Should Personal Finance Be Taught At School?

OLYMPUS DIGITAL CAMERANot all that long ago, if a young person wanted spending money, he would find a paper route or a part time job and earn the spending money he desired. His parents were working hard to support the family, and extra money was not available for his wants. He would learn to manage his money by making poor choices that were not all that costly. His money management habits were developed with his own money while he lived in the confines of his parents home.

In the twenty-first century, parents provide substantial sums of money to their teens because jobs are scarce, and the students have academic and extracurricular activities that fill every waking moment. Kids ask for money when they have needs and do not develop the skills to make spending choices. When the young person leaves home for college or a full-time job, he usually struggles to pay bills and have sufficient funds for any extras. The availability of credit lures him into a situation that quickly deteriorates, and he cannot understand how the debt accumulated so quickly.

Is School the Best Place?

Many people are wondering why money management skills are not taught as part of the formal high-school education. The challenge presented by the need to teach students from very diverse financial backgrounds about personal finance seems insurmountable. Managing money on paper with a fictional budget can never replace the real-life challenge of paying for one’s own needs.

If your parents are unable to afford all the extras provided by your peers, sitting in a financial management class can be embarrassing and threatening. Those same parents can teach their student to manage money from the family’s perspective in a safe environment. The expectation that schools are responsible for every aspect of a child’s education is a misplaced responsibility that is better left to the parents. Assigning age-appropriate shopping duties to a young teen can teach some lessons in the real world without straining the family budget. When the teen learns to save money while shopping for her family’s needs, financial management skills are being learned. One of the rewards for successful savings can be to give the teen some spending money from the leftover grocery budget funds.

A Different Approach

Certain major categories of financial management must be explored and learned before the high school graduate is required to manage money away from home. These major categories have been studied for years by financial experts that have developed proven techniques to create and manage a monthly household budget, create a savings plan, understand the paystub and save for retirement.

  • Monthly Budget – A household that lives according to a budget is more likely to reach the family’s financial goals that when money is simply spent to survive. Every high school student is capable of following a basic budget outline to create a real budget for his family. When income and expenses are set against each other, the financial picture comes into focus. The student can assist with making some adjustments and will gain understanding about the financial situation in the home.
  • Debt avoidance – Parents who repay the entire credit card balance every month set a positive example by discussing this requirement when the purchase is made. Young graduates are overwhelmed with credit card offers and will apply for at least one credit account before leaving for college or starting a full-time job. If the new cardholder has already developed a healthy understanding of the cost servicing a recurring debt, the discipline is present to avoid debt.
  • Save first – One important discipline that must be developed early is saving 10 percent of the money received. Even if the funds must be accessed in the short term, the habit is an important part of avoiding use of credit for immediate needs. As income increases, the savings amount will increase and an emergency fund will be built. Long-term savings goals are part of avoiding debt.
  • Standard paystub – When a graduate gets that first job, the quote of tens of thousands of dollars can sound like a great deal of money – until the first paycheck arrives. Every high school student should learn that the difference between gross and net pay is a substantial amount of money. Payroll deductions must be explained to prevent overspending based on incomplete information.
  • Advanced financial options – Investment portfolios are an important part of creating wealth from the very first day in the working world. Most teens and twenty-something’s are not thinking about 40 years in the future, but if they know 401(k) plans and Roth IRA’s can work to their advantage, they are more likely to start early.

Instead of requiring every high school student to take a class that would force all of them into a mold, each school district could set forth a required home-based course that must be completed. When the student works with their parents, everyone learns from the best financial advisers, and the household finances are improved as well. The freshmen year would cover the basic household budget, and the requirement would be to use real numbers from the family finances. Each subsequent year would present more advanced material in the safe environment of the home.

Accountability for Graduation

Assignments would be due each month to ensure progress throughout the school year. The exact approach to the curriculum would be left up to the family, and the actual dollar figures would be removed from the financial documents prior to handing them in for approval. One of the most important facets to learning about money is to keep financial details of the family private. The amount of money earned and the method of managing the money is an important part of working together as a family. No one else needs to know how much money is made or how it is spent.

Meaningful examinations can be part of the annual completion requirement for the personal financial course that was completed at home. Each module must be passed to move to the next level, and all modules must be completed prior to graduation. If students throughout the country worked with their families to learn to manage money, both generations would learn valuable skills that would impact the financial health of the entire nation.

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