We’re used to seeing algebra and social studies on a high school schedule. But a class in personal finance? Not so much.
Only 17 states require high school students to take a personal finance class, according to the Council for Economic Education.
But knowing how to manage money is essential for life after high school — especially if you plan on taking on debt to pay for college. If you’re not lucky enough to learn about personal finance from your school, here are five lessons you can master before graduation.
1. Creating and following a budget
Even if you’re not making money yet, you should understand how to track spending and saving.
“Before heading off to college you should know that a budget will be a must, since you then will have expenses of your own,” advised David Bakke, a personal finance expert at Money Crashers. “It’s a great way to understand where your money goes.”
Thanks to expense-tracking apps like Mint and Digit, it’s easy to keep an eye on your cash flow. Even if you don’t have much money as a high schooler, you can still learn the fundamentals of budgeting. Plus, you’ll start exercising self-discipline when it comes to cash.
“For high schoolers, there are a lot of important lessons worth learning, but I would have to say one of the most important is understanding the difference between needs and wants,” said Bakke.
“This concept can be tough — even for adults — but it’s absolutely crucial, because it lays the foundation for smart spending and saving habits, as well as pretty much any sort of budgeting.”
To get started, keep track of how much money you have coming in and going out. Set a goal for how much you want to spend and save on a weekly or monthly basis. If you’re having trouble with impulse shopping, try to wait 24 hours before making a purchase. You might realize that the item you thought you needed is not so important after all.
By learning this kind of self-control early, you’ll become skilled at managing money on your own.
2. Starting a savings habit
Instead of living paycheck to paycheck, recognize how important it is to set aside money each month into a savings account.
“By high school, students should have a system for routine savings in place,” said Andrew Housser, co-CEO of Freedom Debt Relief. “They should allocate a percent — 10 percent (more if possible, less if necessary) — to save from every paycheck, whether the money comes from a part-time job or allowance from parents.”
Not only should you know how to build an emergency fund, but you can also practice saving for specific goals, such as a new laptop or spring break trip.
“It’s hard to be effective with finances without goals,” said Housser. “Write them down — ranging from buying a car to buying books to having time to participate in a sport. You’ll modify these goals throughout life [but] keeping them front of mind will help guide finances in that first year in college and throughout life.”
To get started, set a goal for how much you want to save by a specific date. Write out the math so you can see how much you need to put aside each week to get there. Then, come up with some concrete ideas for how to achieve your goal.
Maybe you need to make extra money with a part-time job, or perhaps you can reduce your spending a little bit each week. By starting early, you will develop a savings habit that will help you for years to come.
3. Taking advantage of compound interest
It’s tough to think about retirement when you haven’t even started your career yet. But if you start saving early, you could build a big nest egg over time. Since the effects of compound interest only increase with time, the earlier you can start the better.
Personal finance expert Sharon Marchisello doesn’t think high school is too early to begin saving for retirement. “Begin saving for retirement as soon as you have income,” Marchisello said. “The magic of compound interest will work in your favor. The longer you give your investments to grow, the less you will have to put aside.”
For example, let’s say you set aside $1,200 per year with a 7.00% rate of return until you were 65. If you started saving at 30, you’d end up with $165,884 in your account. But if you started saving 10 years earlier? You’d have $342,899 by the time you retired.
By understanding how powerful the effects of compound interest can be, you might be more motivated to start saving ASAP. If that’s the case, you can open an IRA online with a small minimum deposit (you’ll need to add a parent’s name to the account if you’re a minor).
Once you’ve opened an account, you can set up automatic deposits that will grow over time.
4. Figuring out your financial aid package
Perhaps one of the most confusing things about a financial aid package is that everything is called an “award.” Some parts really are an award, such as scholarships and grants. But loans are also called an award, giving the impression you don’t have to pay them back.
As any grad with student loans knows, you definitely do have to pay them back — with interest.
If nothing else, mastering financial literacy for teens must include how financial aid works. It should explain the difference between scholarships, grants, federal student loans (both subsidized and unsubsidized), and college student loans.
Plus, you need to know you’re not obligated to take out all the loans you’re offered. You could choose to take out less in student loans and pay the difference with savings or income from a part-time job.
As you apply to college, take time to learn about financial aid. When your offers come in, you’ll be able to choose the one that best suits your financial situation.
5. Picking the right student loan repayment plan
Finally, anyone planning to go to college needs to learn the ins and outs of student loan repayment. Before signing on the dotted line, learn about the different repayment plans for federal loans and private loans. Plus, you should estimate how big your monthly payment will be after graduation.
“If it looks like you or your child may need to borrow for school, understand how the loan works and look for ways to control the cost,” Joe DePaulo, co-founder of College Ave Student Loans said. “Discuss interest rates with them, and how this affects the money you borrow.”
DePaulo also recommends talking about who is responsible for the debt. “It’s never too early to discuss how your family is paying for school, including who is responsible for paying back any student loans,” he said. “It can be an emotional conversation, but it’s important for students to understand how the bills for school are being paid.”
It’s all too easy to take out more than you need and end up in debt for decades. By understanding what repayment will look like, you’ll be more prepared to deal with it. Plus, you can search for ways to minimize student loans, whether by applying for scholarships or choosing a low-cost college.
Teaching financial literacy for teens
Along with math and English, financial literacy for teens should be a priority. Without understanding how to manage money, you could have trouble taking care of yourself after graduation.
Plus, you could end up with massive student loan debt and no clear sense of how to pay it back. But by learning financial lessons early, you’ll set up yourself up for success in the years to come.
