Financial literacy is one of the most important factors in leading a happy and successful life. Personal finance education is necessary so students have the opportunity to understand the fundamentals of things such as saving, budgeting, investing and debt. Although understanding personal finance is a basic life skill, many states don’t actually require courses to promote financial literacy.
If personal finance education isn’t available everywhere, how can we ensure that today’s students will be prepared enough to make sound financial decisions as adults? Here are a few of the biggest reasons why it’s so important for financial literacy to be promoted in schools.
Build Good Credit and Avoid Bad Debt
It can be very confusing to understand credit and what a credit score means and its implications. It’s crucial that students understand the importance of credit so that they are educated when it comes time for them to apply for a credit card, buy a car, rent their own place and especially if they need to deal with student loans which many students will when they come out of college. A mistake with credit at a young age (which is easy to do) can cause years of headaches and higher interest rates that they may be forced to pay based on that mistake.
Furthermore, it’s very common for students to accrue a lot of debt. Student loans and credit card debt may add up and become very expensive if there isn’t an understanding of how credit and debt work. It’s not unusual for a young person to overspend on their first credit card and be unable to pay off the balance due. When someone doesn’t understand how to build good credit or avoid bad debt it can often take them years to finally pay the debt off and it may wind up costing many times what they actually spent as interest charges add up over time. Education is key to avoid this trap.
Financial Choices Impact Everything
Personal finance education can influence young people and motivate them to begin their adult lives with good savings and investing habits. Wouldn’t it be wonderful if every person who graduates high school understood the importance of saving for the future? Having the knowledge to make a solid budget that works not only teaches responsibility, it also forces spending habits to be reviewed. Being more aware of their personal finances can cause people to make better decisions about their everyday spending choices.
Making the right financial choices can also have a positive effect on one’s credit score. When someone has taken the time to build good credit they are increasing the odds of being more successful in almost every facet of their financial lives. In some cases having a great credit score can save thousands of dollars in interest payments over the life of a loan.
Responsible Personal Finance Habits Benefit the Individual and Society as a Whole
Personal finance education leads to positive attitudes about money, savings, investing and leads to more than financial health. People with good money management skills are statistically less stressed about their personal finances and in turn, usually more successful. Families rely on teachers to help their children learn about Math, English, and Science. Personal finance is arguably another very significant subject that should be built into the education system to ensure that young people are well suited to start their financial lives.
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