There are many cautionary tales of professionals who managed their finances poorly and ended up losing their hard-earned money. There are also numerous how-tos online detailing steps on how to recover from such troubles. While these are necessary and encouraging for many, there also needs to be more information for young people on how to avoid such financial issues.
High school students are at a stage in their lives where they are on the brink of adulthood. One would think that basic personal financing concepts would be common lessons during this time, but worldwide statistics show otherwise.
Many young professionals dive into their adult lives without adequate knowledge of financial concepts and understanding of how to apply these with their own money.
Five Money Matters a High Schooler Should Understand
In order to avoid problems in the future, make note of these money matters that high school students should have a good grasp of at their age.
1. Choose Your Debts Wisely
In today’s world, living free of debt is not an easy feat to accomplish. There are student loans to pay, bills to answer for, and other responsibilities on your plate.
One thing to note for students is that not all debts are created equal. Some debt is actually good for you in the long run. You just have to know which one will do you well for that particular time in your life.
For instance, homes can be a great investment for the future. Paying off a mortgage and getting home insurance are not necessarily bad for you if have a good handle of your finances prior to purchasing a home.
There are specific forms of debt that are usually too expensive, especially for young workers. Among these are car loans and credit cards with high interest rates. Steer clear of these especially when you are at a point in your life when you are not yet financially stable, such as being fresh out of high school.
2. Building a Good Credit Score
Before they step into their adult shoes, a high schooler should understand that their credit score is something they should take care of. This plays a huge role in their ability to make investments in the future.
A high school student should know that when they start getting a student loan, a credit score becomes attached to their name. Eventually, when they start using a credit card, their debt there also has an impact on their credit score.
Teach your high schooler while they are still young that they should not treat their credit card like a magic lamp that gives you what you want with one swipe. This simple principle goes a long way: swipe only when you can afford to pay for it.
3. Creating a Personal Budget
When your high schooler goes off to college, they will inevitably become responsible for all of their expenses while in their school or in their dorm/apartment. They should be able to record the amount of income they have (or in their case, allowance) and split it into their regular expenses, such as food, school supplies, and even rent.
They should also set aside a portion of their allowance and put it in a high-yield savings account, so that they are able to safeguard their future at a young age. High schoolers should already know how to deposit money on their own.
The convenient thing is that there are many apps that can help keep track of one’s budget. A spreadsheet will also work to show you where your money is going.
4. Practical Experiences on Spending
Aside from financial concepts, a high school student should also have practical experience on spending for their needs. Bring them with you when you go grocery shopping and allow them to check price tags and compare products to understand how to decide wisely.
They should also learn how to pay for utilities such as electricity bills, Wi-Fi connection, and phone bills. This provides a solid glimpse of what kind of spending the adult life will entail and prepares them for the time when they must be responsible for their own expenses.
5. Weighing Your Needs and Wants
When your high schooler learns how many expenses are involved in living for just a week, they become better prepared to weigh their needs against their wants. This enables them to forego unnecessary expenses and make wise financial decisions that don’t leave them in bad debt.
Huge financial mishaps in the future are hard to fix, but early preparation and education enables young people to avoid these issues entirely as they grow up and become more financially independent.
