Study Links Global Prosperity to Financial Education
By Right About Money Staff Report
November 22, 2016
Can financial education lead to more successful small businesses? A new study out of Canada says it can, suggesting that widespread learning about personal finance in schools and beyond may promote long-term global prosperity.
About 80% of small businesses fail within 18 months of launch, and since the financial crisis more small businesses in the U.S. have failed each year than have started. So if there is a magic elixir that might reverse that record of futility it would benefit business owners and the economy alike.
Some 44% of Canadian entrepreneurs get turned down for financing, according to a report from Intuit Quickbooks Canada. The firm generally attributes the failure rate to a lack of financial know-how. In the survey of those aspiring to start a business, one in 10 said they didn’t plan to bring any supporting materials to their pitch with potential investors. Some 35% said they didn’t plan to prepare a business plan; 49% weren’t going to include an income statement; and 68% weren’t going to estimate cash flow.
This surprising lack of preparation before seeking backers speaks volumes about the lack of financial smarts among aspiring entrepreneurs. On some levels it makes sense. Schools generally do not teach personal finance and many entrepreneurs never go to college, where they might pick up more business and financial skills. So some basic coursework in K-12 could make a big difference.
Quickbooks Canada suggested as much, and to address the problem has partnered with a handful of small business advocates and agencies to provide financial education to the owners of 10,000 startups next year. The firm’s Startup Foundations initiative seeks to boost financial literacy among Canadian entrepreneurs by connecting them to research, education, tools and advisers that will give them a better shot at success.
Says Intuit Canada President Jeff Cates: “Without financial literacy skills, entrepreneurs aren’t able to make the right decisions to fuel their own success.”