Education and Debt: How a Dynamic and Educated Labour Force can end up facing BankruptcyDec 05, 2014
The Canadian business sector is made up of a highly skilled, educated, innovative and enthusiastic workforce with a strong blend of skill and experience. So how do highly educated, working residents in a thriving community like Cobourg end up facing debt and bankruptcy?
Recent studies show that a higher level of education may actually increase the chance that you will carry debt. In an article for Time Magazine, Dan Kadlec wrote about trends in spending and saving among the highly affluent in terms of both education and income. Kadlec referenced an Ohio State University study which discovered “that the more educated you are, the more likely you are to take on irresponsible levels of debt.” However, this study did not indicate whether this education includes a financial component.
According to Marc Herman in ‘Do Highly Educated People Have Lousy Financial Discipline?’ “Formal education appears to have little to do with one’s tendency to go too far into the hock. It seems to suggest that borrowing too much money is an enticement beyond education’s ability to curb.” Focus on Financial Literacy and education here in Canada has been placed strongly on students, immigrants, seniors and those with a high school education, as they reportedly have a higher risk of personal finance mismanagement that can result in debt and bankruptcy. However, the findings of the above mentioned studies provide a contradiction to our current ideas about who will likely find themselves in debt. This is why we need to put education and financial literacy education into their own categories. Most “traditional” education does not focus on debt, financial or bankruptcy.
In 2011, a policy document titled Financial Literacy: Scope and Sequence of Expectations was published to review the Ministry of Ontario’s Education Curriculum (grades 9 to 12) and the lack of financial education offered to high school students. “The Ministry of Education is emphasizing the importance of ensuring that Ontario students have the opportunity to improve their financial literacy.” The policy goes on to state that the “goal is to help students acquire the knowledge and skills that will enable them to understand and respond to complex issues regarding their own personal finances and the finances of their families and to develop an understanding of local and global effects of world economic forces as well as the social, environmental, and ethical impact of their choices as a consumer.”
As changes are made to the Ontario high school curriculum, more and more students should head into adult life better prepared with financial knowledge. It will be interesting to see if this has any impact on the next generation’s level of consumer debt. These students will soon join the workforce and may eventually become employers themselves, leading major companies with a workforce below them.
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