”. On the other hand, most of my friends and acquaintances are clueless about personal finances and financial planning and leave the task to a financial “expert” or do nothing at all!

    Part of this relates to the reasons you listed but a more significant point is that financial planning is not part of the curriculum we teach our students – in any subject area! Even required courses such as Planning 10 (in BC) due a woeful job of preparing students for the real world and until some sweeping changes are made, it won’t be either.



  28. Potato on March 17, 2012 at 5:16 pm

    I do science outreach for a few high schools. I also offer to do personal finance or investing outreach, but there’s been zero take-up of that. Even for science outreach it’s a surprisingly tough sell: get an actual research scientist to come in for the day and talk to the kids about science and university admissions, maybe do a little experiment, for free, providing all the materials… and the teachers don’t want to give up the time on their curriculum, or the prep time to try to work with us to make the outreach event fit their curriculum needs. I can’t remember the exact numbers, but of the science teachers we contacted offering to do outreach events, something like less than 5% of them even wrote us back, and only a few ended up finding the time — and two of those were in some way related to the research group (one was the husband of one of our techs, the other worked with us when she did her science undergrad before becoming a teacher).

    So unless PF is added to the curriculum, I don’t know how to get it to the kids: the teachers don’t know or aren’t interested, and you can’t get outside instructors in to the schools to help.



  29. leslie on March 18, 2012 at 10:25 am

    In our required 7th grade Home Ec class (in a small, rural, public school), we were taught about personal finances as part of the curriculum. The home ec teacher gave us fake money to manage. We learned how to write a check and balance a checkbook. We created a budget and had to stick to it for a week.

    It never ceases to amaze me that other schools don’t teach something as simple as this.



  30. Roshawn @ Watson Inc on March 18, 2012 at 2:44 pm

    There is definitely a dearth of PF literacy amongst teachers, just like many others. Fortunately, teachers also make up good enough portion of millionaires, likely due to the better than average income that you mention. I still wish teachers were better compensated, yet there is a financial reality to funding education that cannot be denied. I definitely listened to teachers regarding their areas of core expertise, but many asked me advice regarding their finances 🙂



  31. young on March 18, 2012 at 7:38 pm

    @leslie- That sounds like a really good solution- to incorporate it into Home Ec class (or even math class perhaps). That sounds really fun- I would have loved to create a budget, write a check, and balance a checkbook in grade 7!



  32. young on March 18, 2012 at 7:40 pm

    @Potato- Wow, that’s crazy! I guess time crunched teachers are really feeling the push to teach their curriculum. In this case, it sounds like the curriculum needs to be changed from the top down. The teachers feel too powerless to change, they probably feel powerless with their own finances, and they don’t see the importance of it for the students. PEOPLES MONEY MANAGEMENT IS A LIFE SKILL- WE NEED TO LEARN IT! /RANT.



  33. young on March 18, 2012 at 7:46 pm

    @Gigi- LOL You know what, I think I remember taking Planning 10! Is that like Career Prep?
    good for you for educating yourself on financial books and magazines! It just takes one person to influence others. I have influenced a lot of my friends to become more interested in personal finance too (I guess I just ooze passion out of my pores).



  34. young on March 18, 2012 at 9:21 pm

    @Larry MacDonald- Wow… $94K for 10 years teaching experience in Ottawa?? I’m in the wrong line of business, clearly.



  35. young on March 18, 2012 at 9:22 pm

    @Julie- I agree- this is something that the government has to implement and make it nation wide. It’s sorely needed. Consumer debt is going a bit out of hand.



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