Learning how not to break the bank
By Anne Marie McQueen

Most students who signed up for McMaster University's first-ever credit course in personal finance last year didn't have a clue how to balance their own books.

"They have absolutely no idea about money at all," says Sherman Cheung, course instructor. "They don't really know what a dividend is, they don't really know what a mortgage is ... they have a perception retirement is something they don't have to worry about until they get to their 60s."

The first session of Commerce 4FP3, offered though McMaster's DeGroote School of Business, but open to all third- and fourth-year students, proved to be such a success the school has doubled enrolment capacity for this fall.

Stocks and bonds, RRSPs, insurance, wills and estate management are all on the curriculum. Cheung instructs students facing crushing debt on how to manage it.

He also breaks down the average starting take-home salary and teaches them how to live on it -- and save -- if they ever hope to have a family or a home.

Aminah Syed is a 26-year-old communications co-ordinator working in Edmonton. With bad credit stemming from an identity theft and steep student loans, she finds it nearly impossible to buy a house or a car.

If there had been a personal finance course explaining things like RRSPs and setting up a budget, one that focused on her immediate future, Syed says, "I might have been able to handle things better."

Courses like McMaster's are increasingly popular, although ideally they would be offered in first year, says Patricia Lovett-Reid, senior vice-president at TD Waterhouse.

She points out that while parents usually teach their kids about money while they're living at home, between 18 and 24 they somehow fall through the cracks.

"They're accumulating debt," she said. "But they say 'don't worry about it, I'll pay it off later.' "

Over in England, universities are also starting to offer personal finance credit courses, "partly due to recognition of just how badly some young people do manage money," says Prof. Stephen Lea, an economic psychologist at the University of Exeter.

Lea recalls one study which suggested merely moving on from secondary school has a drastic effect on financial attitudes.

The study involved comparing views of high school students with those in first-year university. The high school students were "all perfectly clear that it was a very bad thing to rely on loans," said Lea. "And (they) were all convinced they weren't going to have any debt at all when they got to university."

By first-year, he said, "they were all in debt and their attitudes to it have completely changed. They think it's not such a terribly bad thing."

Though many blame the current situation on a generation of parents who set an historic example of living beyond their means, Lea says it's not that simple. Because there are so many variables, research into economic socialization hasn't proved much at all.

"It's perfectly, blindingly obvious that there must be some effect, but it's actually hard to find," said Lea. "I could probably retire if I wrote a book teaching parents how to teach their children to turn into good managers of money."