Mastering basic personal finance skills is crucial to a high school graduate and can help secure a financially stable future. Financial skills are not usually included in a student’s formal education, so many graduates know very little about personal finance. Here are five basic financial skills every high school graduate needs to know.
Budgeting
A high graduate needs to know how to create a budget. It is one of the most basic financial skills, yet only a few graduates can create a detailed budget. A budget involves a plan on how to spend money that takes into consideration your income and expenses. It is essential in thriving financially because if you don’t know how much you can spend safely monthly, you can easily go into debt.
Graduates who know how to set up a realistic budget can plan for the future and meet long-term saving goals like retirement. It also enables you to live within your means by matching income to expenses. Budgeting skills can help you to separate wants from needs and avoid financial hardships in life.
Investing
Investing seems daunting if you lack a basic understanding of how the stock market works and how to choose and invest in stocks. Learning basic investing principles can make a huge difference in handling money in college and as an adult. Investing will allow you to grow your savings into real wealth that can change your lifestyle.
Investment principles such as diversification, asset allocation, and rebalancing will help you state your investment career early and earn the freedom to pursue other interests. You will be able to assess what kind of investment to get into and manage your portfolio according to trends and the investments’ performance.
Bank Account Basics
It is important to know checking and savings accounts. Some graduates do not even have bank accounts, which limits their access to affordable financial services. A checking account is vital for your financial success as it helps you to control your money. It is free and easy-to-use, but poor management can lead to high-cost overdraft fees.
Another basic banking skill is balancing a checkbook. Balancing your checkbook ensures that your monthly statement balance matches the balance in your checkbook. This involves monitoring deposits and withdrawals and reconciling entries in the register with the same transaction in your bank statement. This has been made easier with online financial tools available today, but it is still a must-have financial skill.
Managing credit cards and debt is important as it prevents you from accruing huge amounts of debt. It will help manage your spending and understanding how revolving credit works. Paying full balances or making early payments can help you save on interest. It is equally important to build credit and increase your credit score.
Having a good credit score can help you qualify for a lower interest on a mortgage or rent an apartment or pay less for car insurance.
Long-Term Financial Planning
Graduates need to understand the importance of a long-term financial plan. It entails setting financial goals, prioritizing them, and developing a step-by-step plan to meet them. This skill will lay the foundation for a more financially secure future.
Basic Savings Strategies
Learning to save for the future or emergencies is mandatory for everyone. Living from paycheck to paycheck without a cushion can lead to a financial crisis. Financial experts advise on maintaining an emergency fund for at least three months of living expenses. The 50/30/20 saving method is a good strategy that accounts for 50% of income for basic amenities, 30% for wants, and 20$ for savings. Making saving a habit will reap fruitful financial results in the future.
