Click here to view the embedded video.

MoneySense.ca recently published a list of the odds of winning a lottery.

As you can see, on average, you have at least a 1 in 1 million chance of winning the lottery. Interesting enough, you have a 1 in 500,000 chance of being stuck by lightining, a 1 in 50,000 chance of becoming a professional athlete, a 1 in 700,000 chance of being killed by a meteorite, and a 1 in 118,351 chance of dying due to a medical complication.

So the next time you see a lottery commercial and want to join in the fun, just remember, when was the last time you heard of someone being killed by a meteorite.

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In 18 years, when a baby born today goes to university to start an undergraduate degree, the total cost of a four-year program for a student living away from home will be $137,013.

Coincidently, last week I also spoke to 250 grade 12 students about why it’s important to start thinking about your financial future today. In that talk, I shared with them the table below, which outlines the yearly high, low, and average costs of going to an undergrad program at a university in Ontario.

As you can see, the cost of going to school today is already high, and while some parents may opt to pay for their children’s education, with rising tuition costs, children are going to have to burden some of that debt – if tey aren’t prepared to manage that debt, it could take them over 20 years to pay it back.  So if you haven’t started talking to the yonug people in your life about why they need to care about managing their money now, isn’t it about time you did?

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While parents usually have all the right answers, sometimes they don’t. Sometimes, as hard as a parent might try, they just don’t have the right information, and there is nothing wrong with that – if everyone knew every answer, life would be pretty boring!

So what can a teenager or young adult do if mom and dad can’t teach you about financial management? Well, there are a ton of options you just have to look around to find the best one for you. It’s always easiest to start with people you know, so ask your family and friends if they know how to manage their finances, and if so, ask them to share their insights with you. But remember, it’s important to remember not to stop there; you need to continue your education journey!

Next, ask your parents, friends, and family if they can recommend any professionals that you can talk to. It doesn’t matter whether it is a banker, an accountant, a financial planner, or even just one of their friends who is really knowledgeable in the subject of financial management. Most bankers, accountants, and financial planners will be happy to sit down with a young person who is looking for knowledge and have a short talk about how to start managing your finances – and in most cases there is no charge for doing this!

Don’t forget that there is a world of knowledge out there in both traditional and new media. Pick up a book, start reading a blog, listen to a podcast, or find a newspaper or magazine which talks about financial management – your goal should be to read as much as possible until you have a good understanding of what you need to know (it’s all about how comfortable you are with the topic). Learn the basics, and once you have those figured out, start looking at the more advanced topics like investing.

Finally, the best way to really learn is to start doing. Start incorporating some of the information you’ve picked up, by starting to track your expenses, create a budget, and set and meet financial goals. It’s also a great idea to share your information with others – one of the best ways to really gain an understanding of a topic is to teach it to someone else.

What are your suggestions/ideas on how to learn about financial management?

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One of the more advanced topics in financial management is investing – there is a ton of information out there on the subject, and a wealth of advisors to help you de-mystify the world of investing. The only problem with investing is there is an element of risk – especially in today’s economy.  But what if I told you there is a risk-free way to learn about investing?

Have you ever wanted to learn about the stock market or how to invest your money, without the worry of losing your savings?  There is a great site called weseed.com, which allows you to learn how the stock market works without putting any money at risk.  The site uses real companies, with real data, but in a fictional marketplace, where you don’t actually use any real money to buy stocks – think of it as a sandbox for investing.  The site uses social networks to help individuals learn about investing, to help better prepare you for investing in the real stock market.  And the best part is, the site is free!

Watch the video below, and if you are interested in learning about the stock market, go check out weseed.com

Click here to view the embedded video.

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There was a great article in the newspaper discussing how the Canadian education system has failed to teach people about the basics of financial management.  The article goes on to identify five main areas that we need to focus on:

1. The relationship between risk and return
2. Know how compound interest works
3. Learn the basics of debt and credit
4. Teach financial responsibilities in the context of an entire lifetime
5. Financial literacy needs to be ingrained throughout the school system

It’s unfortunate that basic financial management is not a required course in school, as many would argue that this is a fundamental skill that is used throughout one’s life. If I had learned the basics of financial management when I was younger, I probably wouldn’t have ended up 28 Years Old and Broke.

When did you learn how to create a budget, and more importantly, when did you learn why you need to create a budget?  Knowing how to use a tool is only useful if you know why you need to use it.

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Click here to view the embedded video.

So what are these financial management tips?  Well the first one is pretty obvious – you need to be able to figure out the difference between things you need and things you want.  In the movie, Isla’s character is constantly plagued with having to decide whether she really needs those new Gucci shoes, or whether she needs to pay rent.  Unfortunately for her, she always picks high-fashion over the essentials like rent.  It’s not only important to understand this difference, but you also have to know how to get there – how much money can you spend on clothes each week, and how much money do you need to save for food and rent?

