We all know that schools are supposed to teach reading, writing, math, and other essentials, but what about the ability to handle and budget money, also known as bookkeeping? With more Americans in debt now than ever, it seems to be logical that students of all ages be taught more than just who is on the money in order to make them more savvy (and more affluent) adults. Below, we have gathered a list of ten important reasons why bookkeeping skills should be taught in schools.
- Decrease all the debt – As stated above, more and more people are faced with more debt than ever, and it isn’t just the poor folks either. This includes individuals and families of all incomes who accumulate debt via house payments, student loans, finance loans, and much more. Families can be crippled by having too much debt, and students should definitely be taught how to avoid it by schools. This can easily be achieved by teaching a few simple bookkeeping skills, such as measuring income and budgeting expenses.
- Investment for everyone – Now that students know how much is coming in and being spent, what to do with that leftover income? Young people tend to be tempted to buy what they want, when they want, whether it be a shiny new toy or overpriced convertible. However, by putting away anything from $50 to $200 per month, students can find themselves racking up a hefty portfolio – even in a down market if they invest conservatively. Don’t believe me? Have a look at The College Investor and see how he does it. The site is full of useful, student friendly tips on how to invest.
- Credit card debt – They call them the plastic vampire for a reason. Credit cards are a huge way people rack up an incredible amount of debt through the lure of offers such as low APR, high spending limits, and even airline miles. Although consumers can get a “buying high” now, non-savvy students tend to run up to their maximum limit within a period of months. Worse yet, it will probably take them years to pay it all back. If students are taught how credit cards actually work, especially to include the topic of compounded interest, they will learn a truly valuable and priceless lesson.
- What is bankruptcy – Unfortunately, all students know of bankruptcy is taught by board games and daytime attorney advertisements. They rarely learn that not only does bankruptcy come with a high penalty for those filing for it, it can ruin their credit for years to come. Bad credit can be embarrassing should they ever get married, and it will hurt them whenever they go to buy a house, car, or other type of financed good.
- Foreclosure – This is a sort of bankruptcy for a home. Unlike bankruptcy where bills are settled for an agreed amount, a foreclosure means a purchaser loses their home and quite possibly all the equity they have built into it. Bookkeeping skills should be taught to students into what it takes to avoid the foreclosure of a home, including:
- The real cost of owning a home – You may have seen direct mail pieces showing how you can own your own home for as little as $750 to $1,000 per month, or some sort of equivalent. What students don’t know is that is just the cost of the principle, aka the monthly paid made directly for the home. This does not include how much money down it takes to get that pretty payment, not to mention the property taxes (which are likely to rise on a year to year basis), interest on the loan, and primary mortgage insurance (PMI). Students should also be aware of the costs of fixing items around the home, especially big ticket items like the roof or foundation.
- The cost of a car – Let’s face it: students are kids and are going to pick a car as a child would, ie by looks alone rather than the actual cost of ownership. Sports cars may be pretty, but they often have poor mileage, meaning the cost to fill up will be higher, not to mention that cars with low mileage tend to fall apart sooner. In addition, no matter how well a student does in driver’s ed, a sports car is more difficult to drive, making it easier to wreck.
- Lease versus buy – Sure the monthly payments are cheaper when you lease a car, but is it worth the savings? In a word: no. The meager savings of a lease over a buy never even come close to what someone will save by the time they buy the car making payments. Even on a $15,000 car, the lease for five years may be $5,000 cheaper than what it would cost to buy. However, once the car is paid off, the owner never has to make another payment again. They could even sell the car after five years and make that $5,000 back and then some
- College – This major milestone should be discussed far before high school. Teaching kids about the pro’s and con’s of higher education can help them decide if it is right for them. Those who worry they may not be ready for the cost of a college education should also be taught about financial aid.
- Picking Stocks – Older children can take on this learning challenge by simply picking stocks based on performance indicators. Teachers can have the kids invest an imaginary amount of money in a stock or mutual fund, then check it on a regular basis to see how much it rose and fell. After a dedicated period of time, students with the highest yield can be rewarded in various ways.
- How and why we pay taxes – No matter what students grow up to be, they will pay taxes on just about every transaction from their pay check to buying groceries. It is a good idea to have the students fill out actual 1040 forms, from EZ to the long one, to see how much they would pay in taxes, social security, and the like from their intended profession.
- Salary – Most students know what it is, but do they know it can be negotiated for before they are ever hired? Tech smart students will probably already know about average salary sites, so they can easily be taught that they can use them when they are offered a job.
- Saving money – Separate from investing, this is an essential lesson, as all adults need to have some form of liquid cash ready to go in an emergency. Teaching kids the ups and downs of options such as interest earning checking accounts will give them a good foundation for the future.
- Retirement – It may sound too far off for students to take seriously, but having a serious retirement plan is never a bad idea. Not only is retirement a physical necessity when seniors are no longer able to work, it should be a fun, relaxing time.
- Budget planning – No matter what age the children are, as long as they can count, they can develop a budget. This includes having teachers and parents let children use the tech on their phones or laptop to develop a budget for their income (such as odd jobs, allowance, etc.) and expenses for the items they want.
Houston Bookkeeping
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