It’s important for students to learn about personal finance. By the time they’re old enough to get a part-time job, they should understand how to handle their money. Financial education not only helps individuals make good choices about their money management but it also impacts the economic health of our country. Informed consumers can help stabilize markets and bring new business to communities. It is never too early to start teaching children about financial responsibility. Even young children who earn allowances can start thinking about how to earn, save, and spend wisely. Here are a few things that all students should know about when it comes to money management.
Students should understand the importance of goal setting when it comes to saving money. As they get older and want to buy larger and more expensive items like cars or homes, a savings account will help them qualify for loans to make those larger purchases. Savings also help students learn that they don’t need to spend every cent that they make.
Credit refers to how responsible you save and spend your money. You build up credit by paying bills on time and making at least the minimum payments on your loans and credit cards. Your credit score is important because people like landlords, potential employers, and banks, will look at it to determine how trustworthy and responsible you are. Landlords can turn you down for rentals if you have a low credit score. Banks can deny you loans or charge you extreme interest rates when you have a low credit score because they can’t be assured that you will pay off the loan on time or in full. Students need to understand that the way they use money is tracked and will follow them for a lifetime.
Many people in America live deep in debt. Some of the debt comes in the form of student loans or credit card bills. Students need to understand that that isn’t necessarily a bad thing. It just means that you’ve borrowed money that you don’t have and you currently owe a person or an institution payments on that money. The more debt you have, the more you have to pay off and that can become a difficult cycle. Teaching students about how to manage debt responsibly before they get into it can help them make plans about how to pay off future loans.
Young students probably can’t even imagine working in a job, let alone learning about retirement. But as soon as a child starts saving for retirement, they are adding to their future comfort. It is unknown if government programs like Social Security will still be around when our students reach retirement age. It is important that they learn how to save and provide for themselves so that they can enjoy life after work.
There are many forms of investment and it is good for students to start learning about them now. For example, students can learn about retirement accounts and investing in 401(k)s. It’s also important for students to learn about investment as a way to build your income and savings. Playing the stock market or investing in mutual funds are something students can begin to learn about now. With supportive parents, they can start investing an early age. Other forms of investment like buying property can also be explain to students so that they can see what it means to invest their futures.
What financial topics do you teach your students? We’d love to hear how you do this in the comments.