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Canadian teens are overly optimistic about their future earning potential

Canadian teenagers have a rosy outlook on their financial future, according to a recent survey.

The study, which was commissioned by the British Columbia Securities Commission, reveals that teenagers have great expectations when it comes to their earning potential. But there's just one teeny, tiny problem.

These expectations have nothing to do with reality.

The National Report Card on Youth Financial Literacy survey of more than 3,000 youth, ages 17 through 20 — many of whom were currently enrolled in post-secondary education — finds that Canadian youth expect to make big bucks upon graduation. The report states that the average survey respondent expects to earn $90,735 in 10 years. That's roughly three times the average income of 25 to 29 year-olds with post-secondary degrees (according to Statistics Canada's 2006 Census Data). [More: How to talk to kids about money]

Ottawa, we have a problem
The optimism of Canadian youth is also apparent in regard to their understanding of debt. Over half of the survey respondents admitted to already shouldering significant debt, which for nearly 7-in-10 includes a hefty student loan. More than a quarter (27%) currently owe a family member money, while another 25% admit to carrying an outstanding balance on their credit card.

But they're not worried. Among those with a student loan, almost half (49%) say they will definitely or very likely have it paid off in 5 years. (A quick look at the 2010-11 actuarial report released by the federal government shows that student debt has reached a record high at $15 billion, and students are having a hard time shouldering the payments.)

So what's really going on here? Are our kids really that disconnected from financial reality? The answer appears to be a resounding yes. [More: 5 things NOT to teach your kids about money]

Narcissism is not an employable trait
The fact of the matter is Canadian youths assume that they're employable. There's a very real (and scary) psychological issue among Millennials that seems to be rooted in arrogance. Our youth feel that they are entitled to high paying jobs (whether they're actually qualified for the position is a minor detail). What's even worse is that the mentors, counsellors, and parents of these students are doing nothing but enabling this dysfunctional thinking and dangerous financial outlook.

Simply put, our kids are clueless and we're the ones to blame.

Following in their parents' footsteps
It's no secret that Canadians like to spend. Of the $1 trillion that Canadians hold in household debt, $448 billion of that is in unsecured consumer credit debt. According to a quarterly report from TransUnion, Canadians carry, on average, approximately $25,594 in non-mortgage debt. [More: 10 ways to stay broke forever]

Turns out that the next generation isn't any smarter when it comes to kicking their dependency on credit. According to the National Youth Survey, over half of the respondents already carry debt. This includes everything from a student loan (69%) to family loans (27%), outstanding credit card balances (25%) and lines of credit (14%). Among those carrying debt, the average debt load is just shy of $8,000.

Kids are "talking the talk" but not "walking the walk"
For the most part, Canadian youth appear to understand the importance of financial planning, they just lack the positive financial behaviours that will enable future success. While nearly 93% of the survey participants agree that it's important to build up personal savings, only 44% keep a budget. While 60% agree that it's important to have a financial plan, only 12% of respondents have actually taken the time to write one.

How can we fix the problem?
First, we need to hand our kids a healthy dose of reality — and model better behaviour ourselves. Working hard and aspiring to big dreams? Absolutely kid! But let's not get too carried away. Confidence is great; arrogance is just plain rude. [More: Why you really can afford anything]

Second, we need to improve access to financial literacy courses, as well as enhance the execution of course material. According to the survey, less than half of recent high school graduates were able to recall taking a course that covered topics focusing on personal finance.

In fact, the National Youth Survey showed that those respondents who had taken a course proceeded to score slightly higher on attitude, behaviour and knowledge indices, though not substantially so. Having a "good learning" experience with a personal financial learning course, however, was shown to have a considerable effect on the attitude, behaviour, and knowledge indices of participants. Like much in life, it's about making the topic engaging, however 'dry' it may appear to initially be.

The real world sucks… get used to it
Managing financial expectations can be tough, but it's absolutely critical. The harsh reality of the situation is that Canadian youth are grossly overestimating their earning potential. Without a little tough love, these unrealistic expectations will only contribute to growing consumer debt throughout the country. And that's one problem...that never grows up.

GoldenGirlFinance.ca is a free personal finance and education site for women.

Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial or legal strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances, as well as fully aware of current laws and regulations.

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