12 Money Lessons That Need To Be Taught In Schools

By Todd Kunsman

Financial Independence

Published on

Updated on

Unfortunately, the education system in the United States tends to gloss over finances and other important money lessons. 

Although I have been out of high school for just over a decade (where did the time go!?), more than 90% of what I know about money was self-taught.

I was also fortunate enough to have parents who were financially savvy and were able to lay some of the basic groundwork when it comes to managing money.

But many parents do not have much know-how, nor are kids set up to be financially successful. 

While financial literacy continues to be a hot topic and some schools are implementing some education around money, we as a nation are still slacking.

Below I’ll explore why learning about money is important, why financial education might not be taught in schools, and the important money lessons that could set up our children for a brighter future.

Why Is It Important to Learn About Money?

Much of what each of us knows about money comes from personal experiences and the lessons of life. For example, by the time we learn about the goldmine that is compound interest, many of us feel it’s too late to make the gains. 

What’s even crazier is that sometimes high schools do offer basic finance courses; they just don’t offer much genuine help or even require students to take a class or two. 

It’s important to learn about money in school so that we don’t have to learn the hard way: in life. US consumer debt currently sits at around $13.83 trillion, and individually this can equate to hundreds of thousands in student and pay-day loans. 

While debt is not all bad, it can cripple families and leave a lasting impact for generations; and yet individuals are still left to their own devices to find out more about bankruptcy and the impact of interest rates. 

Not only that, but the information out there can sometimes be dubious. Misinformation on the internet is rife and even as recently as the last election we have seen misreporting and false information going viral. 

With the financial services industry being so highly regulated, this can lead to a gap between the credibility of the advice we each have access to.  

Learning about money in schools can enable students to build good money habits from early in their lives. 

For some, this is vital in order to escape their familial financial dependency and gain financial security.

It’s no secret that mental health issues have been on the rise (even before the carnage of 2020), with almost one fifth of the population experiencing mental illness. Could this also be linked to our relationship with money? 

Why is financial education not taught in schools?

Unfortunately, financial education is not at the core of the curriculum. 

It is an afterthought compared to traditional subjects such as English, Math and Science, although I would argue that it is no less important. How many time have you recounted to yourself; 

“I wish I learned this in school!”

Educational decisions are different from state to state, so standardizing finances into schools is certainly challenging. But, times are changing. 

Some states are including personal finances into their curriculums which will hopefully become the norm in the future.

This would increase overall access to financial education and could change our overall behavior towards money. 

Money Lessons That Schools Should Be Teaching

Most of these money lessons were ones I either learned from my parents over time or self-taught by reading various personal finance books.

Regardless, these are important concepts and lessons that could teach the value of money much earlier. 

Naturally, middle school and high school age students might find these concepts boring (I know in my teens I would not have been excited), but this can lay the foundation to help students become more prepared later on. 

1. How Compound Interest Works 

The sooner you learn about compound interest, the more your money can grow! Where simple interest allows you to earn based on the principal; compound interest will allow you to earn on the principal and any non-withdrawn interest. 

For example, let’s say you invest $1,000 into a bank account with 5% annual compound interest. After one year, your account will be worth $1,050. If you do not withdraw the $50 interest accrued, you are then able to earn 5% on the new figure of $1,050. This means that after two years, your account will be worth $1,102.50. 

Let’s compare this to a simple interest bank account with the same rate of 5% interest across the span of 10 years.

As you can see from the table below, you could be missing out on over $128 after 10 years by opting for a simple interest account.

In some cases, it may even be worth opting for a lower interest compound bank account than a simple interest account with higher interest rates. This is because in the long term, compounding always wins. 

Simple InterestCompound Interest
Initial Deposit: $1000Initial Deposit: $1000
After year 1: $1050After year 1: $1050
After year 2: $1100After year 2: $1102.50
After year 5:$1250After year 5: $1276.28
After year 10: $1500After year 10: $1628.89

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it. – Albert Einstein

2. Building Good Credit Early

Having responsible credit usage while you’re young can put you in strong stead for a good – excellent credit score. This might open the door to better mortgage rates, lower interests on loans and credit cards, and other financial benefits. 

