![]() ![]() Even a basic budget is better than no budget. While you won’t get rich from budgeting, it can help you from making big mistakes, wasting money, and living paycheck to paycheck. On a Kanye West album, he rapped about a fictional fraternity called “Broke Phi Broke.” To avoid an honorary membership, high schoolers should get a basic schooling in budgeting. It isn’t rocket science, but it does need to be taught. level education on investments, they should understand what a stock and bond are, how mutual funds and ETFs work, how investment companies make money, and how to choose basic, relatively safe investments like an S&P 500 index fund in a retirement account. That means investing in a 401(k), an IRA or Roth IRA, and making decisions about where to point those investment dollars. Most experts suggest you save at least 10% to 15% of your gross income at minimum to maintain the same standard of living. Social Security is an important social safety net to prevent retired individuals from sinking into poverty, but if you want to keep the same standard of living in retirement that you enjoy today, you’ll need more savings than Social Security. It isn’t that difficult, but without someone teaching it students can’t be expected to have mastery over this vital topic. On the other hand, just paying on-time every month and keeping credit card balances low consistently over time can lead to a great credit score. Students need to understand that one missed payment on a credit card or student loan can damage their score, while high balances and a pattern of late and missed payments sends your score into the gutter. However, most people fall somewhere in the middle. A 300 is considered an absolutely terrible score, where an 850 is seen as perfect, pristine credit. The most popular credit score is the FICO score, which offers score ranges from 300 to 850. Credit scores work similarly, summing up someone’s last decade of credit and lending activity in one number. High school students are intimately familiar with the the grade point average, a system that measures your entire high school experience with a single number between 0 and 4. With over $1 trillion in outstanding credit card debt in the United States, many Americans could use this lesson. Young people need to know how loan work, that you really do have to pay back your credit cards, and if you pay your full balance or make early payments it can help you save on interest, if not eliminate it completely. Laws around giving out credit cards to college students have made this type of sales a little tougher, but nonetheless every 18 year old should understand the power of their signature to open up the door to credit cards and loans that can be used for good, but if mismanaged can leave your finances in ruins. What credit card company wouldn’t want to sign up a new customer for a $10 cost? After all, just buy one expensive electronic and pay interest for a couple of months and they have earned back that pizza and then some. When I went to college, I was met with a swarm of credit card companies and banks offering new accounts in exchange for a pizza, frisbee, t-shirt, and other junk that cost them less than $10. But if you use it the right way, your checking account is free, easy-to-use, and a gateway to the rest of your financial life. If you don’t manage it well, you’ll end up with high cost overdraft fees. ![]() You really can’t reach further levels of financial success without a checking account acting as a nerve center for your money. Think of money orders instead of checks, payday loans instead of credit cards and lower cost loans, and other expensive financial products. How do checking and savings accounts work? A large portion of the population doesn’t have a bank account at all, which limits their access to many low-cost financial services and forces them into more expensive ones. ![]()
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