Was I the only one who learned how to balance a checkbook in elementary school? Most likely. Do I remember any of that information today? NO. As with a majority of things in school, people will often say “When am I going to use this in real life?” or the direct approach “I won’t need this information after I graduate”. When it comes to a person pursuing a career in the chemistry field, it’s not exactly beneficial for them to memorize the events that take place in each part of The Canterbury Tales. But yet, they need to pass that class to graduate. Things like ensuring financial stability should be mandatory classes for those in 11th and 12th grade who will be soon in the real world one way or another. And, with the knowledge gained from these classes students will feel confident about their financial futures. Now being that we all aren’t business or accounting majors we have to learn about these things on our own. Top priority subjects in the finance world include Credit Scores, Investments/Savings/401ks and Stocks and Loans. Let’s look into each one and educate ourselves!
What is a credit score exactly? We’ve all see the commercials and ads for how easy it is to check it but what do you know what it’s purpose is? Investopedia.com defines it as “A statistical number that evaluates a consumer’s creditworthiness and is based on credit history.” Basically, this means your credit score determines how trustworthy you are when it comes to repaying a loan. Naturally, a higher score means a higher trustworthiness level. Lenders look at this number and use it to determine if you will be approved or denied for the loan. To keep the score high all you have to do is consistently pay bills on time and keep your debt low. Investopedia.com also says “A person’s credit score may also determine the size of an initial deposit required to obtain a cell phone, cable service or utilities, or to rent an apartment.” Majority of people need all of these things once they’re on their own and thus places the importance of knowing what your score is and how to manage it before it’s importance is mandatory to your life.
When it comes to investments, one has to think of the long term – not the present. Investing in something guarantees you will have money in the future because whatever invested in will have gained a profit/risen in value. You can invest in something in several different ways: You can buy collectible items such as trading cards or POP figures and wait 15-20 years for them all to accumulate in value and then sell your entire collection for one price. Or, you can buy multiple cases of water in the winter and wait for the summer and sell them on the street and make a guarantee profit based on demand. The latter is generally known as “flipping”. Also, you can invest in someone’s business by buying a stake of their company. A stake is a percentage of the company that you own and in turn make a profit based on the percentage size of your stake. However, if the business does not do well you will end up losing money.
Saving money is something we all are familiar with and told to do. It can be very hard when there are so many things that you want right now though. But, when you save money you can get things you want that cost more – like a vacation. And, saving money is not always strictly putting money aside for the future. It can be using discounts, coupons or simply not eating out too much.. Of course, putting money to the side in a savings account is always a wise choice, especially when you do it consistently. This can be done by putting some of your paycheck into that account every other paycheck or even every paycheck. When it comes to cash and coins, instead of saying “keep the change”, pocket the bills and start putting the coins in a jar. This may seem old fashioned but at the end of the year who knows how much you’ll have?
A 401 K Plan is something you hear adults mention and joke about as a child but never understand. As you get older you still hear it regularly and see it when applying for jobs. But what is it exactly? Investopedia.com defines it as “a qualified employer-sponsored retirement plan that eligible employees may make salary-deferral contributions to on a post-tax and/or pre tax basis.” This basically means you are saving money for your retirement and this money comes directly out your paycheck each time.no, you have no access to this money until you are actually retired. Also, as with most things involving money taxes do play a role. Originally taxes would not be taken out when deposits were made into the plan, only when withdrawals were made from it. However in 2006 the Roth 401k was established which reversed when the taxes were taken out. This version of the plan is available for eligible participants at over half of the companies that offer a 401K Plan. 401K Plans are just like investing and saving – to truly appreciate them you must thing in the long term. Retirement is a long way away for us but we still must keep it in mind. The 401K will ensure when we’re grandparents we won’t have our family members worrying about our finances and we the option to give our grandkids $50 instead of $5 when they get all A’s.
Stocks & Loans
If you’ve listened to rap at any point in the past 15 years you’ve more than likely heard a punchline that mentions something “dropping like the NASDAQ” And, more than likely when you first heard it you didn’t understand it then once you did you began to get tired of it. Anyway, NASDAQ itself stands for National Association of Securities Dealers Automated Quotations and it’s literally the stock market itself – well one of them. It’s the second largest one in the world trailing the New York Stock Exchange. A stock is defined as “a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings.” by investopedia.com. Stocks can be either common or preferred. When you hold common stock you can vote in shareholders meetings and receive dividends. Preferred common stockholders do not vote in these meetings however they earn more of a profit. They also hold priority in the unfortunate case of a company going bankrupt. Actually buying stock is a multi-step process and not one of those “walk away and forget about it and just let the money pile up” things simply because you can also lose money in the Stock Market.You can learn about the process here
If you’re a student or have ever purchased a big ticket item than you are already familiar with loans. Loans are amounts of money given to you because you need the money – and they must be paid back. On the surface level, loans sound great because you spend less of your own money at the beginning. However, as interest adds up you’ll end up paying more and more. The percent of interest however depends on where you get the loan. Taking out multiple loans at once is not encouraged either as this is how you can end up in debt which will affect your credit score which is what we began this whole discussion with. Looks like we’ve come full circle!
In closing, I hope these quick facts taught you something or encouraged you to do more research on the topics I mentioned. As I said earlier, such information should be mandatory to learn while in high school in turn allowing college courses can enhance it. And, while in college or even as you reach the end of high school these concepts will soon become a part of your life both inside and outside the classroom. Some of us get this information from our families or members of our church and some don’t at all. The latter is why it’s so important to have it taught to students in high school.