Finance Tips That Should be Taught In School
If you live in the United States, chances are you didn’t learn how to balance a checkbook or understand a basic budget in high school. That’s because, according to Forbes, there are only 17 states across the nation that “require high school students to take a course in personal finance.”
The numbers don’t stop there. According to a Bank of America and USA Today 2016 survey collaboration, only 31% of young Americans aged 16 – 26 felt their high schools taught them good financial habits. On top of that, only 58% of those young people had started a savings account while only 27% of those surveyed aged 22 – 26 had contributed to a 401K.
Despite these statistics, Champlain College’s Center for Financial Literacy says finances should be taught at many levels of education and start at an early age:
“Personal finance education should start early at both home and school. Ideally, personal finance concepts should be taught in elementary, middle and high school, and should continue into college. In mathematics, you start with counting, move on to addition and subtraction, and then move on to division and multiplication. You need to learn letters before you can read. Personal finance education should be a cumulative process, with age-appropriate topics taught each school year. The reality is that many states and school districts do not provide any substantive personal finance education until high school, if at all.”
Online resources like OppU provide courses on financial literacy in addition to articles on topics like how to teach kids about certain money-related and credit topics. If you are looking for some basics on financial literacy, OppU is a good place to start. In the meantime, here are some universal topics that are largely ignored in primary and even secondary educational spaces.
Save your pennies
Barbara Stanny’s list for Forbes of what she wishes she knew about finances after graduating college provides insight into the multifaceted ways people can save their hard earned money. One of those ways is understanding the power of compound interest.
If there is interest accruing, your money isn’t just sitting there doing nothing. “Understand the miracle of compounding—where your money earns interest, then your interest earns interest, and then that interest earns interest, and before you know it, you’ve got a lot more than when you started,” Stanny wrote.
Money grows if you help it
Investing (and knowing how to do it well) is something a lot of folks don’t quite understand, especially coming out of school. Unless they studied finance, there is a lot of confusion about the world of stocks and bonds and mutual funds.
But Stanny advises against waiting too long to start investing. Even if it’s just a little at a time, the more you invest the more it will grow. That doesn’t mean, however, that you should invest in anything or everything. Be sure you understand your investment choices. “Otherwise, you won’t know what you’re buying; you won’t know when to sell; and you can’t accurately evaluate the advice you’re given.”
“Learn about investing,” she wrote. “Take a class. The only way to make sure your money grows (enough to buy a castle and also maintain it!) is by putting at least some of your cash in long-term assets (like stocks & bonds) that will grow faster than inflation and taxes will take it away.”
How to build and maintain a credit score
Austin Netzley wrote for Insider that, despite how boring it be, it’s important to get a credit report to not only know the status of your credit score, but to also get the clearest understanding of your debt-credit life.
“You may be (like I was!) surprised to see some open lines of credit that you thought you closed or still have a balance on,” Netzley wrote. “The starting point to fix your finances is to get super clear on your current situation, and a credit report will help you do just that.”
Champlain College also supported knowing (and understanding) one’s credit because having a low score can be seriously detrimental to one’s livelihood.
A person’s credit score and borrowing history affects their daily life, they wrote. Doing everything from purchasing or renting a home/apartment, acquiring insurance, or sometimes even getting a job can be impacted by one’s credit history. They went on to explain that a high credit score could save someone upwards of $100,000 in interest payments during their life.
Having more than one income
This idea is crucial, particularly as fears of a recession swirl around the media. Economic experts like Netzley point to making one’s income as “recession proof” as possible. One way to achieve that is to secure multiple streams of income.
Netzley explains that there are three forms of income:
Working income: Do work once, get paid once, such as through a salary or hourly wages
Residual income: Do the work once, get paid over and over again, such as by producing and selling a book or programs
Passive income: Do no work, get paid over and over again, such as through investments
By cultivating multiple revenue opportunities people are not only protecting themselves from potential economic downturns, they are also creating ways to make money in their sleep and freeing up their time.
Start as young as possible
Instilling financial literacy at a young age is important, particularly since young people are met with so many financial decisions so quickly after high school and college.
“The number of financial decisions an individual must make continues to increase, and the variety and complexity of financial products continues to grow,” Champlain College wrote. “Young people often do not understand debit and credit cards, mortgages, banking, investment and insurance products and services, payday lending, rent-to-own products, credit reports, credit scores, etc.”