“Mom, I need you to help me with my Math ISU”, said to me my 17-year-old son a couple of weeks back. He’s just finishing grade 11 this week. Now, either a) He was joking because he knows I haven’t done anything math-related since I took math in high school myself or b) He doesn’t know I haven’t done anything math-related since I was a teenager. He does know my husband is the math geek… er… expert in this household, but he asked for MY help so I decided to see what this was all about and why he was asking me and not the math… expert.
I was pleasantly surprised to see his ISU (Independent Study Unit) for Grade 11 Math was actually a project called “Planning for My Future”, where the opening sentence read, “Believe it or not, within the next 10 years or so you will be successful at completing your education, securing a career, making some big purchases like buying a car or a house and maybe even getting married and starting a family! In order for you to ensure your independence and success, it is important for you to understand your finances and manage them correctly.”
As part of the project he had to answer some very relevant questions for anyone who is looking ahead and planning their future according to what they think they will end up doing career-wise, how much money they imagine they will be making, to make sure they live within their means and budget accordingly– that is, so that they prepare properly for the lifestyle they will be able to afford. Right off the bat they were asked what their career would be, if they were married or single, had kids, pets, where they lived (condo, house, city or suburbs), what their hobbies were and what they did for entertainment. My son, who thinks that at age 27 he will still think like a teenager, included internet, video games and television as entertainment, not realizing that most men in their mid-20s have more “worldly” pursuits in mind. The assignment even asked what charities they would donate to, which I thought was also important to instill in kids from an early age.
And then came the reality check: They were asked to budget for a car (including all expenses related to buying and maintaining it, as well as adding insurance costs, gas and other incidentals). The assignment also asked to determine how much they could afford to spend on their living space, whether renting or buying a house, according to how much they earned (and this was assuming they ended up working in the career they’d chosen, and making a good salary) and how much debt they had– whether they had student loans (and this is a big one for the first few years of college or university graduates), credit car loans– and how much they actually had in assets to help them buy a house (savings, RRSPs, etc.)
Students were asked to fill out a mortgage calculator and go through every step, like any real buyer would, in order to find out what kind of living space they could afford to buy and then going through MLS (Multiple Listing Service, where licensed Realtors advertise all properties for sale) to find a property they liked. After all calculations, my son, who wanted to buy a condo in Toronto, discovered that the $289,000 place he had his heart set on, would in reality cost him almost $500,000– almost half of that going to pay for interest after making 300 monthly payments over the 25-year life of the loan. In the assignment, interest was the same for all 25 years, which is not the case. Needless to say, he was shocked.
The assignment threw in a couple of surprises, emergencies he wasn’t prepared for, and therefore had to adjust his budget accordingly, having to cut down on things like entertainment, travel, restaurants and outings, in order to make ends meet and be able to keep up with monthly payments and pay up their debts. At the end, they were asked important questions any teenager or young person should know and keep in mind such as what they need to know in order to keep a balanced budget, what are the advantages and disadvantages of owning, leasing or buying a used car, the advantages/disadvantages or owning versus renting a house and why credit cards can sometimes lead people to get into financial difficulties.
It’s true that many teenagers think that 10 years is a lifetime and that they don’t need to think about these things at all right now. But it is encouraging to see the educational system is somehow giving them the right tools, at least to start with, in the form of an assignment, in order for them to at least get an idea of the reality of proper financial planning for their future and what happens if they fail to budget properly and live within their means. Sadly, many of them will learn these lessons the hard way, but if they only pay a little bit of attention and take away from something like this assignment at least something that will help them make the right choices, then some small piece of the battle is already won. In my son’s case, I’m keeping this assignment and it will be coming out of the vault very often in the next few years.