Financial Education For Our Youths Should Be Mandatory
Why is there a lack of financial education in America’s schools today? To quote the famous investor, Peter Lynch: “The junior high schools and high schools of America have forgotten to teach one of the most important courses of all: Investing.” Why aren’t we teaching financial “literacy” in our primary, secondary schools and colleges?
Why Aren’t Our Schools Teaching Financial Literacy?
The financial education our students need to succeed is currently not being delivered in our school system. Why are our schools teaching our youths how to work for money but not how to put their money to work? It is difficult to get wealthy with “earned income” alone. And, yet this is precisely what our schools teach: how to work for money. Our young people should know how to put their money to work by investing in “passive” and “portfolio” income. A quote by Robert Kiyosaki states: “You invest for one reason: to acquire an asset that converts earned income into passive or portfolio income.”
An example of “passive” income would be receiving rent payments from rental properties. “Portfolio” income is monies earned from investments, dividends, interest payments, and capital gains. Wealthy and financially educated individuals use these types of income to their advantage!
Financial Literacy Courses Should Be Required
Our children and young adults need an education in financial matters! Many today do not even possess “basic” financial skills. A report by the Treasury Department states: “Financial literacy courses should be required. If classes are optional, they might not reach students who may be unaware of them or who do not value the benefits of financial education.”
Many young people today are being offered credit cards in college when they should be avoiding consumer debt. Many of these kids have no understanding of compound interest. They often go into debt at an early age with student loans. These same youths have never had a course in money, or were taught how to go about investing! They are without financial literacy! “Illiteracy” is the foundation of financial struggle!
Furthermore, studies have shown that many youths graduate from high school and college with little knowledge of how to open a bank account or, how to start saving and investing in order to reach their goals. It is interesting to note that studies have demonstrated that those youths who did take personal finance courses had better credit card scores overall. These youths also had a lower delinquency rate on their debt!
Parents too should strive to teach their children financial literacy. However, many parents, themselves, are not fully educated in financial matters. These parents work for money but were never taught in our schools how to have their money work for them!
Many of America’s middle class have money problems today because of a lack of financial education. A news article by the Washington Post states that 40% of Americans would have difficulty obtaining the cash to pay a $400. emergency expense.
Youths Should Have Some Basic Understanding Of Accounting
Youths should have some understanding of “basic” accounting in order to get ahead financially today. Accounting can be confusing to young people, however, to achieve wealth, this course should be a requirement in our schools. In order to invest successfully, they should have a basic knowledge of two important financial statements: the balance sheet and income statement. Young people should be able to explain the difference between an asset and a liability and also know how these two statements relate to one another. Both accounting and investing are important courses! Many individuals are struggling financially today because they were never taught these very important subjects.
Our schools do not teach us what rich people already know! The wealthy, for instance, avoid liabilities and make it a rule to acquire income-producing assets with their money! This is how many of the rich got started on their path to wealth! The middle class, on the other hand, will buy liabilities instead of assets!
It is interesting to note that a school can teach a person to be a highly educated professional in their chosen field. And, even though this person does very well in their profession, they could be financially “illiterate!” And, this same professional may later find themselves struggling financially due to their lack of financial education!
Our Students Need A Firm Financial Foundation
In conclusion, our youths should not graduate from high school, or even college, without a firm financial foundation! Financial skills are vitally important to achieve success.
Our educational system in this country has a responsibility to ensure that our youths do not leave high school and college without the necessary financial education. Young people need to be taught how to develop “smart” money habits. Financial literacy provides our youth with the necessary skills and knowledge to adequately prepare for their future.
Moreover, our adolescents should have an understanding of “passive” and “portfolio” income. This would ensure they would know how to invest as the wealthy do. In addition, our youths should be taught the best way to save, how to avoid debt, and have some basic accounting knowledge. Financial intelligence has great rewards!