Need a student loan?Here are our top student loan lenders of 2021!
|1.04% – 11.98%1||Undergraduate, Graduate, and Parents|
|1.13% – 11.23%*,2||Undergraduate, Graduate, and Parents|
|3.80% – 9.36%3||Undergraduate and Graduate|
|2.20% – 6.17%4||Undergraduate and Graduate|
|1.05% – 11.44%5||Undergraduate and Graduate|
|1.82% – 11.32%6||Undergraduate|
|N/A7||Undergraduate and Graduate|
|1.12% – 11.23%8||Undergraduate and Graduate|
|1.15% – 11.01%9||Undergraduate and Graduate|
|* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
1 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
Information advertised valid as of 7/22/2021. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
3 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. If you choose to complete an application, we will conduct a hard credit pull, which may affect your credit score. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.
4 Important Disclosures for EdvestinU.
EDvestinU is a product of the nonprofit New Hampshire Higher Education Loan Corporation (dba The NHHEAF Network) NMLS ID#1527348.
APR range and repayment rates displayed assume a $10,000 loan disbursed in two equal disbursements. APR low assumes immediate repayment and 7 year repayment. APR high assumes deferred repayment and 15 year repayment. APR’s presented include a .50% interest rate reduction for electing to have payments automatically deducted from a bank account. The interest rate reduction for authorizing our servicer to automatically deduct monthly payments from a savings or checking account will not reduce the monthly payment, but will reduce the monthly finance charge, resulting in a lower total cost of loan. All examples are provided for educational purposes and actual terms may vary based on credit history, loan amount, applicable repayment term, and chosen repayment plan and method. Please note that the interest rate on variable rate programs may increase or decrease over time. The variable rate example assumes the same standard rate for the life of the loan. The NHHEAF Network reserves the right to modify or cancel its program at any time.
Eligibility: Dependent and independent U.S. citizen students. Currently residents of Washington and California are not eligible for EDvestinU programs.
Loan Limits: Minimum loan amount of $1,000.
Repayment: Standard or graduated repayment options available during repayment; 7, 10, or 15 year term selected by the borrower.
Cosigner Release: Cosigner release allowed if an account is in current standing, after 36 months of consecutive & on-time payments with a borrower FICO >749 for EDvestinU Private Student Loans and minimum income requirement of $30,000 with no foreclosures, repossessions, wage garnishments, unpaid tax liens, unpaid judgments or other public records having an open balance exceeding $100 during the last 7 years. The borrower must not currently be involved in bankruptcy proceeding or had any bankruptcy filings during the past 10 years and cannot have any defaults on education loans.
5 Important Disclosures for Earnest.
6 Important Disclosures for Ascent Student Loans.
Ascent Student Loans Disclosures
Ascent loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: >AscentFunding.com/Ts&Cs;.
Rates are effective as of 07/01/2021 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes income-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: >AscentFunding.com/Rates.
1% Cash Back Graduation Reward subject to terms and conditions, please visit AscentFunding.com/Cashback. Cosigned Credit-Based Loan student borrowers must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs are available for the most creditworthy applicants and may require a cosigner.
7 Important Disclosures for Funding U.
Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.
8 Important Disclosures for SoFi.
UNDERGRADUATE LOANS: Fixed rates from 4.13% to 10.66% annual percentage rate (“APR”) (with autopay), variable rates from 1.12% to 11.23% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 10.90% APR (with autopay), variable rates from 1.10% to 11.34% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.08% to 10.86% APR (with autopay), variable rates from 1.05% to 11.29% APR (with autopay). PARENT LOANS: Fixed rates from 4.23% to 10.66% APR (with autopay), variable rates from 1.20% to 11.23% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 4/1/2021. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (>www.nmlsconsumeraccess.org).
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
Undergraduate Rate Disclosure: Variable interest rates range from 1.15% – 11.01% (1.15% – 10.24 APR)Fixed interest rates range from 4.18% – 11.70% (4.18% – 10.83% APR).
Graduate Rate Disclosure: Variable interest rates range from 1.89% – 10.66% (1.89% – 10.41% APR). Fixed interest rates range from 4.64% – 11.23%% (4.64% – 10.95% APR).
Business/Law Rate Disclosure: Variable interest rates range from 1.89% – 9.22% (1.89% – 8.50% APR). Fixed interest rates range from 4.38% – 10.44% (4.38% – 9.72% APR).
Medical/Dental Rate Disclosure: Variable interest rates range from 1.89% – 8.02% (1.89% – 7.72% APR). Fixed interest rates range from 4.28% – 9.24% (4.28% – 8.94% APR).
Parent Loan Rate Disclosure: Variable interest rates range from 1.97% – 7.06% (1.97% – 7.06% APR). Fixed interest rates range from 4.94% – 8.58% (4.94% – 8.58% APR).
Bar Study Rate Disclosure: Variable interest rates range from 4.44% – 9.58% (4.44% – 9.52% APR). Fixed interest rates range from 7.39% – 12.94% (7.40% – 12.83% APR).
Medical Residency Rate Disclosure: Variable interest rates range from 3.53% – 7.03% (3.53% – 6.76% APR). Fixed interest rates range from 6.99% – 10.49% (6.98% – 10.09% APR).
Variable Rate Disclosure: Variable Rates are based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of June 1, 2021, the one-month LIBOR rate is 0.09%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%.
Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.
Lowest Rate Disclosure: Lowest rates require a 5-year repayment term, immediate repayment, a graduate degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer. Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
Eligibility Criteria: Applicants must be a U.S. citizen, permanent resident, or eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For applicants who have not attained the age of majority in their state of residence, a co-signer is required. Citizens Bank reserves the right to modify eligibility criteria at any time. Citizens Bank private student loans are subject to credit qualification, completion of a loan application/Promissory Note, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens Bank participating school.
Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.