For high school students who are just starting out in the world of work, it can be hard to understand all of the personal finance questions that are thrown their way.
Some of these questions may seem too trivial to worry about, but there are a few that can have a big impact on your future. What happens if you get fired from your summer job? If you lose your car, will you be able to get to work? If you use a credit card, how much do you need to pay back in interest? How do you avoid paying high interest rates on future student loans? These questions may seem simple enough, but they can have a big impact on the life of a high school student.
When Is It a Good Time to Start Learning About Personal Finance?
Learning about personal finance isn’t something that should be put off until you’re much older. It’s a good idea to start early and learn the basics in high school so that you can develop healthy financial habits from an early age, and set yourself up for success down the road.
Many teenagers do not realize how money affects their daily lives and decisions. High school students often begin to work part-time and are able to earn a paycheck for the first time in their lives. Having a job introduces students to the world of financial independence, which can be applied now and later on in life. Paychecks come with taxes, bills, and responsibilities that young people will have to take into account when learning about personal finance.
It’s important to have the basic skills of money management under your belt before you finish high school, because knowledge is power! Being able to manage your finances well means that you’ll be able to navigate adult life with confidence and know-how.
Many high school students have parents who pay for all or most of their expenses such as food, shelter, transportation, etc., but they will soon be considered independent adults once they graduate from college or university. The more preparation one has prior to becoming financially independent the better off he/she will be in creating a financially secure future.
What Are Some Common Questions High School Students Should Know?
High school students need answers to common financial questions involving everything from planning for college, saving money, and finding a job. As highschoolers begin to take a more active role in managing their finances, it’s important for them to be prepared for the questions that are bound to arise. The following questions are common ones that every high school student should know by the time they graduate.
- What is the difference between a credit card and a debit card?
- What are some reasons for having a savings account?
- What are some reasons for having a checking account?
- Why does it matter how much of your income you save?
- Why does it matter how much of your income you spend?
- How do you determine your net worth?
- What is a budget?
- What are some simple tips to help you save money?
- What are some simple tips to help you spend less money?
- What is the difference between needs and wants?
- What are some reasons for having an emergency fund?
- What are some reasons for having a retirement account?
- Why is it important to invest early in life?
- What are some reasons for having life insurance?
- What are some reasons for having car insurance?
- How can you get out of debt faster?
- What is the difference between good debt and bad debt?
Why Isn’t Financial Literacy Taught in High School?
You might wonder why financial literacy isn’t taught in school – isn’t it important
Financial literacy is not a core subject (like English or math), not a mandated subject (like health or physical education), and not tested on. Teachers are also not trained to teach those subjects.
Furthermore, it’s simply not a priority for schools or society as a whole when the economy is struggling. It’s sad but true: when times are good, we’re all allowed to forget about our finances until things get bad again and we start worrying about money again. But by that point, it’s too late for most people who didn’t learn how to manage their money well.
What Personal Finance Courses Should High Schools Be Teaching?
Personal finance might seem like a challenging topic to tackle in high school, but it doesn’t have to be that way. In fact, the basics of personal finance are not difficult at all. Some schools even teach the subject and find it to be a hit.
If you’re looking for a simple course outline for your students, use these helpful questions and relevant tips as your guide:
- What do you know about credit? How can credit be good or bad?
Credit can improve your life by offering you things that you may not initially be able to afford—such as education, a home and car—but also can ruin your life if misused or abused. Educate students on how credit works (for example: why do credit reports exist?) and what can happen if they don’t use it wisely (credit score consequences).
- What is a budget? Why is budgeting important?
Budgeting is important because it allows you to plan ahead financially so that you have enough money for everyone of your financial needs as well as unexpected expenses. Explain simple budgeting concepts (like delayed gratification) and show them how making a plan will help them reach their goals.
What Are Good Resources for Learning Personal Finance Basics?
Some good resources for learning personal finance basics include:
- High school teachers. For many high school students, the most obvious resource would be their teachers. If they do not know the answer to a personal finance question, they may have friends or other contacts that can provide an answer, or if all else fails, they can help you look up the answer on the internet or in a book.
