What is financial literacy, and how do we teach it to our kids to keep them from repeating our mistakes? Financial Literacy Lessons You Should Learn in School.
Every generation hopes to teach its children not to repeat the same mistakes. As an adult, you’ve definitely learned some knowledge over your lifetime the hard way, and if you’re a parent then passing on that knowledge feels critical to help protect your kids in the future.
Some things should be given a heavier focus in the education system. The capacity to understand how important it is to manage your finances wisely among those topics.
What are some things you wish you had known in high school regarding money management?
What Is Financial Literacy?
Financial literacy classes teach students the basics of money management:
That knowledge lays a foundation for students to build strong money habits early on. And avoid many of the mistakes that lead to lifelong money struggles.
Financial Literacy Courses Help Students Build Habits to Win With Money
So, what are the advantages of learning money principles as a student rather than as an adult? Financial Literacy Lessons You Should Learn in school
Well, students who take a financial literacy course early have the most time to apply what they know. And many financial literacy students apply what they learn right away—while they’re still in high school.
For example, according to a survey conducted by Ramsey Solutions Research Team in 2016.
Nearly two out of three high school students who had taken a personal finance course reported that they were already earning an average of $3,000 a year.
A high majority of the same group said they were in the habit of creating monthly budgets for their money.
And 20% already owned a car they paid for themselves! That’s why the basics of personal finance should be taught in high schools everywhere, right alongside other basics like reading and math.
Financial Literacy Lessons You Should Learn In School
1. Your Credit Score is Everything
They barely touch on this in high school. But one underestimated yet heavily important focus when teaching financial literacy should be the importance of a good credit score.
Why is it not harped on that your credit score will make or break all the major financial decisions in your life?
Kids who are heading out the door and into the real world. Need to have a clear understanding of just how vital a healthy credit score is. It can determine huge decisions like:
- Credit card applications.
- Mortgage loans in case you ever want to get a place of your own.
- Auto loans to help you afford that car you need to get you to and from work.
On top of why your credit score matters, it would also be helpful to know what actually impacts it and helps you to look better to the credit bureaus.
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Sometimes people think that paying a cell phone bill or rent payment on time helps to build credit. Unfortunately, this is rarely the case. Knowing what builds healthy credit really boils down to two major factors:
- The age of the debt and
- The regularity of the payment.
Students understand that there are consequences for turning in late homework. But they can’t possibly grasp the importance of paying your bills on time.
Understanding the major difference between a lunch detention and consequences that directly impact your future ability to buy a house are so drastically different.
In my case, I’m extremely grateful to have been taught about this concept from an early age.
It helped me consider my ability to pay for things and the consequences of not having the funds to pay for what I wanted.
Now as an adult, I continue to use my credit cautiously and in ways that will help me in the future.
2. Don’t Accept Every Credit Card Offer
When you’re young and a fresh 18-year-old. “Exclusive” offers keep rolling into your mailbox offering you one credit card or the other. The Financial Literacy Lessons You Should Learn in Early 20’s
Fancy gilded envelopes, flashy lettering and exciting verbiage. Make it seem like you’ve won some sort of contest, but that applying to every offer you receive is not a good idea.
It’s exciting to see that you’re an adult now and you can make these kinds of choices. But exercising caution is more important than a piece of plastic with your name on it.
Reading the fine print on these so-called exclusive offers is essential before applying to any line of credit.
The application might scream that the interest rate is 2.5% and that you pay no fees. But learning to check out the fine print is a handy skill to learn.
Related Post: Credit Card Mistakes You Might Be Making
Oftentimes these offers expire after 12 months, raising your interest rate to something catastrophic and inundating you with hidden fees later on.
I’ve seen many friends and colleagues fall victim to great advertising, but while you’re still young.
Over the years, I’ve learned that different programs and even simple Excel sheets give me the freedom to spend when I want. And have the money I need when the car breaks down.
It’s all about balance, so I encourage everyone to find something that helps to manage spending and saving.
It’s easy to say that kids are irresponsible and want to blow their money as soon as they have it. But think about how you learned to save and maintain a healthy bank balance.
