Schools don’t teach personal finance lessons to students. They are stuck with the notion that personal finance is only useful for adults, not for kids.
Learning to manage your personal finances is important regardless of your age. But it is most important during elementary school years. Why is that? Studies indicate that whatever children learn in school, stays with them forever. If children learn the importance of personal finance, they will create and organize budget more seriously when they grow up.
Importance of personal finance
It’s hard to predict how the economy will perform in the future. Personal finance advice helps one to keep his finances afloat even amid dire economic conditions. No matter how the economy performs, a person can stay safe and keep managing his budget systematically if he follows the right personal finance advice.
The problem is people either ignore such advice or fail to implement them. But if they receive these advice at an early age, they’d internalize them and after growing up follow religiously.
But kids are immature
Kids don’t have psychological impediments that define adulthood. Kids learn quickly, way more quickly than adults. Also, as evidenced by contemporary scientific studies, kids’ brains undergo neuronal rewiring. Do you know what that means? It means lessons learned at an early age turn into neurons when the learner grows up to be an adult.
When the importance of personal finance is explained to an adult, he tries to understand it using his sense of reasoning. But the same explanation works differently for kids. Because they lack the ability to think critically like an adult, they don’t question anything and memorize everything. This is how kids learn to save money, avoid overspending and maximize their earning. They incur these habits and later in life, get benefited.
Parents neglect their duty
Most parents don’t feel the need to discuss financial matters with their kids. They wait for the kids to become adults. However, it only shows parents are unable to explain complicated things to their children. Children have their own ways of understanding things.
Research indicates kids are fun-loving and take an interest in things they find entertaining. Parents should take note of this and impart financial education to them in a playful manner and in the guise of entertainment. Instead of explaining to children how debt works, how compound interest works, parents should play games with them that encourage them to perform simple mathematical operations and offer them rewards upon successfully performing the operations.
Basic finance isn’t difficult
Both schools and parents need to step forward to educate children about basic finance. The funny thing is basic finance is not difficult at all. Gaining understanding in basic finance shouldn’t take much time regardless of whether the learner is an adult or a kid.
Basic finance doesn’t include insurance, bonds, real estate, etc. Basic finance includes earning, saving, expenditure, etc. Children whose age is between five and ten years can learn these things without much hassle.
Schools already have arithmetic in their curriculum’s. Basic finance isn’t much different from arithmetic, except a few terminologies. Kids can comprehend the terminologies if the explanation is easy enough for them to understand. Even if they don’t understand everything fully at the time of explaining, after growing up, they can quickly figure out.
Class on student debt
A study conducted in 2018 revealed that a total of 44 million students borrowed money to further their education and the cumulative amount owed by them is $1.5 trillion. To raise awareness, schools, especially high schools can offer classes on student debt.
By attending the classes, students can learn about the debt spiral. How people fall into the spiral, how debt originates, how to pay off the debt in time or even before the deadline, how not to incur new debts in the meantime, what are the habits that to one after another debt stockpiling on one another – students can learn everything.
Quantifying risk of debt
Not all students have the same degree of risk. Some students are more prone to incur debt than other students. But risk is intangible, so how can one calculate it? Doing a course on personal finance can help them understand risk and even measure it. An academic course on debt can cite present and past studies categorizing lenders in terms of gender, age and economic group. By getting access to such data and comparing themselves with the lenders mentioned in those studies, students can gauge their risks of falling into the debt spiral.
Both elementary schools and high schools can offer courses on debt. Courses offered in elementary schools be fun-filled and casual while those in high school can include serious topics such as the dire consequences of not paying debt within the deadline, why the students need debt, list academic areas that require them to incur debt, etc. Such courses can prevent the epidemic of student debt.