If you have been following me here for a while then you probably have heard me referring back in time in my posts to “I wish I knew this before and how different it would be now”. Take a moment and think for second, would you be in a better position right now if you knew something about as simple as managing money back when you were in high school? I know that I did not have any of this in my curriculum other than just majority of classes that I had no interest in at all.
Then the reality hit us and we learn many things from mistakes in regards to personal finance. I covered as one of my first posts the reality of adult life I learned and you need to know when you turn 18.
The closest course you must be wondering about right now is most likely that you took in high school which is “economics” class. Well, tell you what… Economics does not teach you what you really need to know and the best part it is usually your last year as a senior you were allowed to take that class. What I’m trying to say is that I did not learn anything about credit scores, investing money, managing money, interest and how bad it is, or even what compounding interest is.
This economics class or any other classes you take really does not set you for a successful, stable financial future.
Discussed in this Post:
- How to Build Credit
- Simple Budgeting
- How Credit Cards and Interest Rates Work
- Compound Interest When it Comes to Investing
- Basics of Investing and How Stock Market Work
- Starting a Business
Let’s jump into what this post is really about Personal Finance Lessons High Schools Need to Teach:
1. How to Build Credit
Having a Great Credit Score is absolutely crucial for being financially stable. There are so many benefits of having a great standing credit. With a great standing credit you will have less interest to pay on everything you purchase on credit whether it is a car, qualify for an apartment, and even buying a house in the future with much better rates. With bad credit, everything is much more complicated and will cost you way more in interest or even disqualify you for a place to live.
It is not easy to build a great credit as a student but it is relatively easy if you are responsible individual. You can also improve your credit score by 100+ points in just 6 months and I’ll be honest, it is relatively easy when you figure out how credit works. It takes time to build a great credit but unfortunately it is much easier to ruin it, so starting properly is crucial.Is credit card a smart choice? Depending on your needs.
High Schools Need to Teach: Something as simple as how to start out right with credit especially building credit while students are young. Recommend some types of credit cards, loans for schools? Introduce students to building a great credit score.
2. Simple Budgeting
Budgeting is something that is not taught in high school, it is just something we eventually experience when we realize that we have no money left. This lesson is especially crucial because as we move out of our parents place many things in our life change and it is absolutely necessary to develop life skills way before we move out.
Budgeting improperly can really cost you and then many other negative effects to follow down the chain. Proper budgeting include importance of paying bills like rent, insurance, utilities, car payments and always making sure that there’s enough of money left for food, savings, investments, and emergency money left. I mean do you want to live on the edge? if something tragic or unplanned and important were to happen, what would you do? What to do when you are barely getting by financially. If you spend more than you earn then you really have problem that you need to fix.
High Schools Need to Teach: A simple budgeting techniques to help young adults to separate needs and wants. It is very important to create a plan for what you want out of your life. Budgeting properly opens many doors for a better opportunities. Knowing the importance of paying bills on time and still having money left over for the right investments into your future is another lesson that should be taught in high school
3. How Credit Cards and Interest Rates Work
One of the major milestones in life is getting your first credit card and after turning 18, you will most likely open your first credit card. The problem is that you barely know anything about a credit card! Credit card is not free money, it is just money you borrow from the banking institution and depending on the period whether it is introductory or not introductory period, the bank earns money off of you by charging interest. Many people especially first time starter students run into high utilization because they spend and think that it’s all good, the problem is interest rate.
Whatever balance you may be carrying and thinking of paying it slowly off you need to make sure that interest is not eating up your whole monthly payment. At 20% APR( Annual Percentage Rate) and for example you are in $3,000 credit card debt, you are looking at paying $600 in interest per year and it grows as the balance go higher. Now think about 20% on car purchase interest rate? Meanwhile carrying a large balance will also affect your credit score in negative ways.
Best credit card to start with as a student from my perspective is “Discover It” credit card for its many unique offers and absolutely amazing customer service team. You also get bonus cash every year for maintaining a 3.0 GPA.
Credit card interest accrues daily if you carry the balance over. The main purposes of the credit card is to:
- Build Your Credit History
- Rely on it for Emergency
- Use it for its Perks and maximize them – if it’s a gas credit card, use it for the gas. Restaurants? use it for dining out.
High Schools Need to Teach: Teach the students How Credit Cards Work and what effects it might have if you get too excited and start spending it left and right. Understanding the consequences of interest rate and how important it is to pay off the bills monthly will go a long way to set yourself for a great financial future.
4. Compound Interest When it Comes to Investing
It is difficult to reach certain amount of income as just being fresh out of high school. But being young has one major advantage over everybody else and it is time. By opening investment or savings account early, any youngster (the earlier the more you will earn) can take advantage of account that earns interest on interest over and over or whats called compound interest.The great way to make a step if you are afraid is to open “acorns” account that rounds up your change. Get started with free money.
High Schools Need to Teach: Teaching this lesson to students as early as high school could really help for students to think about their future and will definitely separate some students that take advantage of this and put even a “small” amount of money that they earned throughout working in summers and soon enough they will have a much larger sum of money than what they initially began with.
5. Basics of Investing and How Stock Market Work
There are so many people in their adulthood out there that still don’t know the basics of Investing or how the stock market work, let alone students. If we can implement the understanding of stocks into high school curriculum we could see a very interesting outcome over the years. For majority of people learning the stock market and realizing its advantages could be very late but understanding how it works early and where to put the money could set any young adult off to a great start. Start Investing with just $100 or less.
Even a basic understanding of how stocks work and identifying where people could earn and where people lose money in stock market and how proper investing can make somebody rich! Check out my post how much you need to make to be in the top 0.1%, 1%, 5%, and 10%.
Thing about stocks is that you don’t have to invest in companies that are too new but instead you can invest in established companies that have had consistently growth and look like they are not going anywhere, companies like Google, Amazon, Apple, and many others that are not going anywhere anytime soon.
High Schools Need to Teach: Learning how investment and stock market work early could really make somebody rich in the long run. You don’t have to be like Warren Buffet but if you don’t learn about this early you could miss out on thousands or even millions of dollars that you could have earned over the years in the stock market. It does not a requirement to have a lot of money in order to start investing.
6. Starting a Business
Ok, this one is not something for everyone, maybe you just have no interest in business at all. That is totally fine but getting a basic understanding of how to start a business can be a very lucrative and productive way to learn so much in many areas. Even if business fails, you learn so much and I cannot tell you how much I have learned ever since I started this blog as a small business. Read why College is the best time to start a business.
For some having a business can really be a life changing experience and who know what kind of ideas a young entrepreneur will have in their head right now. Having a business is not just about money but is more about gaining experience, meeting a lot of amazing people, knowledge and abilities you can put on your resume that will put you above all other applicants and so much more.
Business is not for everyone and I believe that the secret to life success is more of doing what you loveand money come with it.
High Schools Need to Teach: Teaching high school students how to start a business will really make a person think and when a student is done with college career and got something on the mind or a solution to some type of problem, he/she will have a basic understanding of starting a business already without having to stress out on where to start and what you need.
Personal Finance is so important in everyone’s life and I really cannot believe that high schools don’t focus on teaching these aspects but instead focus on the same curriculum that has been the same for decades.
Knowledge of these lessons I talked above will make an outstanding impact on our society.
But who knows the reality? maybe this is the goal of current society is for majority of people to go through financial problems by making mistakes because government earns money on that as well? Nobody knows the real purpose of what and why we learn things that we will 90% of time will not apply to our life.
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