high school teacher teaching group of students in class.

What Financial Topics Should Be Taught In School, According To Financial Advisors


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According to the Council for Economic Education, 25 of the 50 US states require students to take an economics course to graduate. In 23 states, a course in personal finance is a prerequisite for graduation.

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In the other half of the country, children can earn their caps and dresses without knowing there are 100 cents in a dollar – let alone have a clue what to do with those pennies and dollars.

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GOBankingRates spoke with financial advisors, financial coaches and educators to find out what topics they would make sure schools teach if they designed the program. Here is what they said.

How compounding can work against you

Albert Einstein is quoted as saying that compound interest is the “eighth wonder of the world” and that “he who understands it, earns it – he who doesn’t understand it, pays for it”.

Coming out of high school, young adults will be bombarded with credit card offers from the moment they turn 18, and if they don’t learn how interest accrues in school, the bank will teach them the hard way as soon as they are legal.

“A lot of young people go to college and get a credit card for points or free stuff and don’t realize how much they’re spending on interest because they’re only making the minimum payments,” said Matthew Robbs of Smart Saving. Advice. “Having this knowledge in high school could save many young people from long-term credit card debt.”

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How compounding can work for you

Just as high school students should learn how quickly debt can pile up when a borrower receives compound interest, they should also learn how money can make money for investors who use the power of compounding in their favor. – but only if they give him time to work his magic.

“With compound interest — money earned on money earned — more is better for investing,” said Jennifer Seitz, certified financial education trainer and educational content manager for the banking and investing app. for teenagers Greenlight. It even offers educators a sample lesson.

“If a teenager invests $150 a month with an annual interest rate of 8% starting at age 16, they can see it grow to over $1 million by age 65,” Seitz said. “And amazingly, the $150 they set aside each month is less than $90,000 of that. Waiting just five more years – until age 21 – to start saving $150 a month would only reach about $730,000 at age 65. That’s nearly $400,000 less without the five-year advance, and only about $10,000 less.

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The ABCs of investing

Even if the students had graduated with a rudimentary knowledge of how investors can harness the power of compound interest, most of them would not be able to apply these lessons in real life because the most of them leave school without learning the basics of how to place their interests. money to work.

“Students should learn how to invest in stocks, bonds and mutual funds, including that buying a stock is buying shares in a company and buying a bond is lending money to a business or government entity,” said life and money coach Elizabeth Chiang MD, Ph.D. “It’s important to understand the expense associated with investing and how that affects ROI.”

How to avoid the student loan trap that many will fall into

Some students will graduate from high school and get their first job. Without a good education, they won’t know how to handle the money they earn. Others will go to college, and many will pay for that privilege for years or decades to come.

“Given the more than $1.7 trillion outstanding in student debt owed by more than 43 million people here in the United States and the struggles many face in repaying it, America’s youth must also be educated on ways to prepare for the cost of higher education, as well as available ways to avoid or minimize student loan debt,” said Patricia Roberts, financial educator at Gift of College.

“This includes selecting post-secondary institutions whose net costs are as manageable as possible given family circumstances and available funds such as scholarships and grants that do not require repayment,” she added.

How income is taxed

No matter where they go to school or what they do after graduation, every child will eventually become a taxpaying adult. And when it comes to paying taxes, learning as you go is a recipe for disaster.

“Students should understand the basics of how federal income tax works, how it is calculated, how it is withheld from paychecks, how income taxes differ from investment taxes, and the basic ways to mitigate tax,” said David Frederick, director of customer success and consulting at First Bank. “Federal income tax is complex, and many adults just pay what the government says with little mediation plans and rejoice, mistakenly, when they get a refund. Students should be made aware of this system and the basics to get ahead of it.

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The basics of budgeting

Finally, there’s personal finance — the art, science, and skill of managing your household money. It’s the cornerstone of adulthood, but most children never learn it in school and stumble all their lives.

“Even high school students understand the basics of earning more than you spend, I hope,” Frederick said. “But financial literacy courses should extend this basic lesson to long-term projects. Give students a basic income and establish options for borrowing, investing, and spending. Students should be instructed on how to match expected income with essential expenses and how incidental expenses and savings are accounted for. Bonus points for the financial literacy course that can incorporate taxes into budgeting and get students a 401(k). “


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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was previously one of the youngest nationally distributed columnists for the nation’s largest newspaper syndicate, the Gannett News Service. He worked as a business editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as an editor for TheStreet.com, a financial publication at the heart of New York’s Wall Street investment community. .

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