(State of Financial Education: Many money problems Americans face could have been avoided if financial literacy had been taught earlier in school. This knowledge helps create a foundation for students to learn quickly. strong financial habits and avoid many mistakes that lead to financial struggles throughout their lives. This story is one in a series examining the current landscape of financial education in this country.)
As a child growing up in a Latin American community in East Palo Alto, Calif., “The only thing we knew about money is that it’s always hard to be low income.” said Karina Macias, 26.
One lesson her parents tried to teach her is that it’s better to keep a revolving balance on your credit card and never pay it off in full, she recalls – “that’s what I learned from. my parents”.
When Macias reached high school, she took a personal finance course and learned a better way to handle high interest debt.
Now, as an adult, “I’m very responsible with my credit cards,” she says. (Having a big month-to-month balance generates extremely high interest and can lower your credit score.)
Tim Ranzetta has taught personal finance classes to children across the country and from all income groups.
“The lack of knowledge is staggering,” he said.
And yet money is still a taboo subject, said Ranzetta, CEO and co-founder of Next Gen Personal Finance, a nonprofit focused on financial education for middle and high school students.
But in 2021, the stakes are too high, he said.
“Coming out of the pandemic, you realize that a lot of people are being left behind,” Ranzetta said. “This education is necessary.”
When Preenon Huq was in high school, his economics teacher covered some personal finance in the classroom. A lesson in compound interest stood out, he said.
“I wanted to buy a car and my teacher told us about putting away $ 200 at 18 and how it could become a million dollars – it was a light bulb moment.”
As the son of immigrant parents, Huq, now 24, said they don’t talk about money at home and his parents never splurge. Still, Huq began to diligently save so that he could afford a car himself.
At 19, he opened a Roth individual retirement account and maximized contributions. (This year, you can contribute up to $ 6,000 to a Traditional or Roth IRA.)
Later, when Huq became an accountant, he also maximized his employer sponsored 401 (k) plan (you can carry up to $ 19,500 into these work plans).
Now he has saved about $ 100,000 for retirement between the two accounts.
Huq also works in two side jobs to earn extra cash, including a part-time position at Best Buy and as a wedding DJ during the summer months.
He bought this car – a used 2005 Toyota 4Runner – and then, last year, a 1993 Mazda Miata. In October, he bought his parents’ house in Plymouth, Minnesota.
After years of saving money, Preenon Huq bought his parents’ house in Plymouth, Minnesota at the age of 24.
Source: Preenon Huq
Numerous studies show that there is a strong link between financial literacy and financial well-being.
Students who need to take personal finance courses from an early age are more likely to benefit from lower-cost loans and grants to pay for university education and less likely to rely on private loans or high-interest credit cards, according to research by Christiana Stoddard and Carly Urban for the National Endowment for Financial Education. (Students are also even more likely to enroll in college when they are aware of the financial resources available to help them pay for it.)
“Our results show that high school financial education graduation requirements can have a significant impact on key student financial behaviors,” the authors said in the report.
Among adults, those with better financial literacy find it easier to make ends meet in a normal month, are more likely to pay off their loan in full and on time, and less likely to be forced into debt or debt. to be considered financially fragile.
They are also more likely to save and plan for retirement, according to a report by the TIAA Institute based on research conducted over several years.
“There is a causal link with literacy and financial outcomes,” said Gary Mottola, director of research at the Financial Industry Regulatory Authority Foundation.
Teaching children about money should be a lifelong lesson.
“Financial education is not a one-size-fits-all business, just like math is not a one-time business,” Mottola said. “A more constant drumbeat of financial education is probably much more effective.”
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