Many adults will, at some point in their lives, consider their financial circumstances and wish they’d acted sooner in specific areas. “I wish I’d known that in school” is a common phrase among those trying to compensate for lost time.
Those thoughts hint at a genuine need to teach elementary financial lessons to students. If they’re armed with more knowledge, they’re less likely to make the same mistakes as their parents.
Each item on this list is one of many regular suggestions for managing finances, and each needs to be taught in schools.
1. Basic Transactions
This lesson can begin in Kindergarten. Teachers can set up dummy transactions using pretend coins and notes for goods and services. Once the exchange is complete, the storekeeper calculates change, so a little math lesson is thrown in as a bonus.
With role-play involved, this should be a fun introduction to financial literacy and an excellent option for the youngest students.
2. Using Bank Cards
At a more advanced level, children could use a dummy bank card to pay for their products. This would lead to a lesson about cards and how contactless payments have revolutionized the way we shop.
At this stage, the difference between debit and credit cards can also be explained, along with the charges that may apply to the credit card option.
3. Comparing Costs
Younger children can also be taught that identical products do not cost the same at every store. Prices are higher in some outlets, and it’s a case of comparing to find the best deal.
The same principle applies to utilities and insurance, and this is an excellent way to make youngsters aware of the value of comparison websites.
4. Start Saving Straight Away
The sooner you start saving, the more time your money has to grow. This is particularly true with long-term investments such as pensions, which are essential for those approaching retirement.
Students generally don’t think that far ahead, and schools have an excellent opportunity to teach them the importance of regular saving and the potential pitfalls of not putting money aside.
5. Check Your Company Pension
When young adults start working, they want to know about salary and vacation allowance. The terms of their pension seem less critical when their entire career is ahead of them.
As a teenager working in the insurance industry, I assumed my employer was taking care of my pension, but I was wrong. Schools can teach those starting in employment the importance of workplace pensions.
6. How Credit Scores Work
It’s essential to understand the role that credit scores play in borrowing. They’re the measure that all lenders use to assess risk and the likelihood of the borrower meeting their obligations.
Schools should be required to educate students on how credit scores work, how to build a good credit record, and how to maintain their good scores.
7. Using Credit
Once students understand the importance of credit scores, it’s an excellent time to discuss borrowing. Teachers can explain how lenders assess a potential risk before considering the costs of loans and mortgages.
Dummy calculations would be helpful at this stage; the students can evaluate the vital issue of income versus borrowing costs.
8. Budget Effectively
All students should be taught the importance of budgeting. Income and expenditure calculations are crucial to living comfortably and not worrying about paying the bills.
With easy computer access, teachers can set up dummy spreadsheets and talk their pupils through the regular expenses that adults must meet.
9. The Importance of Emergency Funds
An emergency fund is essential alongside long-term savings. Emergency money should be in a separate account, with instant access when needed.
Students will benefit from understanding that unexpected periods of unemployment or unwanted medical bills can blow their budget, and emergency funding is preferable to using credit.
10. Clear Debt First
Borrowing rates will always be higher than interest on savings. This basic rule of finance helps banks make money, but many young people must be aware of this crucial fact.
Paying off debts before saving is another clear financial lesson that schools should teach their pupils. In adulthood, those students will be thankful for the information.
11. The Dangers of Debt
In addition to lessons on debt management, it’s helpful to underline what might happen if things go wrong. Nobody wants to scare their pupils, but older students need to understand the implications of running up unmanageable debts.
Bankruptcy and the potential loss of a home are worst-case scenarios, but the danger of debt is a lesson everyone should learn board much earlier.
12. How Interest Rates Work
Discussions on interest rates could form an essential part of a lesson plan for older students. Who sets the interest rates, and what economic conditions determine future changes?
Understanding essential elements of the process, such as why interest rates on savings are lower than those on borrowing, are also valuable lessons to learn.
13. Understanding Compound Interest
Beyond the basics taught in the previous section, it benefits pupils to understand the power of compound interest. The idea that you can earn interest on savings and then acquire extra funds on the interest itself can boost savings over time.
Compound interest also works with debt, which helps explain the downside of this essential financial factor.
14. Costs of Running a Home
I wish I’d been taught this lesson at school. Young adults still in college may benefit from learning the total obligations required for running their homes. Beyond mortgage payments or rental bills, there is much more to cover.
Utilities and property taxes add to the household budget, and unless those students have learned about those extra costs from their parents, they may be in for a shock.
15. Side Hustles and Passive Income
The concept of having a side hustle is relatively new and an area that schools and colleges can pick up on. Extra work options, such as buying and selling online, mystery shopping, and market research, are worth outlining.
Similarly, affiliate marketing and other passive income ideas are in the lesson plan, and the teachers would be required to warn students about common scams.
16. How the IRS Works
The Internal Revenue Service collects federal taxes, and it’s vital to understand how the system works. Lessons on what you can claim and what constitutes income would be essential parts of the teaching program.
Discussions about deadlines and penalties are valuable lessons for all students preparing to enter the world of paid employment.
17. Establishing Goals
Everyone should have financial targets, but there’s no better time to set them than when in school. Do the students want to own their homes, or are they happy to enter the rental market? Do they want to travel before settling down into employment?
Teaching the value of goal-setting is another essential part of finance that can be taught early.