It takes some trial and error (mostly error) to figure it out. But being taught in high school just how important these decisions are would have been so much more helpful.
Related Post: What Is Insurance Score & Does Credit Affect Insurance?
It takes a village to raise a child, and learning financial literacy in school can be one way that the village does its part to help. Poor judgement lands them with an account overrun with high rates and fees.
Another reason that it’s a bad idea to apply for every credit card offer goes back to the initial bullet point: Your credit score.
Applying for multiple lines of credit at once gives your credit score a major hit. And can flag you to the credit bureaus as untrustworthy. (Again, it all comes back to your credit score!)
3. Put Some Damn Money Away: Financial Literacy Lessons You Should Learn
The minute you hold your first hard-earned paycheck. It’s easy to want to go on a shopping spree and blow it all in one weekend.
As an adult you know that’s horrible advice. But as a kid you can’t think of anything better to do than having fun with your paycheck.
Saving a portion of your paycheck should be beaten into students’ heads. As many times as possible so that they understand how big of a deal it is.
Parents and grandparents can advise their kids. But sometimes the voice of a teacher or peer is louder than the authority figures at home.
There is so much that you learn when you’re balancing your own bank account that you never even considered before:
- The reality of over drafting your account, how easy it is to do and hidden fees or locked debit cards every time you overspend
- Autopayments from bills coming out of your account every month; unless you’re paying attention then your account can drain in a hurry
- Unforeseen, expensive emergencies that can seriously impact whether or not you eat this week
It’s more fun to spend and boring to save, nobody is arguing that point. But understanding the significance of putting money in the bank and being ready for anything is a great skill to learn. Financial Literacy Lessons You Should Learn In School
What Is Taught in a Financial Literacy Curriculum?
It’s important to empower the next generation and teach them to handle their money wisely. We want our kids to beat the debt statistics!
But practically speaking, how do we make that happen? Thankfully, personal finance is 20% knowledge and 80% behavior.
So while it’s important that a financial literacy course teaches money lessons, it’s more important to give students an actionable plan to manage their personal finances.
The Foundations are exactly that: a simple plan designed to help students confidently handle their finances. Here’s how it works:
1. Save a $500 Emergency Fund
The first thing students should do is set aside money for emergencies.
Financial emergencies like a lost cell phone or a flat tire could put students into debt if they don’t have any money set aside.
But big problems become minor inconveniences when they have an emergency fund in place.
2. The Art of Budgeting: Financial Literacy Lessons You Should Learn
A personal budget is a financial plan that allocates future income toward expenses, savings, and debt repayment.
“Where does the money go?” is a common dilemma faced by many individuals and households when it comes to budgeting and money management.
Effective money management starts with a goal and a step-by-step plan for saving and spending.
Financial goals should be realistic, be specific, have a timeframe, and imply an action to be taken.
This lesson will encourage students to take the time and effort to develop their own personal financial goals and budget.
3. Get Out and Stay Out of Debt
Debt is dumb! It’s a huge financial burden that way too many people carry.
Cash-back rewards, airline points, minimum monthly payments and zero down—they’re empty promises.
The financial literacy class teaches students the ways debt traps them and how to break free ASAP.
4. Living on Your Own
As young people grow up, a common goal is to live on their own. The Financial Literacy Lessons You Should Learn Early in your 20’s.
However, the challenges of independent living are often quite different from their expectations.
This lesson provides a reality check for students as they investigate the costs associated with moving, obtaining furniture and appliances, and renting an apartment.
5. Cars and Loans
“Should I buy a new car or a used car?” “Where is the best place to finance my automobile purchase?”
“Is it better to take the rebate or the low-rate financing plan?” These are typical questions asked by people buying vehicles.
In this lesson, students are asked to identify costs associated with owning and operating a motor vehicle.
Since these costs are commonly underestimated, guidelines are provided on how much to spend when buying vehicles.
6. Pay Cash For Your Car
New cars are only worth 40% of their purchase price after just five years. Paying the monthly minimum—plus interest—on something that’s losing value isn’t a good investment.
