Budgeting Cash Flow Education Financial Literacy

5 Things Every High School Graduate Should Know About Managing Money

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Most of us were not taught household finance in school. Even today, it is rare for students to learn how to budget, how to balance a checkbook, how to use a credit card, etc. in high school.

Below are 5 money management tips I discuss with every client. If you have a high-schooler or recent graduate, do them a favor and share these how-to’s with them now:

Tip 1: How to Balance a Checkbook

Fewer and fewer people balance a paper checkbook with a pen, but the same principles apply no matter how you track your income, expenses and savings. Balancing your account simply means tracking how much is coming out vs. how much is going in to make sure you don’t overdraw—which often incurs high fees. 

Tip 2: How to Set Up and Stick to a Budget

No matter how much money you have, you need a budget to control spending and achieve your financial goals. 

As young people start to manage their own money, they need to first prepare for monthly expenses such as:

  • Rent and utilities
  • Insurance
  • Car payments
  • Groceries

From there, it is helpful to have a “rule of thumb” like the 50/20/30 rule for allocating income: 50% for basic needs like those above; 20 percent for savings; 30 percent for wants like going out to eat, taking trips, shopping for clothes, etc.

Tip 3: How to Use Credit Cards Appropriately (and Why You Should Pay Off Your Balance Monthly)

Teenagers about to be set loose in the world need to know how credit cards work, particularly how to avoid carrying a balance. Credit card companies love to solicit college-aged students, enticing them with appealing offers. But before someone gets a credit card, they need to understand how debt accrues. 

The ABC’s your child needs to know:

  1. A credit card is like a loan; you have to pay back what you charge
  2. Interest builds daily when you carry a balance
  3. Your interest rate can play a huge role in your monthly bill if you aren’t paying your bill off each month (so get a card with a low interest rate)

Tip 4: How to Build Credit

A good credit score can make it easier--and sometimes cheaper--when buying a house or car, qualifying for an apartment, etc. If you have bad credit, these tasks can be much more difficult.

Paying your bills on time, keeping credit card balances low, and limiting the number of credit card accounts you open can all help you build good credit. 

Tip 5: How to Invest in the Stock Market

The stock market is confusing, complicated and time-consuming. In fact, many adults have only a basic understanding of how it works. 

Introduce your children to stock market fundamentals at an early age, so they can understand the risks and how compound interest works. 

Starting small now could yield large returns for your teenager as they face major life decisions. Helping them understand long-term investments could be an impactful life lesson they’ll thank you for later.

Make these lessons part of your high-schooler’s at-home curriculum to give them a good foundation for making financial decisions throughout their lives. 

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This content is developed from sources believed to be providing accurate information, and provided by Kelly Financial Planning. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.