When young people get out on their own for the first time, they are faced with making tremendous financial decisions. How to budget for food, rent and utilities. How much to spend on clothing and entertainment. Whether to open a credit card or take a cash advance.
These decisions have real consequences, and making poor decisions in one’s 20s could affect a person’s credit for years to come. It could determine when they can buy a house or how much interest they will pay to finance a car.
Beyond that, choosing not to set aside money for retirement until later in life results in many years of lost savings and growth potential. It could mean playing catch-up for years, working later in life or not having the kind of retirement you might want.
Having poor financial skills at the start of adulthood is a recipe for hardship. That’s why we’re glad to see local schools are still putting an emphasis on teaching area students how to manage money. Balancing a checkbook, paying bills and setting aside money for a savings account are all valuable life skills students will need to know when they’re on their own, but those concepts may not easily fall into English, math, science or social studies curriculum.
Oct. 15 is National Get Smart About Credit Day. Parents can reinforce those concepts by helping their child open a savings account at a local financial institution. Children who earn money through chores, allowances or part-time employment can be taught to take a portion of their earnings and save it — for college, a new gaming system, a car.
With college students amassing unfathomable debt and struggling to pay their student loans all over the country, these lessons are perhaps even more valuable today than at any time before. Knowing how to budget will help students make smart choices about how much to borrow and formulate plans for how they will pay that money back.
In some ways, making mistakes is a rite of passage into adulthood. Dealing with consequences is the easiest way to learn how to avoid the same circumstances in the future. But that doesn’t mean young adults should have to deal with a lifetime of bad credit, increased interest rates and overwhelming debt.
By teaching children financial literacy skills, we’re doing everyone a great service.