- Parents. Most parents are willing to help their children learn new ideas and concepts, including those related to personal finance. In fact, this is one of the main reasons why it is so important for teenagers to talk with their parents about money issues!
- Friends and relatives. Friends and relatives are more likely than strangers to be able to give you trustworthy advice about what does and does not work in real life situations. They also have more experience dealing with money problems firsthand than someone who has never had any financial difficulties before (more on this later).
- Financial planners. If your family has a financial planner or coach in their network, you can ask for advice from them as well. If you don’t have those resources available now, there may be opportunities for you to attend classes or seminars hosted by local banks and credit unions.
- Personal finance websites. Examples include Investopedia, NerdWallet, FINRA Personal Finance, and our site here at Banks.org
What Are the Best Personal Finance Books for High School Students?
Along these lines, here are the best books for high school students to start learning about personal finance:
- Personal Finance For Dummies, Eric Tyson – This is more of an introductory book that covers everything you need to know about personal finance in one place. There’s no particular order or way you have to follow—just pick up this book and start reading!
- The Richest Man in Babylon, George S. Clason – This book is a staple of any personal finance library and should be read by all. It uses parables to explain ways to save money, build wealth, and become a wise investor.
- Rich Dad Poor Dad, Robert Kiyosaki – What sets this book apart from others like it is its use of story as an alternative method of teaching high schoolers about money. As opposed to approaching the topic from a theoretical standpoint alone, Kiyosaki offers advice in a relatable way through narrative.
- The Millionaire Next Door, Thomas J. Stanley – If you want your high school student to become the next millionaire next door (as the title suggests), this is the book for them! It uses real-life stories from Americans who have built their net worth up with hard work over many years rather than winning big on lottery tickets or getting lucky in Vegas casinos.
- Random Walk Down Wall Street, Burton Gordon Malkiel – A guide for the stock market with practical advice on investing and achieving financial freedom. Malkiel’s main point is very clear: start a savings plan early in life and invest in a variety of companies via low-fee index funds.
Should I Set Up a Budget as a High School Student?
It’s never a bad idea to develop money management skills, and high school is the perfect time to start. It’s also the perfect time for your parents to get you started on a budget. Your parents might not be thrilled about giving you money, but if you have your own account, it will be easier for them because they won’t have to pay for everything.
A budget is a written plan of how much money you make and how much you spend it on things like food and clothes. You can use a spreadsheet or an app to keep track of it all. For example, Xcel has budgeting templates that are easy to customize or use with any other program that uses spreadsheets (like Google Sheets).
There are different ways to set up a budget:
- Add up all the expenses in your life (everything from rent and food to entertainment) then subtract that amount from what you earn each month. If there’s money left over, save it! If there’s no money left over after paying expenses, reduce spending until there is some left over (this is called zero-based budgeting).
- Use the 50/30/20 rule: spend 50% of your income on essentials like housing and groceries, 30% on wants like entertainment or travel, and 20% on savings or debt repayment (this method is called envelope budgeting).
How Do I Save Money as a High School Student?
As a high school student, you might be wondering how to save money. After all, it can seem like you’ve got more on your plate than ever before. It can be hard to prioritize saving, as well as deciding what types of things are worth saving for. Here are some tips for saving:
First and foremost is that you should save at least a small percentage of your income every month. Whether it’s 10% or 20%, the goal is to try and set aside at least some of your money each payday. If you’re not sure where to begin, divide your pay into three separate piles: discretionary spending (stuff like coffee shops or clothing), needs (like food and rent), and wants (anything fun). Next, look through those piles and decide which ones are important enough to put aside money for. Then make a plan with yourself about how much you should put into each category each month so that by the time you turn 18 officially (but even before then) you’ll have enough in the bank to buy a few nice things with the rest of your allowance or birthday money—maybe an iPod Touch or other electronic device!