Lesson number 2 is that it’s never too early to start teaching your kids about financial management.  There is this one scene in the movie where Isla’s parents (John Goodman/Joan Cusack) are standing around with a book on how to teach your children financial management, asking themselves, is it too late?  Well, if they need help, it’s never too late, but at the same time, it’s never too early.  Parents, start a conversation with your kids today and tell them why they need to understand the difference between something they want and something they need, then teach them how to create a plan to meet their needs and desires.  Kids, ask your parents what a budget is, and how you make one, after all, you don’t want to end up 28 and broke, living in your mom’s basement.

Which brings us to our final lesson.  There is a scene in the movie where Isla’s character is trying to unfreeze her credit cards from a block of ice so she can go shopping – in order to curb her wild spending habits, she froze her credit cards.  This is a great example of the need for balance in life.  No matter what you do, whether you like to spend or save, you need to have a balance in life.  Learn to save your money, but at the same time, learn when it’s OK to spend it.

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What financial advice would you give in the current economy?  Would you tell people to save their money?  Would you tell people that today is a buyers market?  Maybe you’d tell people that they should do nothing and see what happens, otherwise known as the deer caught in headlights syndrome.  Would you give the same advice to a teenager or young adult?

I was recently asked this question, and you know what my response was?  My advice for the current economy is the same advice I’d give in a good economy – understanding the basic principles of financial management and implementing them is good no matter what is going on in the economy.  It doesn’t matter if the economy is doing well, it doesn’t matter if the economy is doing poor, it doesn’t matter if the economy is flat, what matters is that you understand how to track your spendings, how to set financial goals, how to meet them, and how to think about the future.

Are you stuck where to start?  Well, let me break it down for you.

1. If you don’t know how much money you make each week, month, or year, figure it out – you need to know how much money you make to make a budget
2. Know where your money goes – track your expenses, and see where you are spending your money.  Once you start tracking things, you’ll be amazed to see where your money is going – did you know a Starbucks a day costs you over $500 each year?
3. Understand this basic formula: Income – Expenses = Savings.  Whatever money you don’t spend throughout your daily life will be your savings, and these savings are what let you plan for the future.
4. Create financial goals – figure out what you want to buy in the short term (maybe it`s an xbox, a new TV, or some new clothes) and long term (do you want a new car, a condo, a house, a vacation around the world), because our next step is to figure out how to meet these goals.
5. Create a budget and stick with it – now that you know where your money is going, and you`ve figured out what your financial goals are, create a budget to meet these goals and stick to it.
6. Start thinking about the future – do you know at what age you want to retire? Do you know what the future holds? If you`re like me, chances are you don`t, but that doesn`t mean it`s too early to start thinking about the future.  If you start saving even $100 each month for your retirement, and you make use of compound interest, you`ll be amazed how much you can save by the time you want to retire, and who knows, maybe you`ll even be able to retire early.
7. Share your knowledge with others – financial management isn`t a topic that is often found at the dinner table, but that doesn`t mean it doesn`t belong there.  Start a conversation about managing your money with your parents, with your sisters, with your brothers, with your cousins or even with your friends.  Share what you know, and who knows, maybe your family and friends will share some new information with you!

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Unfortunately, this isn’t a topic that is a mandatory part of high-school education even though it should be. A recent study by the University of Manchester found that:

standalone financial education qualifications can dramatically improve individuals knowledge, skills and confidence in financial matters and that long lasting behavioural change can be achieved as a result.

The study also found that:

A specifically designated and substantial qualification is effective in changing young peoples financial behaviour (this contrasts with the Government approach of thinly spreading financial education across the curriculum in a variety of subjects).

Personal financial management education is effective when provided at a time when young people are experiencing the transition towards greater independence and adulthood (this contrasts with the approach of many who believe that early years and a focus on primary school children is appropriate).

Approximately 95% of students reported understanding money matters after taking the course and high levels of knowledge and financial awareness continued to be reported at both the 10 and 22 month follow up periods (FSA research published in July 2008 suggested there was no evidence that other forms of financial education produced lasting improvements).

Students confidence greatly increased e.g. confidence to go to a bank and discuss financial matters, greater confidence in how to research financial options and products and so on

So for the parents out there, the question isn’t “Do I teach my kids about financial management?”, instead it should be “When should I teach my kids about financial management?”.

If you haven’t started the journey yet, maybe you should today.

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Canada’s unbiased, non-profit source for information and tools that help consumers make better decisions when investing and managing their money.

This is an amazing site with a ton of information on everything from Investing Basics to Saving for Retirement to GIC’s and Savings Bonds to this great video which describes how credit works!

Oh, and for those of you who are teachers, there is a Teachers’ Corner with helpful resources to incorporate money management into your classroom.

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