Personal finance is a topic that's rarely addressed in a school setting. It's something that young people often learn from their parents when the time is right, or even just through experience. In fact, only four states have made it mandatory for high-schoolers to take a semester-long personal finance class, and when it's optional, high schoolers tend to choose other classes, like AP classes, that seem more important to them at the time. But the reality is that money makes the world go round, and learning about it at a young age can help shape teens into financially responsible and successful adults. That being said, not all teachers are financial experts, and certainly, don't have time to go into the intricacies of personal banking; but teachers most definitely have real-world experience with finance and can probably teach a crash course in the basics. Here's how to do it:
Start with Saving
Learning how to pay yourself first is probably the most fundamental thing when it comes to personal banking. Teens need to know that while making money is very literally rewarding, spending it all at once can be detrimental. As a teacher, you can provide scenarios of people making money, spending it all, and then running into some expensive accident later on. Putting students in role-play situations where they have to solve money problems may help to drive the point home. You can even set up an allowance/rewards system in class (with fake money of course) and hold the students responsible to save at least 10% of their earnings – an online calculator can help with this.
Students need to know from the start that credit is borrowed money. Teenagers tend to make a lot of mistakes with credit cards – in fact, only 9% of college students pay their credit cards on time. Teach your students that credit cards are a good financial option, but only if used responsibly, and not just a substitute for real money. Show your students that along with a credit card comes a grade, and if you pay on time, you get a good grade. But if you get into the habit of paying it late, your credit score will drop, which can lessen your chances of leasing an apartment, getting an auto loan, and buying a house. You can show students an example receipt of expensive items bought with a credit card, and tell them how much time they have to pay it off on an average salary. Have them work in groups to brainstorm ways to pay the bill on time, whether it's going out to eat less that month, or postponing the purchase of certain items until the next month.
Get Busy with the Budget
Teens have to grasp that money is finite, and most of the time people are operating on limited budgets. Along with the savings project, you can have them create a budget for the year, (as if they were an independent adult) including rent, groceries, utility bills, going out, etc. They can research all of this online and talk to their parents or older siblings about their personal budgets. Having these real conversations may help them understand the reality of finance and the importance of planning and organizing it. Teachers can also implement an online budget simulation tool, such as Budget Challenge, a gamified competition with real-world money challenges.
Teach them Taxes
Teens don't often realize that when people earn a salary, they don't receive all the money they earned because of taxes. A percentage goes to the government to pay for public necessities like roads, schools, healthcare programs, etc. You can display an example pay stub that lays out exactly how a paycheck is dispersed – gross pay, federal taxes, state taxes, and social security and Medicare taxes. As a group project, you can give each group a program that income tax pays for. They can research this topic and explain to the class why our taxes need to go to such programs and also share their opinions – whether they agree or disagree and why, which may even lead to a great class debate.
Drive it Home Digitally
The best thing about banking nowadays is how easy it is thanks to technology. Almost all banks have mobile apps to help people keep track of their finances anywhere, anytime. And there are lots of online tools that actually teach teens about banking, such as Practical Money Skills, which helps students and teachers with the basics of finance, and OnGuardOnline, which shows teens how to keep their personal banking information safe and secure online. Teens should know that technology is constantly changing the way banks work. Staying informed and choosing a bank that fits their personal necessities will make their lives much easier in the long run.