Why they should teach financial planning in school!

Why should public schools teach financial planning in school? Maybe a better question is should schools teach students basic money skills, not just financial planning. Just recently, I was very surprised when a friend of mine mentioned he had to show his son how to write a check and his son had just graduated from college. But then I started to research to find out where kids learned about money? Usually it is from their parents and the allowance they receive. But then how many kids even get an allowance? But where can you find out who gets an allowance or for that matter how many kids live in traditional home with a Dad and Mom?

High school financial planning

Financial Planning Is Fun!

In today’s economy, both parents usually work if they can, and if it is a single parent family, the kid(s) usually only hears about how expensive everything is, not how to manage money. Learning about finances through osmosis is not good.

Kids used to learn a lot of their money skills from getting a job, but unemployment for youths is extremely high. According to the Bureau of Labor Statics (http://www.bls.gov/web/empsit) Kids from 16-19 years have an unemployment rate ~21% (boys ~ 25%; girls ~ 19%) which varies month to month. Of course these figures are a snap shot but it is hard be employed as a student. I have not seen a paperboy in years; they are all adults. At fast food restaurants, again adults are behind the counter. So I again ask the question where do kids learn financial skills?

Paperboy

Where are the paperboys?

When a high school aged kid graduates he might be going to college, a trade school, look for work and he/she will be faced with all types of financial decisions. How do you buy an automobile, rent an apartment, and SAVE! A big first paycheck may not go as far as you think and then how do you keep more of your cash? It is hard to get experience in money matters until you are on your own. This is where school can do what it’s purpose is – teach the skills you need to be successful and survive on your own.

Schools cannot teach responsibility, but they can teach the tools to make smart decisions and be responsible citizens. I always wished finances would be simple math. To stay on top of your finances, our environment is changing! An example is how many people do there banking the old fashion way with pen and paper, and how many people do online banking? So what should be taught?

10 financial planning lessons that should be taught in school

1. Check writing and balancing a checkbook
2. Credit/debit cards management (CardRating.com or Bankrate.com)
3. Online Banking
4. What is on your pay statement (withholding, taxes, FICA etc.)
5. Develop a personnel budget (Chart fixed expenses and your variable costs)
6. Insurance (term vs. whole life, car) (insweb.com)
7. Health Insurance
8. Saving/investment venues (401(k), IRAs, mutual funds, stock market etc.)
9. Loans (Home, car, student)
10. Credit Scores

This is a short list on what young adults need to learn before you tackle the world. An interesting antidote that happened to a responsible college grad was when he bought his first home. He graduated from college with no debt! He managed that by having a well paying job during the summers, scholarships and his parents put a small amount of money monthly into mutual funds where through compound interest paid for fours years of school. He bought a used car with cash. He proceeded to get a good job and while he rented an apartment he was still able to save money. After eighteen months he decided to buy a house. He had the money for the down payment, but he almost was denied his home loan because he did not have a credit rating – he never had borrowed money! Cooler heads prevailed when they reviewed his assets and what the bank “hung their hat” on for approval was he had bought some furniture on time payments (at 0% interest) and approved his loan. Unfortunately this is not the norm.

Most college graduates have high student loans. This is why it is a good reason to teach financial planning in high school for all students. The goal is to give young adults the tools to manage their resources in a responsible manner. Being deeply in debt and struggling to stay afloat is not much fun. Declaring bankruptcy is not where anybody wants to be. If you do have high debt, call a credit counselor to help you figure out your finances and create a spending plan. A good place to go is the Association of Independent Consumer Credit Counseling Agencies (aiccca.org) or the National Foundation for Credit Counseling (nfcc.org). Both are reputable and nonprofit agencies.

The reason financial planning should be taught is that we are in a complex world and a person should be able to enjoy the fruits of their labor. A person needs to learn and recognize good money management practices so they don’t get buried in debt. Teaching good financial planning practices gives individuals the tools to develop a future and allows you to keep more of your cash for your goals.