When you stop to think about it, why was algebra a required subject in high school, but learning how to manage personal finances wasn’t even on the school’s radar screen?
Without a doubt, algebra teaches basic logic, but so does creating a budget and learning how to stick to it. And although algebra might help getting into college, knowing the ins and outs of their personal finances can actually help students stay in college.
Adding courses in personal financial management to a high school’s curriculum has the potential to ease the transition into adulthood regardless of which direction a student’s life may take.
The following 3 reasons why personal finance should be taught at the high school level are as enlightening as they are obvious.
Money Management is a Learned Skill
The assumption that all parents are capable of teaching their kids how to manage money is a false one. Over 50% of Americans have credit cards and latest stats show that credit card debt stands at $7,050 per average household ($15,112 per indebted household), with an average 17% interest rate.
These figures alone indicate that a large number of households are not managing their finances well and are, in fact, overextended. Add to that the number of families living at or below the poverty line and you have an overwhelming case for additional education in personal finance at the high school level.
What do students need to learn in order to hone basic personal finance skills?
A recent Forbes article cited a study conducted by the Harvard Business School stating that personal finance courses have no effect on financial outcomes and that additional math courses and mathematical ability determine the extent of a person’s economic success, not financial literacy.
As compelling as this argument may be, there are a number of reasons why both are important, especially for kids who come from financially illiterate households. They need to be exposed to financial planning concepts that they might otherwise not learn about, as well as improve their math skills. The two go hand in hand.
Learning how to use and manage credit cards, become familiar with credit score and rating services like Equifax and Transunion, understand mortgage rates, know how to create a personal budget, and then live within it, are important skills that need to be acquired as early on as possible.
Start Early for Better Results
The sooner students start learning the basics, the better.
Courses such as those being taught by Pennsylvania Institute of Certified Public Accountants have helped students understand the value of savvy budgeting, paying themselves first, understanding the impact taxes have on their take-home pay plus other financial planning tips.
Money management apps like mint.com abound on the internet – tools that can provide invaluable help and support to students. Understanding the concepts behind the tools will make those tools that much more effective.
Awareness and Understanding of the Bigger Concepts
Concepts such as compound interest, debt management, prioritizing needs and wants, plus those listed above, are some of the skills that even many adults haven’t mastered. Exposure to these concepts in high school, through programs like Money as You Learn, gives students a leg up to become more self-sufficient as they enter the work force or go off to college.
Forbes reported that college-related debt, on average, stands at $32,500 including student loans, credit cards and family loans. Students need to know how to plan for a future that includes debt, rather than trying to cope with it once they’ve graduated.
It should be noted that among millenials, ranging in age from teens to early 30’s, fewer are carrying credit cards, many are thriftier than the preceding generation and some even seem to be more financially cautious. If this is a trend, then the reasons why personal finance should be taught in high school become even more powerful.
Navigating the choppy waters of today’s increasingly complex society will be made easier as students better understand and prepare for the financial challenges and opportunities that await them.
