Growing up, unfortunately, it’s not common that we’re taught practical personal finance tips in school.
While geometry is usually on the curriculum, everyday skills like balancing a bank account typically aren’t.
Finances are one of the most important aspects of life but aren’t on the school curriculum?
As we reflect on what we wish we knew then, we’ve rounded up ten money lessons that could have saved all of us a lot of time, headache and hassle if we learned them long ago.
If you have a high-schooler or recent graduate of your own, feel free to share these tips with them – along with your own.
Personal Finance Tip #1: How to Balance a Bank Account
Balancing a bank account involves tracking how much is coming out of your account versus how much is coming in (put simply think spending versus saving).
This is a valuable lesson that needs to be learned at an early age, whether it’s with a spreadsheet, in a money-tracking app or through a bank’s budgeting software.
Tracking spending versus savings can show us trends and valuable information.
Revolut is a fantastic app for this and I can’t recommend this highly enough.
Personal Finance Tip #2: The Basics of Budgeting
This personal finance tip is key.
Budgeting is crucial to achieving your financial goals. The foundations used to establish a budget are basic, yet often overlooked.
Especially as high schools graduate and go on to start their career or attend college, there are monthly expenses they’ll need to learn to prepare for. These could include:
- Rent or a mortgage
- Utilities
- Insurances
- Car payments or loans
- Groceries
For anyone looking to start a budget, the 50/20/30 rule of thumb is an effective place to start. Your after-tax income would be broken down into three categories:
- 50 percent on needs (monthly bills, rent, etc.)
- 20 percent goes directly into savings (automate this otherwise you’ll never do it!!)
- 30 percent on wants or discretionary (eating out, shopping, trips, etc.)
Personal Finance Tip #3: How to Use a Credit Card
It’s pertinent that teenagers learn early on how a credit card works and, more importantly, how to avoid racking up high-interest bad debt.
Credit card companies are notorious for soliciting with enticing ‘attractive’ offers.
Understanding the hidden dangers of accruing interest early on can save anyone hundreds (or thousands) in unnecessary debt.
When it comes to using a credit card, always remember:
- You have to pay back what you borrow and what they charge – it’s not your money!!
- Credit card interest accrues when you carry a balance
- Your interest rate can play a huge role in your monthly bill if you aren’t paying your charges completely off each month
Personal Finance Tip #4: How to Build Credit
Having a good credit score can make a big difference in how you manage your finances as an adult.
If you have good credit, it can make things easier (and sometimes cheaper) when it comes to buying a house or car, qualify for an apartment and more.
If you have bad credit, these tasks can be much more difficult, so it’s important to learn about this early on.
Building good credit can involve positive financial habits including paying your bills on time, keeping credit card balances low and limiting the amount of credit card accounts you open or use to an as-needed basis.
Personal Finance Tip #5: How to Start a Business
Starting a business is probably not on most high schooler’s radar, but why not introduce something like this early on?
Getting an introduction to the basics of starting a business is a great way to at least get them thinking about it as a potential career path.
If they decide to do this later in life, they’ll already have the foundation of some basic business knowledge.
Personal Finance Tip #6: The Basics of the Stock Market
I wish I had known about the stock market at an early age, it’s that simple. There is long term growth potential like nowhere else.
There’s no getting around it – the stock market can be confusing, complicated and time-consuming.
In fact, many adults today still carry around only a basic understanding of the market.
Consider introducing your teenager to the basics of the stock market at an early age, giving them the foundational knowledge needed to understand the importance of investing in achieving larger financial goals.
Even starting small now could yield large returns for your teenager later in life. Helping them understand long-term investments and how the market works now could be an impactful life lesson they’ll thank you for later.
Personal Finance Tip #7: The Importance of a Pension
If finances are boring then a pension is likely to be the pick of the uninteresting.
That said, no one can deny the importance of a pension
A pension is simply a long term tax-efficient savings account.
There is no other savings vehicle like it, nowhere else the Government will contribute 20% or 40% of your savings to your pot.
When at school, retirement will be the last thing on a students mind.
However tie the tax relief available on pension investing, the tax-free growth available and the long term growth potential (Lesson #6 above) then it’s a topic worth discussing at an early age.
Personal Finance Tip #8: Keep an emergency fund
As we emerge from the pandemic, one thing that is clear is that we never know what the future can hold.
Millions of people lost jobs or had reduced income.
In school, kids should be taught the importance of having a separate fund built up that’s easy to access to cover expenses.
In the event of an emergency, they can then tap into this.
They will soon become adults with bills to pay and this emergency fund can act as a safety net.
At Fortitude Financial Planning we recommend an emergency fund of minimum 3 months expenses, at best 6 months expenses.
Personal Finance Tip #9: Be taught that investing isn’t gambling
Children need to be taught that investing isn’t gambling.
Gambling is where you have a splurge on boxing or football.
With gambling, the potential is there to lose everything.
Its important kids are taught the fundamentals of long term investing and how it differs from gambling.
Personal Finance Tip #10: Invest early and often
Saving for the future, whether it be a car or home or even retirement, is likely the furthest thing from a kids mind.
However, starting early gives them the benefit of compound interest. Interest upon interest.
Typically referred to as the eighth wonder of the world.
When kids invest early, they will truly benefit in. the long run and when they turn thirty, they’ll be over the moon with it.
In Ireland, the mortgage ladder is difficult to get on and it’s only getting harder.
By investing early our kids can save themselves a lot of pain and annoyance in future.
You learn a lot of things in high school, and while many of those memories will last a lifetime, these useful financial lessons would have definitely helped with some stronger financial decisions in the future.
Help your own teenager or grandchild hit the ground running with these helpful personal finance tips.
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Francis McTaggart CFP® SIA RPA QFA
Disclaimer: All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice.
You should always engage the services of a fully qualified financial planner before entering any financial contract.
Fortitude Financial Planning Ltd will not be held responsible for any actions taken as a result of reading these blog posts.
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