But building your credit score goes beyond just being smart with credit cards. So how can you build good credit early? 

  • By making repayments consistently and on-time (this applies to loans, credit card usage, and general bills)
  • Having a varied credit usage (for example a mix of credit cards, student loans, phone bill etc)
  • By opening credit lines as early as possible as the longer your history, the better your score
  • Don’t apply for multiple lines of credit at once, as this could be a red flag on your report
Related: You can easily track and get recommendations about your credit score by using Credit Karma. The platform is completely free to use and does not impact your credit score when you check your profile. Sign-up for Credit Karma here.

3. Basics of A Good Budget System 

Budgeting is one of the most important things you can do to take control of your money and build a financial plan for the future. This is especially true as you first are getting started with your finances.

There are a number of ways you can create a budget, but the crucial step is ensuring you are able to stick to it.

When creating financial goals, a budget should work with your lifestyle to build upon wealth and stop you from wasting money unintentionally. 

To start with budgeting, it’s a good idea to calculate your monthly income, then your monthly expenses. These are the outgoings that don’t particularly change from month to month; your rent or mortgage, housing bills, car insurance etc.

Add your less predictable variable expenses to this, then simply allocate your income realistically to each portion of the expenses and track your progress. 

4. The Impact of and Dangers of Debt 

Not only can debt harm your financial health, but it may also impact on your mental health and relationships, causing financial stress and anxiety.

By delaying the effects of payment; debt can facilitate the instant gratification feeling we get while spending which sometimes belittles the cost and true value of the purchase. 

Long term debt can affect your eligibility for credit, including certain mortgage products and credit cards which could keep you involved with the debt cycle. It also costs money to be in debt, as interest rates add to your bills and keep you from achieving your financial goals. 

5. Concept of Paying Yourself First

The idea of paying yourself first allows you to make inroads into building wealth before your money goes out towards bills or spending. It makes saving money easier by automatically dedicating a set amount towards funds you can use in retirement or later life.

By prioritizing your own savings, the pay yourself first method can allow you to accrue a good emergency fund and change the way you look at finances.

Instead of controlling your life, this method helps you understand that money exists to facilitate the lifestyle you want to lead. 

First, you’ll receive your income. Then, you’ll add to your savings accounts; IRAs, 401ks, emergency funds etc. Next, put away your income tax — I’d recommend saving at least 30% if you can.

It might sound like overkill; but wouldn’t you rather have a leftover sum of money than be scraping the bottom of the barrel when tax season comes around? Next, transfer your monthly living expenses; then finally you’ll be left with the “spending money”. 

6. Understand How To Invest Wisely

It can feel great having enough money left over from your living expenses to start investing. But without understanding the basics of investing, the road can be long and confusing.

There are a number of different types of investments available, each with various levels of risk and return: 

  • Stock market
  • Index Funds
  • Retirement Accounts
  • Alternative Investments (from real estate to collectibles to art)

One of the most common recommendations by financial services professionals is to spread your wealth.

Because each investment carries a level of risk, this means that if one of your choices loses money or goes bust, you’ll likely still have a few other investment channels open.

It might also be a good idea to consistently review your portfolio and leverage tax-advantaged accounts in order to make the most of your income. We’ve got a brilliant guide on How to Invest Wisely for beginners if you’d like to read more about Investing. 

7. Credit Cards and How to Use Them Properly

Without much research, a credit card could look like totally free money to a teenager. Before you know it, irresponsible credit card usage can mean your debt is spiraling out of control.

As an introduction to credit, you might be best off looking for a prepaid credit card. This should ensure that you can better control your budget while also building up good credit history for later.

This type of credit card does not carry the risk of getting overdrawn, because you fund it prior to usage. However, it still requires an application and credit check; so might be a safer introduction to credit cards. 

If you opt for a traditional credit card, you might be eligible for certain rewards perks such as free airline miles. Plus, this offers you more flexibility in terms of cash flow from paycheck to paycheck living.

Just ensure that you always pay back credit card balances on time and in full; as well as knowing your limits. 

