Growing up, it’s uncommon that we’re taught practical financial lessons in school. While geometry is usually on the curriculum, everyday skills like balancing a checkbook typically aren’t. As we reflect on what we wish we knew then, we’ve rounded up six money lessons that could have saved all of us a lot of time, headache, and hassle if we learned them long ago. If you have a high-schooler or recent graduate of your own, feel free to share these tips with them - along with your own.
Lesson #1: How to Balance a Checkbook
Checkbooks are going the way of the dinosaur (thankfully), but the same premise of balancing one applies to money today. Balancing a checkbook involves tracking how much is going out of your account (spending/saving) versus how much is coming in (income). This is a valuable lesson can start an early age with a money-tracking app or through a bank’s budgeting software.
Lesson #2: The Basics of Budgeting
Budgeting is crucial to achieving your financial goals. The foundations used to establish a budget are basic, yet often overlooked.
Especially as kids graduate and go on to start their career or attend college, there are monthly expenses they’ll need to learn to prepare for. These could include:
- Car Payments
For anyone looking to start a budget, the 50/20/30 guideline is an effective place to start. Your after-tax income would be broken down into three categories:
- 50 percent on needs (monthly bills, rent, etc.)
- 20 percent goes directly into savings
- 30 percent on wants (eating out, shopping, trips, etc.)
Lesson #3: How to Use a Credit Card
It’s pertinent that teenagers learn early on how a credit card works and, more importantly, how to avoid racking up high-interest debt. Credit card companies are notorious for soliciting to college-aged students and enticing them with attractive offers. Understanding the hidden dangers of accruing interest early on can save anyone hundreds (or thousands) in unnecessary debt.
When it comes to using a credit card, always remember:
- You must pay back what you charge.
- Credit card interest accrues daily when you carry a balance.
- Your interest rate can play a huge role in your monthly bill if you aren’t paying your charges completely off each month.
Lesson #4: How to Build Credit
Having a good credit score can make a big difference in how you manage your finances as an adult. If you have good credit, it can make things easier (and sometimes cheaper) when it comes to buying a house or car, qualify for an apartment and more. If you have bad credit, these tasks can be much more difficult, so it’s important to learn about this early on.
Building good credit can involve positive financial habits including paying your bills on time, keeping credit card balances low and limiting the amount of credit card accounts you open or use to an as-needed basis.
Lesson #5: How to Start a Business
Given the success of some social media accounts, starting a business may already be on your child's radar. Those of you running a business may have subconsciously planted the entrepreneurial seed in your child's mind as well. Consider introducing entrepreneurship early on. Introducing the basics of starting a business is a great way to at least get them thinking about it as a potential career path. If they decide to do this later in life, they’ll already have the foundation of some basic business knowledge.
Lesson #6: The Basics of the Stock Market
There’s no getting around it - the stock market is confusing, complicated, and time-consuming. In fact, many adults today still carry around only a basic understanding of the market. Consider introducing your teenager to the basics of the stock market at an early age, giving them the foundational knowledge needed to understand the importance of investing in achieving larger financial goals. Even starting small now could yield large returns for your teenager later in life. Helping them understand long-term investments and how the market works now could be an impactful life lesson they’ll thank you for later. Some may have already jumped over the stock market in favor of the new cryptocurrency of the day, however understanding the basics of the stock market are relevant, nonetheless.
You learn a lot of things in high school, and while many of those memories will last a lifetime, these useful financial lessons would have definitely helped with some stronger financial decisions in the future. Help your own child or niece, nephew hit the ground running with these helpful financial tips.
This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.