Financial Smarts After High School

You’re Never too Young to Save Short-term savings goals for elementary school kids Should I buy a pack of gum or save for something bigger? Mid-term savings goals for high school and college students Prom Video game system Car Spring break ski trip

Compound Interest is a Beautiful Thing Compound Interest is earning interest on interest Consider rewarding your child for saving by giving a nickel for every dollar saved For instance, start with $1,000 and add $25 a month for 40 years. If the investment earns 8% and is compounded annually, your high school student could have nearly $100,000 in savings well before retirement age. This Photo by Unknown Author is licensed under CC BY-SA

Compound Interest Might Bury You When it comes to debt, compound interest is not your friend. Debt can spiral out of control quickly. For instance, a online debt calculator can show that a $1,000 credit card charge with a 19% APR could take eight years to pay off and would cost $998 in interest. Just seeing these numbers on paper can help a student grasp the dangers of uncontrolled debt.  If your teenager just cannot wait to save up money for the next hot thing, consider lending them the cash–with a steep interest rate. That’s safer than them taking out a formal loan, but can also teach them how fast compound interest can work against them.

You Don’t Have to go into Debt to Pay for College Be creative in looking for options to avoid student loans: Attend part time Work while in school Choose a cheaper school Graduate early Start at a community college Live at home while attending college Join the military to help pay for schooling Going to school debt-free doesn’t have to be every student’s goal, but they should think carefully about every dollar that they have to pay back.

College Degrees are not all Created Equal Choosing the right school is important, but choosing the right degree may be even more so.  Become familiar with the current and probable future job market. Look for a degree that will excellent job opportunities. In today’s job market, a college degree doesn’t necessarily guarantee you a decent job!

Everyone Needs an Emergency Fund Having cash to fall back on in the case of an emergency is essential. This money can be used for emergency car repairs and other issues that might crop up during college. If you are concerned your student will use the fund for non-emergencies, consider opening a joint account so you can monitor their spending. This Photo by Unknown Author is licensed under CC BY

A Car isn’t a Good Investment Cars are (quickly) depreciating assets, which means they lose value as time goes on. High school students should strive to pay cash for cars, even if that means driving around a beater. This is a great opportunity to talk to your students about paying interest.  Taking out an interest-bearing loan for a car should be a last resort. This Photo by Unknown Author is licensed under CC BY

Keeping up with the Joneses Could Wreck Your Life Allowing what others have to drive our financial choices, particularly when those choices involve spending beyond our means, is a slippery slope. Teaching high schoolers to avoid “keeping up with the Joneses” is difficult, but will avoid financial difficulties later. One way to teach this lesson is to take the amount that you usually spend on back- to-school clothes and hand it over to them. Just make sure that they understand that you won’t bail them out. It is up to them to make sure the amount covers all of their back-to-school needs.

Financial Institutions are There to Sell You Things Make sure that students’ understand that banks and credit companies exist to make money by selling financial products and they can be very shrewd when doing so. This is an especially important conversation to have before your student steps foot on a college campus. There will credit card companies and banks all over campus trying to get them to sign up for credit cards. These products aren’t necessarily bad, it is just that students can end up with way more credit than could be healthy for their financial future.

Budgeting Doesn’t Have to be a Drag Budgeting isn’t a bad thing. It is just about taking control of your money so you can meet financial goals. High school is a great time for students to learn to live on a budget. You can give them this power by handing over a lot of the money you would have spent on them. For instance, give the full control of their lunch money. If they run out of money by Wednesday for two weeks in a row and have eat PB & J from home, they may learn to budget out their money over the week.

Not All Debt is Bad Debt High school students need to understand how to stay out of the most expensive forms of debt: long-term student loans, depreciating car loans, high interest credit cards, etc. But they also need to understand when to use debt and how to manage it wisely. One way to do this is for them to figure out where they want to live some day. They can look at current home values and mortgages rates, and figure out what it would cost them to buy a home responsibly. They need to learn that mortgage debt isn’t always a bad thing, and eventually may learn how to use credit cards to net some financial rewards.

Credit Scores are Important Students should learn early on about their credit score, including how to maintain one. Talk to them about their credit card and subsequent score. Tell them what a good score is and how to maintain excellent credit. One way to establish credit is through a secured credit card, These require a deposit, so lack of payment doesn’t cause a hefty and immediate consequence. But this can help them build up credit over time.

Living Takes Money — a lot of it Most teenagers have no concept of how much it takes to cover basic costs of living. You can help prepare your high school student for the real cost of life by letting him in on your family budget, having her shop for groceries, or requiring that he pay for his own car insurance.

Money Isn’t Everything It’s easy for high school students to get caught up in dreams of giant homes, luxury cars and tropical vacations, but don’t forget to teach your student that money isn’t everything. When choosing a major, students should select a major that will make them employable but they shouldn’t choose a career just because of the money. Remember that it is important to set good examples for your kids, showing them how to establish healthy financial practices.

Sources https://www.doughroller.net/personal-finance/13-things-every-high-school- student-should-know-about-money/ Created by Nancy Kojder Business and Finance Instructor Ben Barber Innovation Academy