Last night on Saturday Night Live (October 22, 2011) in a comedy skit someone commented there’s much more to the United States than war – like math. The only problem: The US is much better at war than math. The inconvenient truth that American individuals and families owe $2.4 Trillion and Canadian individuals and families owe $479 Billion in consumer debt supports the observation that the math don’t quite add up.


This brings up the biggest bed buffalo of all - that individuals and families have been spending more than they bring home. What else does the math tell us? Up until the credit crunch of 2007-08 conventional wisdom from the instant gratification culture informed consumers (as well as governments and corporations) that debt was good. For over 35 years everyone followed this advice. At first it was gradual. Consumers were told to pay off the credit card balances in 30 days to avoid interest charges. Later, consolidation loans and lines of credit came to the rescue of high credit card interest charges and high monthly payments.

By the early 1990s the reality of consumer debt had sunk into public acceptance. Middle and lower income families needed credit to survive. Consumer debt (in Canada) rose from $23 Billion (in 1975) to $100 Billion (in 1990). People were well-cultured to borrow more and more each and every year. More and more people had become career debtors facing a lifetime in debt.

The borrowing has never stopped – before, during and after the credit crunch shock waves of 2007-08. Do we have a problem with math or what? On October 20th an article in the Vancouver talked about teenagers who learn early are more likely to avoid impulse spending and bad debt. This is one of those motherhood statements that have a warm almost undeniable ring to it. Who can argue with learning?

The problem really is one of choice. How many individuals and families can live without credit? Conventional teaching methods focus on money and family budgets. Young children, however, observe and absorb what their parents do. Lifestyle in action is much deeper than figures on the family expense ledger. What do the parents buy when they go shopping? Do they search for the best prices? Is food ever wasted? How many bags of garbage go out into the yard every week? When the parents go shopping do they use cash or credit cards? How does a child know what’s really going on?

Teenagers are a different story. They already have acquired tastes, shopping habits, preferences and attitudes towards consumerism, thriftiness and hard work or the opposite, they lack consumer savvy, know little about saving or being careful with money and/or prefer to win a lottery ticket than work hard. It’s much more difficult to teach these life skills later in life.

Several problems irritate family budgets, beginning with a high rate of failure. Just concocting a budget will not accomplish much for very long. It has to be realistic and reasonable. It must list all of the essential monthly and annual expenses. It takes years of discipline, sacrifice and hard work to make them succeed. There are no over night success stories with family budgeting. It also helps if the budget is set up and functioning before people assume any credit obligations. This, perhaps, is the greatest failing of all. A budget is only whipped up after a debt crisis appears – and this kind of budget is doomed to failure because the ability for people to meet the basic family expenses has been seriously diminished by existing and oftentimes onerous creditor obligations.

I have frequently wondered about how many of the people who owe the $479 Billion (in Canada) have family budgets. It would be quite wrong to suggest nobody has one. The news has been out for quite some time, and it’s all over town - about the impoverishment of the middle class over the last 30 years. Wages have not kept up with inflation and taxation and a very long list of excruciatingly high expenses for working families like housing, transportation, child care, post secondary education, internet related expenses, cell phones and even the cost of food. Rather than bite the bullet and spend less, the consumer has been counselled by governments and financial experts to keep on spending, spend more, keep the economy thriving, even after it has been revealed that spend really means borrow.

So, it isn’t the math after all. We manage some of our money and borrow the rest - and hope for the best. The outstanding debt in Canada and the United States tells an irrefutable truth about the financial health of middle and lower income individuals and families. A global paradigm shift about money and debt is what’s needed. Yes, on the to-do list is teaching children and teenagers about money.

Let’s start by spending only the money we have. Save before making large purchases. Get the best price for our goods and services. Show our children and teenagers how to do it on a day to day basis. As a means to give our youth a fighting chance for a prosperous future let’s be much more careful with student loans, car loans and credit cards. Let’s show them the way by giving them an irrefutable example to follow. We can only help lessen the burden on the next generation by first learning from our own generation’s mistakes.