Did you know that only 19 US states require students to take a personal finance course in school? American students are considered somewhat illiterate when it comes to finance, according to a study released by the Organization for Economic Cooperation and Development on July 9, 2014.
Rather than let your high schooler become another statistic, the following are four basic finance lessons every student should learn before graduating
1. Make Your Money Work for You
Investing is a lesson only a few students ever learn in high school, let alone college. Teaching them the power of money invested in mutual funds, share dealing accounts and other conservative accounts (for the time being, until they feel comfortable taking on more risk) can improve their financial well-being in addition to expanding their horizons when it comes to the world of finance and how it can work to their advantage.
It’s a good idea to do comprehensive research to find the best share dealing account and then allocate money to invest in a few different shares to balance your investment portfolio.
2. Start your retirement fund early
Encouraging students to start a retirement account during their high school years can also be one of the best personal finance lessons they’ll ever learn. They will reap the benefits of starting early later on when it comes time to retire.
It might be a challenge trying to convince a teenager to invest in an account they can’t touch for five more decades, but a handy online retirement tool like ROTH IRA calculator will give them an exact idea how much they should save to have a comfortable retirement.
3. save where you can
Whether it’s food, a car, clothes, housing, or entertainment, paying full price for anything is silly because there are often times more frugal options waiting in the wings. When discussing personal finance with your high schooler, be sure to cover the three most important areas:
- Food: Use coupons (through a local publication or from online websites), buy generic, supermarket food, even if name brands are flashier, wait for certain items to go on sale before buying, and for dining out, try to find places that offer student discounts.
- Car: It’s often said that cars lose an average of 15-20% of their value the moment you drive it off the dealer’s lot – always buy used unless you are financially secure enough to buy new.
- Clothes: Again, use coupons, wait for sales (especially for seasonal items), price-compare online prior to purchasing, and if you have limited financial means, stick to what you absolutely need and build up savings – not a wardrobe – in the meantime.
4. “Paying Your Dues”
Many high schoolers like to fantasize about fabulous careers with massive salaries and generous vacation time, but in reality, they’re going to have to pay their dues like everyone else, no matter how well they do in school or where the end up going to college.
Paying your dues now could mean getting a job at a fast-food restaurant, which isn’t known for being glamorous but could significantly boost their resume.
Volunteering is also a viable option; anything that gets them work experience outside of school can give them an edge over their peers during their job search later on, but no matter what, there will still be some grunt work, unpleasant coworkers, and lousy pay when they’re first getting started in the workforce.
Learning this now is crucial to avoiding frustration and disappointment later on.
5. Seek Out Alternatives
One of the biggest financial crises we have in the US and UK at the moment isn’t in real estate or the stock market; it’s in the student loan industry. There is over one trillion dollars of student loan debt currently and that number continues to climb each year.
All too often, high schoolers feel like they will miss out on valuable employment opportunities if they don’t graduate from the “right” college.
Unfortunately, the fact of the matter is that many private universities cost over $40,000 per year for tuition, room/board, and other expenses, and even public state universities can cost over $15,000 per year.
Instead of taking out a massive student loan in hopes of paying it off later with that well-paying, entry-level job they think they’ll land immediately after graduation (see “Paying Your Dues” above), encourage your kids to seek out other options, such as two years of community college first, or a state school education instead of a private liberal arts university.