The Only States That Teach Personal Finance (and What You’ll Have to Teach Your Kids Yourself)
Georgia recently became the 13th state in the nation to require high school students to be taught personal finance. According to Next Gen Personal Finance , Georgia joins Alabama, Florida, Iowa, Mississippi, Missouri, Nebraska, North Carolina, Rhode Island, Ohio, Tennessee, Utah and Virginia in requiring teens to complete at least one semester of personal finance before they graduate can.
While this growing trend of states requiring basic financial literacy to be taught in high school is encouraging, it still means that only “35% of students in the US will have access to financial literacy classes,” according to CNBC . Most children and adolescents will still need to receive this education elsewhere.
Since money management is not traditionally taught in schools, the responsibility falls on parents. In addition to what we have already written about what to teach your child about money at any age , here are some basic financial skills that every teenager should know by the time they graduate from high school.
Basic budgeting
Every teenager should be taught how to make a realistic budget. Teach them (with your own statements) how to collect financial documents such as W-2 and pay stubs, utility bills, credit card statements, receipts and all other financial documents relating to their (future) income and expenses. After creating a list of monthly expenses, they need to know how to break it down into fixed and variable expenses. Teach them how to compare their total income to expenses so they can either put together a savings plan for their monthly income balance or decide where to cut expenses so they don’t live beyond their means.
Smart shopping
Children and teens should be taught how to compare stores considering the price, volume and quantity of items such as groceries, personal care items, toys, sports equipment and other small items, whether in the aisles of your local Stop ‘n Shop. , or on Amazon. Take them to the grocery store with you and talk about your own process of evaluating and finding the best value for money. Or give them a certain amount of money and a shopping list and encourage them to buy your family’s essentials with those limited funds.
DIY money saving skills
Being able to do basic household chores can save you a lot of money. Parents should actively teach their children to do laundry, plan meals for the week, mend and hem clothes, cook, clean, clean the toilet or drain, and perform basic car maintenance such as changing the oil or air filter. They will be able to save money they would otherwise spend on tailors, maid services, takeaways and mechanics.
How to Split the Bill (and Calculate Tips)
Everyone should know how to split the bill in a restaurant and how to properly tip waiters. Teach your kids to add a tax and a little more tip than usual to their total (to compensate for their party members who inevitably get their math wrong). Teach them also that there are different approaches to group payments. Some believe that all group dining purchases should be divided equally by the number of attendees, regardless of who ate what, while others will rely specifically on what they ate and drank. Children should be prepared for both scenarios and be able to quickly calculate a 15-20% tip.
The importance of a good credit history
While the credit card industry wants our kids to believe that credit and purchasing power are free, plentiful, and available all the time, our job is to teach them that it isn’t. Help them understand the importance of having fewer credit cards and paying their bills in full and on time, as well as understanding how much they will pay in interest for carrying balances over from month to month. (Here you show how easy it is to get into debt and how long it can take to pay it off.) Tell them about the benefits of a high credit score as well—lower mortgage interest rates, more likely to get your rent approved, and better rates for car insurance.
How to set short and long term savings goals
Help your child or teen set both short-term and long-term savings goals. This can start at an early age by asking your child to come up with a toy they want and encourage them to set aside a few dollars from their allowance each week or month to buy one on their own. Praise progress and keep it visible , as financial consultant Rachel Stewart said, “either keep the money in a transparent container or show your child a bank statement.” Being able to see their money pile up is a great motivator.
As they get older, work with your teen to set a long-term savings goal, like a car, and help them figure out how to adjust their budget, savings, and income to meet that goal.
Investment
Investing can be intimidating, even for people of an advanced age. Introduce your child to investing opportunities and the time value of money, either through a basic investing course , using an app like Greenlight , or by allowing them to invest a small amount of money in a savings account.