1. Balancing Your Checkbook
When you balance your checkbook, you ensure that the balance in your checkbook register matches the balance in the monthly statement issued by your bank. To do this, you will need to track withdrawals and deposits and reconcile each entry in the register with the same transaction in your bank statement.
This task may seem old-fashioned with the financial software and online tools available today, but it is a fundamental financial skill that you should learn. Why? Because you can’t simply rely on the balance given by an ATM or what is displayed on your bank’s online portal; they do not always reflect the most up-to-date amount in your account, as the current and available balances can differ.
While balancing a checkbook is an important financial skill for high school students to acquire, it is even more critical for adults to maintain an accurate record of their transactions to manage their more complex financial affairs. It should be noted that your checkbook balance should match your bank statement balance each month.
2. Creating a Budget
A budget is a plan for how to spend your money that takes into account your income and expenses, and it is the key to financial success. If you don’t know how much you can safely spend and save each month, you could easily fall into debt or fail to achieve long-term savings goals such as retirement.
Every student should learn how to create a realistic budget and plan for the future to be successful later in life. Whether you use the envelope system that divides all your monthly cash into separate envelopes, a zero-based budget that leaves no money at the end of the month, or a financial app like You Need a Budget, creating a budget is a crucial financial skill that everyone should master to live within their means.
3. Paying for College
Many students believe the only way to pay for college is through student loans. However, there are other funding options available that do not require repayment, including grants and scholarships (available even for those who do not have perfect grades) and work-study options.
Learning how to pay for college without accruing massive amounts of student debt should be a requirement for all high school students in their final years. If you have already passed that age, acquiring this essential financial skill will allow you to provide advice to your younger family members on how to graduate debt-free.
Note: If you must take out a student loan, it is generally preferable to opt for federal loans rather than private loans. Federal loans offer lower interest rates, flexible repayment plans, and forgiveness programs.
4. Life Skills
Although these tasks may not seem related to money, grocery shopping, cooking, cleaning, and other chores can save you a lot of money compared to eating out, using a meal planning service, or home cleaning service.
With basic financial skills, you can find the best prices for food and clothing and plan practical menus to help you make it to the end of the month and beyond. Other skills like doing laundry, mending clothes, and performing simple car maintenance yourself can extend the life of your possessions, ultimately saving you more money.
Note: Packing a homemade lunch instead of eating out can save you around $25 a week or $1,300 a year.
5.
Investing
Investing can be confusing if you don’t have at least a basic understanding of how the stock market works and how to choose and invest in stocks. Obtaining a basic investment education can make a significant difference in how you manage your money in college and as an adult.
Learning investment principles like asset allocation, diversification, and rebalancing in high school will get you started on your investment journey ahead of others. You can then enhance your portfolio and potentially retire earlier in life.
6. Long-term Financial Planning
Understanding the need for a long-term plan for your money is a fundamental financial skill that you must master if you want to be financially secure in the future.
So what does this mean for students exactly? In addition to learning how to budget, it involves learning how to set financial goals, prioritize them, and create a step-by-step plan for achieving them. This process will lay the groundwork for working towards major financial goals later in life, including paying off debt, saving for retirement, or buying your first home.
7. How to Build Credit and Manage Credit Cards
While many college students target credit card offers, there’s a good chance they lack knowledge about how to successfully use credit cards. They often view them as extra money rather than a tool. This is likely because these students were probably not taught how to use cards in high school; a study by Everfi found that college students have very low success rates in answering basic questions about credit card usage, credit history, and emergency funds.
Of course, credit cards can be good or bad, depending on how you use them. However, they are a reason many college students and young adults fall into debt. Everfi’s study found that 36% of surveyed college students already have over $1,000 in credit card debt.
In addition to using credit cards, learning how to build credit and improve your credit score are essential financial skills. A good credit score can help you rent an apartment, qualify for lower interest rates on a mortgage or car loan, or even pay less for car insurance, so it’s important to manage your credit from the time you graduate high school throughout your college years and beyond.
8. Renting an Apartment and Paying Utility Bills
Many students start their college lives living in student housing, meaning they don’t have to worry about rent checks or managing utility bills like utilities or cable.
However, the student housing life doesn’t last forever, so it’s important to learn how to rent and maintain an apartment and split bills with roommates. Learning how to handle these tasks as a student can help you succeed in the future when you buy a home and need to budget for the ongoing costs of homeownership.
Frequently Asked Questions (FAQs)
Why does money management matter?
Money management skills like budgeting help you effectively plan for your financial future. Without a plan, you can easily spend more than you should and miss opportunities to save for retirement or other important expenses. Planning also helps you avoid financial problems like falling into credit card debt. It empowers you to take control of your money so that your money doesn’t control you.
What is the first step toward effective financial management?
The first step toward managing your money is usually understanding how you spend your money. Review and categorize your expenses, then assess how you’re doing in each category and where you are overspending. From there, you can build a budget and start actively managing your money.
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Sources:
– National Credit Union Administration. “Understanding a Check and Balancing a Checkbook.”
– First Horizon Bank. “Understanding Your Balance.”
– Federal Trade Commission. “Making a Budget.”
– Chime. “How to Make a Budget: A Guide to Choosing the Right Budgeting Style.”
– Federal Student Aid Office of the U.S. Department of Education. “Types of Financial Aid.”
– Capital One. “Easy Ways to Save Money Every Day: Tips and Ideas.”
– U.S. Securities and Exchange Commission. “Beginners’ Guide to Asset Allocation, Diversification, and Rebalancing.”
– U.S. Department of Labor. “Savings Fitness a Guide to Your Money and Your Financial Future,” Page 7.
– Experian. “What Are the Different Credit Scoring Ranges?”
– Experian. “Why Do Car Insurance Companies Base Their Rates on Credit Scores?”
Source: https://www.thebalancemoney.com/should-learn-high-school-2385824
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