Financial literacy isn’t a focus of many schools. Unfortunately, the younger generations will pay for that if basic money lessons don’t become a priority in our education system. Here are ten basics you may be shocked to hear aren’t regularly being taught in schools.
Table of Contents
How to Open a Bank Account
Opening a bank account is vital to manage many financial obligations. While it may seem overwhelming, there are a few basics you need to open a bank account.
Thankfully, it’s not that difficult to open a bank account. Once someone learns how to do it, they’re set for life. Bonus points if they’re taught how to read their bank statements to know what is happening with their money.
Many people have a negative view of budgeting. They think it as restrictive, but it’s quite the opposite.
A budget is freeing as it allows you to spend towards your goals and live the life you want. A budget doesn’t have to be difficult.
There are countless apps to do it. Even starting students with the simple basics of writing down what they hope to earn and plan to spend can go a long way to help them learn the practice.
Einstein is famously quoted as calling compound interest as the eighth wonder of the world. It’s that powerful.
For it to work, you need to start as soon as possible. Teaching students that saving small amounts for retirement in their college job can do wonders decades from now.
The Importance of a Good Credit Score
A good credit score is essential in life. It can both help and hinder you. While not a perfect system, learning how it works is key for students to understand.
Knowing the basics of how your credit score works is relatively easy to understand, so it must be taught.
Paying Yourself First
You are your most valuable asset. It’s important to treat yourself as such, and pay yourself first. The goal is to transfer money to your savings account with every paycheck you receive.
Most employers allow you to do this for free, as do banks. It takes a few minutes to establish, and the rest is done for you.
Many students can start this even with their high school job and develop a discipline that will serve them the rest of their lives.
The Dangers of High-Interest Debt
High-interest debt is suffocating, and it keeps you from achieving your goals. It’s important that students understand that debt is restrictive and you must be vigilant to avoid it.
Credit cards, such as rewards credit cards can be helpful, but students must master the idea of repaying indebtedness in full monthly. Anything else can set them up for failure in the future.
How to Create Financial Goals
Goals are important to have as they help you measure your progress. Financial goals are even more essential as time works for and against you.
Students may not know exactly what they want in life, but walking them through the process of creating goals is powerful. They’re teens, so their goals will change 38 times by the time they leave college, but the discipline should remain.
How Credit Cards Work
To many students they might see credit cards as free money. We all know that’s not what they are, but it’s easy to get into that mindset.
Students should be taught the basics of how credit cards work. That includes paying interest, the importance of paying them in full monthly, and what happens if you don’t repay them.
Taken a step further, throw in how loans work so students can see the entirety of how debt operates.
Living Within Your Means
Living below your means is essential to creating wealth. Students must learn to sit down and look at how you’re spending your money.
If you’re spending more than you earn, it can be ruinous. Helping them understand the practice of cutting expenses and clawing earnings is important. This is an exercise that will serve them for the rest of their lives.
The Importance of Starting to Save Early
Compound interest and time go hand in hand together. Sadly, like the power of compounding, the power of starting to save early isn’t being taught in many schools.
So often it’s easy for young adults to believe they need a lot of money to start saving. It’s the time you begin and developing that muscle of saving that’s paramount. Schools need to teach that even if you’re starting by saving $20 or $30 a month, it’s best to start there and not wait until.
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I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.