When people don’t have a basic understanding of personal finance, the results can be devastating. The negative impacts aren’t just felt by the individual, but also by their family members and community. If students were learning personal finance in school, they wouldn’t find themselves in these terrible positions as adults. Still not convinced? Here are 4 reasons students must learn personal finance.
1. It is a Practical Life Skill
Not only is understanding personal finance a necessary life skill, it is a skill that kids need to learn as early as possible. By the time they are 16, many kids own cars, have jobs, and bank accounts. This means budgeting for gas and car insurance, reconciling bank statements, tracking expenses, and filling out tax forms. Once they are 18, students may be renting apartments and receiving credit card offers. There are students who will receive help and guidance from their parents on these matters, but unfortunately many will not. If these skills aren’t learned at home, they simply must be taught in the school.
2. Students Who Learn Young Are Less Likely to Develop Bad Habits
A large part of personal finance education is teaching young people to track their spending, to create and stick to a budget, and to spend money. Students also learn about credit, interest rates, and how to identify a good offer of credit and one that is predatory. These programs also teach students about investments. Ultimately, students who are well educated in personal finance know…
- The importance of saving money for emergencies
- How to budget so that they do not run out of money
- The importance of investing for their retirement
- How to determine whether or not an interest rate is fair
- How to avoid predatory creditors such as buy here pay here retailers, pay day and title lenders, pawn shops, and high interest credit cards
- How to set savings goals to pay for wanted items and experiences
How to resist temptation to borrow money or purchase things on credit that are not absolute necessities
3. Too Many Entities Prey on Students who Lack Financial Knowledge
It is a well known fact that finance companies target students with credit card offers. These marketing campaigns often began the moment the student turns 18. These companies use slick marketing tactics to appeal to young people. They promise students the ability to get what they want now and pay for it later, and they do so by depicting images of young people living the good life. Students are offered low introductory rates which often jump into the double digits after just a few short months. Students who do not understand how credit works can find themselves in thousands of dollars in debt by the time they graduate. Much of this can be avoided with just a bit of education.
4. Students Who Do Not Learn These Skills Are at Risk of Financial Abuse
Students who receive education in personal finance are more likely to remain in control of their own money, and they are more likely to recognize and put a stop to financial exploitation and abuse if it happens to them. This means they are less likely to fall victim to unscrupulous contractors, or duped by other con artists. Students who have this knowledge are also more likely to have their own bank accounts, and to establish a healthy credit rating. This financial independence makes it easier for them to leave abusive situations, and less likely to allow an abusive partner to control their finances.
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