Financially literate people have acquired basic skills needed to understand money management and personal finance. Topics include responsible borrowing, budgeting, shopping, and saving or investing. Most adults need to make some of these types of choices almost every day.
Few can argue that financial illiteracy leads to poor choices. Often, lack of knowledge even makes folks vulnerable to outright scams. Sadly, bad decisions can lead to long-term financial struggles that some folks never recover from. Thus, financially literate people tend to agree that it’s never too early to teach kids how to handle their money. And that process should certainly start before children grow up and enter the adult world.
Why Do High School Graduates Need Financial Literacy?
High school graduates generally need to start “adulting” on some level right after graduation. For example:
- Financing higher education: Many students make major financial decisions about financing college or trade school before graduating high school. For instance, prospective students should understand the long-term impact of accepting large student loans. Even if students make a prudent decision to take out a student loan as a way to invest in their future, they should have the skills to manage that borrowed money wisely.
- Managing income and bills: Others may skip or delay further education to begin full-time jobs or join the military. These recent high school graduates suddenly have a paycheck, employee benefit options, and bills to pay. At the least, even young graduates should understand the impact of their choices about budgeting, saving, and managing credit.
Should High Schools Require Financial Literacy Education?
Young people might have time on their side to start building their future financial security. However, without basic financial literacy, they can waste time and money learning expensive lessons that might have lifelong impacts.
Should schools teach students more about financial literacy? Why not ask students and recent high school graduates to learn the answer? For instance:
- The University of Chicago published a survey that found over 50 percent of high school seniors wished their school had offered more personal finance education.
- In one survey, 30 percent of students thought their high school did a good job teaching personal finance. Only about one-third of the states require this kind of class.
- Students who have taken financial literacy classes tend to enjoy higher credit card scores and carry lower credit card balances.
- Financially literate people tend to retire with 30 to 40 percent more wealth.
Do Personal Finance Lessons for Students Start at Home?
Some parents may spend time teaching their children sound money management skills. For example, CNBC reported that most parents say that they should take responsibility for teaching their children about personal finances.
Some families do a relatively good job. Parents might begin with their toddler’s tooth fairy money. They might continue to advise children when they get their first paycheck from a part-time job and continue to help with decisions about financial aid or renting an apartment.
At the same time, only 57 percent of adults demonstrate financial literacy in the United States. Almost one-third of parents admit they never discussed personal finance with their kids. Other parents may teach their children some aspects of personal finance but lack the knowledge, inclination, or confidence to offer a well-rounded personal finance education.
Improve Your Family’s Financial Literacy
Our experienced financial advisors care about families. We guide and monitor wealth building and offer information and education about various financial choices. Not only can you pass along more wealth to your children, you can also pass along an invaluable education. Call, email, or visit us today to discuss your family’s financial goals.
Advisory services offered through Commonwealth Financial Network, a Registered Investment Adviser.
