Having basic personal financial skills is one of the most important things you can do to live a healthy, happy and secure life. Your level of understanding around the fundamentals of budgeting, saving, debt and investing will impact every part of your life and can mean the difference between prosperity or poverty.
With how important these basic life skills are, it’s shocking that only 17 states require students to take a high school course in personal finance. High schools teach Geometry, Art, Latin, and Home Economics—all valuable to know for sure. But how often on a day to day basis do you need to calculate the area of a trapezoid? Personal finance is a necessary life skill that must be taught in schools. Here are five reasons why:
1 – Money touches everything.
At 18 years old, kids are thrust out into a world where every step they take from graduation to retirement will be directly impacted by their financial knowledge and money management skills. Career decisions, buying your first house, getting married, having children—finances all play a massive role in each of these life events. And it’s not just the major ones; finance is a part of our everyday life. Whether it’s where we eat, what we buy, traveling, going out with friends or negotiating prices, every day we are faced with financial decisions. Young adults lack the experience and education to make these decisions – big or small.
2 – The Majority of Americans want personal finance taught in schools.
When it comes to financial education in schools, many adults feel that more should be done to help students get a head start. A recent Credit Karma/Qualtrics survey found 63% of respondents think personal finance education should be taught in schools. Although nearly two-thirds of Americans are in agreement of the importance of finance in our schools, respondents were a bit divided over when this should happen.
- 30% believe it should start in elementary school (Author included!)
- 33% believe it should start in middle school
- 32% believe it should start in high school
- Only 5% believe it should start in college
Despite some debate over just how young is too young when it comes to learning about personal finance, or where that education should occur, the study shows many Americans are aligned on putting school-sponsored personal finance education on the political agenda. More than three-quarters (77%) of those surveyed believe politicians should push to add financial education in schools, and 67% of those surveyed would prefer to vote for a candidate who prioritizes adding mandatory personal finance education to the public school curriculum.
Additionally, there’s a lot that Americans would be willing to give up to receive better financial education, including happy hour (35%), dating apps (29%), morning coffee (24%), vacation days (12%) and even their sex lives (8%).
3 – Lack of financial knowledge has painful consequences
Finances are understandably one of the major causes of stress for adults. Everyone can relate to this stress; even the wealthiest people have felt financial pains at one time or another. Debt and/or a lack of savings can cause considerable hardship on a person’s life. And it doesn’t just cause daily stress. Financial problems can lead to divorce, poor health, depression, and bankruptcy.
The statistics below show that plenty of adults are feeling the pressure of financial issues. Many of these could be avoided with some basic knowledge.
● Nearly half of Americans don’t have enough cash available to cover a $400 emergency. Getting fired or having a medical emergency without any savings would be devastating. Understanding the importance of an emergency fund could prevent this.
● Millennials are starting their careers with a combined $1.52 trillion in debt. Students coming out of college have more crippling student loans than ever. They are spending years trying to pay them off, which means they are saving less than they could. Being taught about debt, the different ways to pay for colleges, and the importance of not borrowing more than you can afford could help to prevent these massive numbers.
● 38% of U.S. households have credit card debt. On average, they owe $16,048 with an APR of 16.47%. While some debt, like mortgages or student loans, can be considered “good” debt, credit cards are most definitely not. Learning the dangers of credit cards and high interest rates are critical, as well as the importance of paying them off.
● 33% of American adults have $0 saved for retirement. Considering the fact that most will need at least $1 million to retire (for 30 years of living), a lack of savings is a major problem. The most important rule in saving for retirement is to start early. However, seldom do because they weren’t taught the important of compound interest and time.
4 – Financial literacy leads to a healthier life
More than half (51%) of millennial respondents surveyed answered that they feel their level of personal finance knowledge is holding them back from making financial progress, compared with just 43% of Gen Z and 26% of Gen X and older. And, they are right – it is holding them back from their full potential. The positives that come with having a financial education are undeniable, such as:
- Promotes good savings habits. Just imagine if your child came out of college and started immediately saving for their future. Imagine if we all had.
- Budgeting teaches awareness and responsibility. If someone has a budget that they actively manage, it forces them to look at their spending. They are aware of how much they have available, and this leads to making better spending decisions.
- Smart financial decisions positively affect one’s credit score which impacts their entire life: getting a job, applying for a credit card, renting an apartment, buying a home or car, getting insurance, even signing up for their power bill. Having an excellent credit score means saving thousands and thousands of dollars in interest payments over their lifetime.
- More jobs, more money, and less debt are good for the economy as a whole.
- Understanding money management leads to financial health and positive attitudes around money. People’s attitudes around money can be instrumental in shaping their character, plus promotes the desire to give back.
5 – Where else will they learn it?
The study showed that in lieu of school-sponsored personal finance lessons, many Americans turn to alternative sources of money advice and information. For example, 41% of respondents said they’re self-taught, while 37% said their parents taught them about finances. Just 12% said they learned about personal finance from teachers.[“source=forbes”]