Financial literacy is an essential life skill that can empower individuals to make informed decisions about their money. However, many of these skills are often overlooked in traditional school curricula, leaving young adults ill-prepared to navigate the complex world of personal finance. Here are five crucial financial skills that should be taught in school but often aren’t:
- Budgeting Basics: Learning how to create and stick to a budget is fundamental to managing personal finances effectively. Yet, many young adults graduate from school without ever having been taught the basics of budgeting. Understanding how to allocate income towards essential expenses, savings, and discretionary spending can lay the foundation for financial stability and long-term success. My spending planner that you received when you signed up to my newsletter was created especially to solve this problem. How are you getting on with it? Does it help?
- Debt Management: With the prevalence of student loans, credit cards, and other forms of debt, it’s essential for individuals to understand how to manage debt responsibly. This includes knowing the difference between good debt and bad debt, understanding interest rates, and developing strategies for paying off debt efficiently. Without proper education on debt management, many people find themselves burdened by debt for years to come. If you have debt above 7% APR, consider negotiating it down with the company and/or consolidating it into a lower interest loan. You might even be able to transfer it onto a 0% credit card but be sure to cut the card up so you are not tempted to use it.
- Investing Principles: Did you know that investing is one of the few ways that the average person can become wealthy in their lifetimes? I didn’t. I thought it was gambling and just for the rich. Investing can be a powerful tool for building wealth over time, but it can also be intimidating for those who lack knowledge in this area. Schools should provide basic education on investing principles, including different investment vehicles such as stocks, bonds, and mutual funds, as well as the concept of risk and return. Equipping students with this knowledge early on can empower them to start investing wisely and take advantage of compounding growth.
- Taxation Knowledge: Understanding the basics of taxation is crucial for financial literacy. This includes knowledge of different types of taxes, such as income tax, VAT, as well as how to file self-assessments properly. Many individuals enter adulthood without a clear understanding of their tax obligations, leading to costly mistakes and missed opportunities for tax savings. Understanding how to read a payslip and making sure it is correct could save you money, don’t assume employers have got it correct. Many large employers in the U.K. have been fined in recent years for not even paying their employees the National Minimum Wage. I reported my last company to the Pensions Regulator for not paying me the correct contributions whilst pregnant, this is discrimination and is illegal. I would never have even known this myself had I not worked in payroll.
- Financial Goal Setting: Setting financial goals is essential for creating a roadmap to financial success. However, many people struggle to articulate their financial goals or develop a plan to achieve them. Schools should teach students how to set SMART (Specific, Measurable, Achievable, Relevant, Time-bound) financial goals and develop strategies for achieving them. Whether it’s saving for a home, paying off debt, or building an emergency fund, having clear financial goals can help individuals stay focused and motivated.
Incorporating these financial skills into school curricula can empower students to make sound financial decisions and build a solid foundation for their future financial well-being. By providing young adults with the knowledge and tools they need to manage their money effectively, we can help ensure a more financially secure future for generations to come.
If you want help with budgeting, you can get my free spending planner now by signing up to my newsletter where you’ll also get my articles a whole month before I publish them here! What are you waiting for, sign up here now! > https://laurenjohnston.co.uk
*Quick disclaimer – I am not a financial advisor, I do not give financial advice and you are responsible for your own financial wellbeing 🙂
Lauren <3