Most high school students would jump at the chance to take a course called "How to Retire Early as a Millionaire."Forty states include personal finance to some extent in theireducational standards or guidelines, according to the National Council on Economic Education. On the surface, this makes it seem that educators in most states realize that high school grads should have a basic understanding of personal finance. If you dig a little deeper into the numbers, you'll find this is not thecase. The actual implementation of personal finance into high schooleducation is dismal. Only nine states require a course with personalfinance content to be offered and only seven states require studentsto take a personal finance course in high school to graduate (Georgia,Idaho, Illinois, Louisiana, Missouri, South Dakota and Utah). If you are looking at real-world life and what it takes to get ahead,what you do with the money that you earn when you are young candetermine whether you live your life financially secure or paycheck to paycheck. After graduating and beginning to work is when people should be making quality personal financial decisions, not when they should begin learning how personal finances work. Here are eight subjects that aren't taught in high school:
1. Realities of Credit CardsLack of understanding of how credit cards work causes far more financialproblems for people than should ever happen. Credit cards aren't evil, but they can seem that way if you don't know how to properly use them. When you already have a credit card is not the time to be learning howthey work, unless you want to receive some extremely costly lessons.Teaching people in high school that using a credit card is not using freemoney and comes with a huge cost over time would keep a lot of peoplefrom the early personal-finance disasters these cards can cause. It would also help reduce the vast amounts of credit card debt thatAmericans continue to rack up.
2. How to BudgetOne of the first places people get into money trouble is not knowing how to budget. Not knowing how you spend the money you earn is nothing more than inviting financial disaster. Learning how to set up a basic budget and stick to it can be the difference between being financially secure and running up largeamounts of debt.
3. The Importance of SavingThe importance of saving and creating an emergency fund cannot be overestimated for basic personal financial stability. It's not the everyday things that get most people into trouble, but theunexpected events that happen in life that cost more than anticipated.Learning to prepare for the unexpected can mean the difference betweengoing into a debt spiral or escaping financial emergencies with yourfinances intact.
4. The Meaning of FrugalityIn the consumer-driven world, there seems tobe nobody teaching the importance of frugality. Frugality is oftenignored or even scorned, but it is a sure way to personal-financesuccess. Learning to make the most of what you have, to get a goodvalue in all that you buy and to not waste when not necessary arelessons that would help every young adult handle their financesbetter.
5. How to InvestThe earlier people start investing for their future, the easier it is for them to reach their financial goals due to the magic of compound interest. Understanding the basics of investments and learning where they should be placing their money should be understood when they leave high school ratherthan having to experiment as young adults. The time to know about investing is before you have money to invest rather than by trial and error when receiving a paycheck.
6. Basics of Real EstateUnderstanding the fundamentals of real estate and how different mortgages work is extremely important as many are finding out with the current subprimemortgage meltdown. A good grasp of what is important when purchasingreal estate and how different mortgages work rather than whether youcan make the monthly mortgage payment at the time of signing it wouldhave saved a lot of people their homes.
7. Retirement IssuesThe first step that any new employee should do when joining a company is to join the 401(k) plan they offer up to the match, since not doing so is essentially throwing away free money. Yet since high school doesn't teach this, many youngadults do exactly this. If schools taught high school students howeasy it is to become a millionaire if they only begin saving forretirement early through 401(k) and IRAs, many more would embracesaving and investing early.
8. Finer Points of EntrepreneurshipWhen it comes to financialsecurity, putting all your eggs in one basket contains a lot of risks.In today's work environment, there is no guarantee of lifelongemployment. Learning basic entrepreneurship and building a part-timebusiness on the side is something that everyone should do for both theincome and tax benefits. Schools should not only teach the basics tobe able to work for somebody else, but also how to work on your own if you choose.
Since most high schools don't teach personal finance, those most inneed of this education (those students with parents that have goodfinances are likely teaching them at home) are left to try and figureout this information on their own after they graduate. Some will succeed in learning and some will struggle, but all would be betteroff if they had learned it before entering the work force.