8. How to Read Bank Statements

Although it sounds slightly tenuous, reading bank statements might not actually be as simple as they seem.

Most banks send out monthly bank statements to their customers and some may also provide the option for digital copies. So what bank statement information should you be focused on? 

  • Account summary: this is the opening and closing balance for the statement period and any transactions which occurred
  • Interest: this shows the money your account accrued in interest over the statement period
  • Fees: this section will show any bills or deductions your account has been exposed to over the statement period
  • It’s also good to double check your personal information on the bank statement since errors on here can lead to much bigger financial problems later on

Why is it important to be able to read a bank statement? 

You should have the ability to reconcile your bank statement with your own records, receipts and memories of purchases. Not only does this ensure you can stay on track with any budgeting; but also means you’ll be able to spot fraudulent activity as soon as possible. 

9. Buying A House and Mortgages

What many teenagers don’t realize, is that the costs of buying a house don’t stop at the building itself. From realtors fees to taxes; you’re going to need thousands of dollars more than the deposit price of your new property.

Mortgage eligibility starts with good credit. There are a range of mortgage options, and the better your credit; the more choices you will have available.

But buying a home, understand the loan types, and knowing all the expenses are money lessons that are not taught in school. It can be daunting to purchasing your first home, so why aren’t we better preparing everyone in schools?

10. Introduction to Taxes and How they Work

Tax is a compulsory monetary contribution to state revenue; usually calculated on a means tested basis. This means that once you begin working; a proportion of your income will return back to the government each year to contribute towards funding defence, medicare and social benefits such as food stamps or disability bursaries. 

It’s likely you will be taxed on a number of different areas; from your income to the sales taxes commonly seen in the grocery store.

Each year, you’ll file your taxes with the government and declare the taxes owed. It’s therefore a good idea to save a portion of your income each month so that you have enough to pay when the deadline arrives. 

While taxes can get complicated, it’s important for everyone to understand the basics of taxes and maximizing your tax burden.

11. Importance of Living Within Your Means

It’s so hard these days to scroll through your favorite social media app and try NOT to compare yourself and your lifestyle to the people you follow, especially if your feed is full of celebrities.

Even without social media, comparison can be hard to escape. But we need to remember that these online spaces are curated, not realistic.

Often, we don’t see what things are really like behind the scenes. 

Living within your means is making the most of the resources you have available, but not going beyond that.

It’s about saving up over time for large purchases instead of splurging with your credit card and balancing your expenses alongside your income. This creates a sustainable lifestyle and lowers your risk of experiencing financial difficulties. 

12. How to Talk About Money With Others

Talking about money can be a bit of a sticky subject, some find it awkward while others like to brag.

Being comfortable to talk about finances leads to transparency and might aid with better overall management. It also might remove the guilt that some of us feel about spending! 

That being said, it can feel like a stressful and taboo experience. If you’re looking to start a conversation about money with a friend or family member, it’s best to find a private time to chat.

You might need to discuss estate planning with older individuals or chat to a partner about how their credit rating will affect you. Of course, don’t be afraid to ask for help if you’re struggling to manage your money! 

How Do I Learn the Value of Money?

If your education system never taught you some of the above money lessons, but you are ready to learn the value of money — you have some options!

No matter your age, taking the first step to learning and improving your finances is a commendable step. So what can you do to learn the value of money and become financially savvy?

  • Dedicate time each week to reading about finances, money, and investing. There are plenty of great books that anyone at any knowledge level can learn firm The trick is staying consistent each week!
  • Spend time on your finances each week as well. Often, it’s easy to get lazy and not pay much attention to your spending, budget, bills, and income. But spend even an hour a week looking at the numbers, you might be surprised what you find.
  • Take an adult financial literacy course. If you really have no clue where to start or facing tons of debt, an educational course for adults might be perfect for you. There are so many learning opportunities and courses out there. Check out the Financial Literacy Program for Adults, as an example.
  • Learn from a financial mentor. Now, I caution blindly taking advance or investing tips from someone without doing your own research. However, if you know someone who is a master with money, ask if they can teach you a thing or two. Take notes, absorb their knowledge, and see how it can apply to your own finances.