five basic personal finance lessons every high school student should learn

Posted : July 31, 2013
Last Updated : August 10, 2022

five basic personal finance lessons every high school student should learn

Learning about the basics of financial management at an early age will help ensure that you will be more responsible with money later in life. Here are five personal finance lessons that you should learn as a high school student.

How to create a budget.

To be fiscally responsible now and in the future, you should practice creating and sticking to a monthly budget. Making a budget will help you:

  • Itemize and manage your income, expenses, and savings.
  • Recognize how you spend your money.
  • Save for unforeseen expenses or changes in income.
  • Make decisions about your money both today and as your circumstances change over time.

In order to create a budget, you will need to identify your sources of income and determine your fixed and variable expenses. Fixed expenses are costs that don’t change from month to month, such as a car payment. Variable expenses will vary from month to month, such as entertainment or snack costs. Below is a sample 4-week budget for a high school student.

Description Income (+) Expense (-) $ Available
Part-time job $350.00   $350.00
Allowance from parents $20.00   $370.00
College fund   $25.00 $345.00
Cell phone bill   $50.00 $295.00
Snack money   $30.00 $265.00
Savings for a used car   $50.00 $215.00
Entertainment   $50.00 $165.00

To be financially sound, it is crucial to spend less than you earn. If your expenses exceed income, then you will need to identify ways to adjust your budget by reducing your expenses or increasing your income. For more information about creating a budget, read Creating a College Budget.

The importance of saving.

As a high school student, you may not yet realize the value of saving your money. If you have enough money to pay for your expenses, why should you worry about putting any money aside each month? The answer is because you never know what the future holds.

Having money in savings will give you financial security in case of an emergency or major expenses. As a high school student, it's wise to set aside some money for unexpected expenses like car trouble or a broken phone, as well as planned costs like school trips.

Once you graduate and begin your career, understanding how to save money can prepare you for other unexpected expenses. Setting aside money regularly will also help you meet your short and long-term goals (i.e. college tuition, expensive vacation, comfortable retirement, etc.).

For more information about saving your money, read Saving For Your Future: What To Do With Your Money Once You Get a Steady Income.

Realities of credit cards.

Due to credit card legislations, lenders cannot issue a credit card to you if you are younger than 21 unless you can prove that you can afford payments or you have an adult to co-sign. However, the earlier you learn about the realities of credit cards, the better off you will be.

Obtaining a credit card has some advantages. If used wisely, it can help you build a good credit score and give you a sense of financial security in cases where you can't immediately access your emergency savings.

Obtaining a credit card also has some disadvantages if it isn’t used wisely. These pitfalls can include paying high finance charges and accumulating too much debt.

The most important lesson to learn about having a credit card is to pay off the balance each month by the due date. If you follow this rule, you can reap the benefit of building a good credit score and avoid the pitfalls of accruing too much debt, finance charges, and late payment fees.

For more information about credit cards, read Avoiding Credit Card Woes.

The time value of money.

This is an important concept to learn as a high school student because time is on your side. The time value of money refers to the relationship among time, money, and rate of interest.

It means that if money can be invested to earn a return, then the same amount of money is worth more today than at any point in the future. For example, if you put $100 into a savings account today that pays 5% interest a year, in one year you will have $105 because of earned interest. The key points to take away from this concept are:

  • Begin saving/investing your money as soon as possible so it has more time to accrue interest.
  • Save/invest as much as possible as your current budget allows.
  • Opt for saving/investing avenues that offer higher rates of interest.

The worth of being frugal.

As a high school student, you are bombarded with ads about the latest technology and fashion on a daily basis. While it may be tempting to succumb to those ads and purchase the latest and greatest, you must learn how to live within your means and understand the difference between wants and needs if you want to be financially stable.

Learning how to make the most of what you have and how to get a good value on items that you do purchase will only yield financial benefits for your future.

The earlier you learn about personal finance management, the better prepared you will be in your future endeavors. For more information about financial literacy, contact your high school counselor or financial advisor.

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