It is the dream of every student to succeed in their education to secure well-paying jobs for a more prosperous life. However, do many understand issues surrounding money management to guarantee that won’t live on cheque-to-cheque every month? Mostly no! The education system has not placed much emphasis on training students on money management. Admittedly, possessing prudent money habits differentiates poverty and wealth.
Financial literacy programs provide high school students with the necessary financial management skills. Gaining knowledge in areas such as budgeting, saving, investing, and debt management, among other skills, lays a foundation for strong money habits. Learning financial management will help learners in making informed decisions about their money, and avoid unnecessary mistakes that could expose them to lifelong financial struggles. It will also help them in deciding the most appropriate investments that could help them to create wealth.
Here are 7 benefits highlighting the importance of financial literacy in education
Students who gain access to financial literacy classes enjoy numerous benefits throughout their lives. They are capable of cruising through college without financial difficulties and transitioning the same in their careers. Financial literacy allows them to effectively manage their money, live off debts, and improve their financial health. Some of the benefits of financial literacy to high school students include:
- Students become better at making crucial financial decisions
- It allows individuals to learn the principles of money and debt management
- Helps students to create achievable financial goals
- By acquiring strong personal finance management skills, students can reduce expenses while increasing their savings
- Live a better life with less financial stress and anxiety
- Become proficient in making and following a budget
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Here are the key components that should be ingrained in financial literacy in education
- Budgeting
One of the most important aspects of financial literacy education is budgeting. Without having a proper budget, one might end up misappropriating their hard-earned money, exposing them to financial problems. Budgeting allows you to allocate your money to spending, saving, and investing based on your income.
A proper budget is essential since it guarantees you financial security and prosperity. Once high school students acquire budgeting skills, they will easily pay off all their existing debts and begin saving money and investing in viable opportunities.
- Investing
Being a successful investor requires you to possess strong skills to ensure your investment pays off. Financial education and literacy help you to learn vital investment components, guaranteeing you success. For instance, you will acquire knowledge on interest rates, risk mitigation, and diversification among others.
You will also gain strong analytical skills that will help you in making sound investment decisions based on the prevailing market conditions. Learning the essential components of investing will guarantee you a stable cash flow.
- Borrowing and debt management
As an investor or even at an individual level, it is inevitable to borrow financial resources to meet your financial obligations. Therefore, it is important to learn the aspects of credit to ensure borrowing is efficient and sustainable. Some aspects such as interest rates, time value of money, and loan structure are vital in helping you gain practical borrowing skills and manage your debts to avoid long-term financial stress.
- Taxation
High school students should be trained from an early age to understand taxation and its impact on their financial health. Financial literacy and education would help learners gain knowledge on the role of government in managing a country’s economic well-being. It will be crucial for them while investing in different businesses or securities.
In addition, learners will understand the different types of taxes and how the rates differ. For instance, employment income, investment and capital gains, rental, and inheritance incomes are taxed differently. Without financial literacy in high schools and college students might never get the chance to comprehend taxation principles. They will always rely on someone to explain their taxes to them.
- Personal financial management
From my point of view, the most important aspect of financial literacy education is personal financial management. It encompasses all the above components. Students will gain strong skills that would enable them to create a balance between the components, harnessing their financial independence. For instance, they will learn how to reduce their expenditure and debts, while increasing their savings and investments. Having sufficient knowledge in the above components grants you an in-depth knowledge of personal financial management, leading to financial independence and freedom.
Here are 4 factors explaining the importance of financial literacy in education
- It empowers the youth
Financial literacy in education is necessary for empowering youths to make informed choices when it comes to money. Like in any other subject, financial literacy allows students to acquire knowledge and skills that will help them throughout their lives. They will become more proficient in money management matters, allowing them to live a better and happy life.
- Prepare students to become more responsible adults
Training high school students in financial management skills prepare them to become more responsible adults. Unarguably, individuals who fail to acquire such skills are inclined to take up poor money habits, making it impossible for them to save enough money for investment, buying a home, or other assets. They may also become prone to irresponsible borrowing, ending up with very poor credit scores. Acquiring financial literacy skills will prepare students to become more responsible and make sound financial decisions.
- Discourage students from picking poor money habits
Lack of financial literacy skills exposes students to bad money habits such as gambling, which eventually results in poor outcomes. Besides, financial illiteracy would expose learners to becoming prone to peer influence to engage in poor financial decisions. Possessing strong personal financial management skills will discourage students from adopting or engaging in bad financial habits.
- Encourage students to set aside emergency funds
Financial literacy allows students to understand the need for setting aside an emergency fund. It is inevitable to get into difficult situations that require substantial amounts. For instance, one may lose his or her job or face a medical emergency, making it difficult to sustain one’s lifestyle. Being financially literate will help students navigate through the challenge with ease and bounce back.