A student’s best bet is to buy a good used car and pay cash.
Yup, it’s possible! It takes planning ahead and saving up over time, but it’s way better than throwing an average of $563 a month at the “new” car they bought a year ago.
It probably doesn’t smell so new anymore!
7. Buying a Home: Financial Literacy Lessons You Should Learn
For many, buying a home is the single most important financial decision they will make in their lifetime.
However, the process of becoming a first-time homebuyer can be overwhelming, and requires a foundation for basic home-buying knowledge.
This lesson will provide students with information on buying a home and where and how to begin the process.
After comparing the differences between renting and buying, students will be introduced to a five-step process for home buying.
This framework provides an overview for the activities involved with selecting and purchasing a home.
8. Pay Cash For College
The student loan crisis in America is out of control. Our nation’s outstanding student loan debt is at $1.56 trillion. Trillion!
Today’s grads are delaying marriage and not saving for retirement. Plus, they can’t even move out of their parents’ homes because of the chains of their past—debt.
Students who pay for college with cash, on the other hand, step freely into the next chapter of life.
9. Making Money
Building your career is one of the surest ways to increase income and make money.
When planning for the future, one of the most critical financial decisions is determining your career path.
In this lesson, students will be encouraged to consider various topics related to career planning and the financial aspects of employment.
This variation of the decision-making process can help a person match personal abilities and interests with appropriate employment opportunities.
10. Build Wealth and Give: Financial Literacy Lessons You Should Learn
Now for the super fun part!
Students who live debt-free and are disciplined about saving money can really live and give like no one else.
This takes time, patience and a little bit of compound interest. But imagine the life-change that happens when money is no longer a worry.
Instead of being consumed by financial stress and fear, they can enjoy their money and spend their time thinking of ways to give to others.
When a student is financially literate, they don’t just make smart decisions with their money.
They build good habits that trickle down to their families, their communities, and eventually, the nation.
That’s a trend that will change the toxic money culture and create a new normal.
And it happens one student at a time.
Think about the jump start your child could get on life if they were already budgeting. Saving regularly and spending wisely before they graduate!
They could have thousands of dollars in the bank, a paid-for car, and the beginnings of a retirement fund.
And that’s not just a dream!
Every year, thousands of students learn financial literacy skills through Foundations in Personal Finance curriculum.
They discover the tools they need to build a lifetime of success with money. Foundations simplifies big topics like:
- Taxes,
- Insurance,
- Real Estate and
The global economy so students can feel confident stepping into the next chapter of their lives. Students deserve to feel empowered and prepared to tackle their finances head on.
11. Credit: Financial Literacy Lessons You Should Learn
In today’s world, credit is integrated into everyday life. From renting a car to reserving an airline ticket or hotel room, credit cards have become a necessary convenience.
However, using credit wisely is critical to building a solid credit history and maintaining fiscal fitness.
While most students have a general idea about the advantages and disadvantages of credit. This lesson provides an opportunity to discuss these issues in more detail.
12. Credit Cards
What is APR? And what is a grace period? What are transaction fees?
These and other questions will be answered in this lesson as students learn about credit cards. And the different types of cards available and features of each, such as:
As students start to shop for their first (or next) credit card, this lesson will make them aware of various costs and features.
Included in this section is a discussion of the methods for calculating finance charges.
Various federal laws protect our rights as we apply for and use credit cards, such as procedures for disputes and protection from card theft and fraud.
In this lesson, students will also be given an opportunity to analyze the information contained on a credit card statement.
13. Banking Services: Financial Literacy Lessons You Should Learn In School
If the fee for an ATM transaction to withdraw money is $1 and a person withdraws money twice a week, the banking fees for that person will be $104 a year.
Over a five-year period, those fees invested at five percent would grow to more than $570.
Most students know that banks and other financial institutions (credit unions, savings and loan associations) offer a variety of services.
However, few people know how to make wise choices when using financial services.
In this lesson, students will learn about the different types of financial service products available and the features of each.
Reasons Teachers Should be Teaching Financial Literacy: Financial Literacy Lessons You Should Learn.
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