Once this is done and your bank account looks healthy, take another look at all the stuff in those first two piles—especially if they’re items that cost more than $20 now. Take another look at if they will still matter tomorrow when you’ve got $200 in savings and no other need for spending any more money on them except maybe buying pizza once in a while. You probably don’t want to spend too much on these kinds of things anyway since it would only be one purchase out of hundreds over time; plus if something does happen later where you absolutely need it now, there’s always eBay!
Once again take another look at what kind of balance sheet this creates: if there are still some items left that seem worthwhile but these funds aren’t enough yet because they still require one-time purchases like filling up gas tank or paying an electric bill.
What Is Interest?
Interest is the cost of borrowing money. If you have a savings account, this means that your bank will pay interest to you on the balance in your account (in other words, they are borrowing money from you). If you want to borrow money from a bank and get a loan, they will charge you interest as it costs them to lend out their money.
Interest rates vary depending on the type of loan (credit card loans usually carry higher interest than student loans) and other factors like the strength of your credit score or the reputation of your lender. The more money you borrow, the more interest you’ll pay back over time.
What Are Credit Cards and How Do They Work?
You use a credit card to make a purchase, and then you repay the credit card company for that purchase over time. When you apply for a credit card, the credit card company will give you a spending limit — in other words, the most money they will let you charge on your account. You can’t spend more than your spending limit.
There are two types of credit cards: unsecured and secured. Unsecured cards don’t require collateral, while secured cards do require collateral (usually cash). Secured cards are typically easier to get than unsecured cards. The downside is that if you don’t pay back what you owe with a secured card, you may lose whatever money or assets were used as collateral on your account.
Credit cards have something called an APR—an annual percentage rate—which is essentially the interest rate for the money charged on your account for the year. If you pay off the balance every month before it’s due, there’s no APR because there’s no interest owed to the credit card company (and there’s usually a grace period in which this can be done). But if you don’t repay what was borrowed by at least a minimum amount before it’s due, interest gets added onto your balance.
What Kinds of Loans Are Out There, and How Can I Get One?
There are four main types of loans: student, home, car and personal.
To apply for a loan, you need to fill out an application, and then wait to see if you’re approved. A good credit score can improve your chances of being approved.
How much you get in a loan, and what the interest rate is depends on how much money they think you can pay back each month (known as your debt-to-income ratio), your credit score and other things like that. It’s important to know whether it makes sense to borrow money for something like a new television or an expensive vacation—if it will take years to pay off the loan, maybe you should save up instead.
As far as how you actually go about getting a loan from a bank or other financial institution (and certain kinds of student loans), that’s more complicated than I have time or space for here
What Are Some Cool Financial Hacks for High School Students?
You have three main options when it comes to saving money in high school: open a savings account, start investing or do both. As soon as you earn your first paycheck, make sure that you deposit at least some of the funds into your savings account, because this will help build good habits for the future. When it comes to investing, there are numerous apps available that cater especially toward younger users who want an easy way to get involved in trading stocks with minimum capital. Good budgeting is essential when trying to save money in high school and this will allow you more flexibility later on down the road if any unexpected expenses arise.
It’s never too early to start saving, and you don’t have to be some sort of financial wizard to get started. In fact, most of the best tips are super-easy methods that anyone can use, even if they’re in high school.
One simple way to save money is by cutting down on gas consumption. Save gas by combining errands into one car trip instead of taking multiple trips in one day. Also try cutting down on how far you travel each week (and conversely, make sure that you take less expensive public transit when possible).
Another great way for students to save money is by buying used textbooks or renting them online—new textbooks are much more expensive! Also, keep your eyes peeled for special deals from book retailers like Amazon and eCampus Textbook Rental. Sometimes they’ll offer special discounts if you purchase multiple books at once or if you buy early in the semester.
Get a part-time job after school is over; this will help relieve some stress and give you some extra cash for spending money
Finally, there are plenty of ways for students to make a little extra cash during their summer break. Whether it’s doing odd jobs around your neighborhood or setting up a babysitting business with friends (or maybe even both), taking advantage of the long summer days gives you ample opportunity to earn some money while still having time off from school—just be sure not to spend it all in one place!