Are You Financially Literate?

If not, it could cost you.

The whole point of high school and college is to set you up to find a job you enjoy. The whole point of having a job is to make enough money to support yourself, lead a hopefully happy and healthy life, and eventually retire.

Knowing how to manage your money is a basic life skill. One that’s more important than ever. In order to do this you need to know how to manage your money. In other words, you need to be financially literate.

financial literacy (noun) 1.The ability to manage your money for a lifetime of well-being.

Financial literacy is so important some Florida lawmakers are pushing to have it be a required course for high school students.

In the meantime, some organizations, like the nonprofit youth organization Junior Achievement, are offering programs to help students learn about financing, budgeting and running a business.

Yusuf Fattah, 19, a sophomore at the University of South Florida, participated in the organization’s programs during his sophomore and junior years at C. Leon King High School in Tampa. He and a small group were tasked with creating and running a real small business. They had to buy supplies, pay vendors and employees, and manage a ledger.

“It taught me a lot about personal finance. I learned about everything from budgeting to taxes,” Yusuf says. “When I got to college, I saw that a lot of the decisions we had to make in the class were completely transferable to real life. For example, I realized I couldn’t go out to the movies one weekend because I needed to save up for next semester’s textbooks. I definitely learned how to budget.”

Yusuf thinks a common misconception high school and college students have is that personal finance is hard.

His top tip to get started?

“Before you make any purchase, sit down and ask yourself, do I want it? Or do I need it? You may want a Starbucks before class, but you don’t need it. And besides, you could just go get a free coffee in the student union. It’s fine to treat yourself once in a while. But when you see that unsubstantial spending is happening every day, that’s when you need to start making tough choices.”

Yusuf Fattah, 19, sophomore at University of South Florida

Financial Literacy 101

Want to take your financial future into your own hands? Here are three things you can start doing today to take charge.

1. Create and maintain a budget. Start by tracking how much money is coming in, how much you’re spending and what you’re spending your money on. It doesn’t matter if you don’t like or aren’t good at math. Tools like Mint.com can help you keep your finances on track.

2. Understand interest. When you borrow money, whether it’s a student loan or taking out a credit card, you’ll likely be charged interest. Interest is usually calculated as a percentage of the amount of money you borrow. It also must be repaid to the lender. In 2018, the average new credit card interest rate was 17.2%. Let’s say you borrow $1,000 and plan to pay $25 a month on your balance. At that rate, it will take you 60 months (five years!) to pay off your debt, assuming you don’t make any other purchases. Instead of paying back just your original $1,000 debt, you’ll owe an additional $500 in interest, bringing your total payment up to more than $1,500. That’s 50% more than you borrowed!

3. Start saving. It’s hard to think about retirement when you haven’t even started working full time yet. But learning to save now can help you gain the skills and practice you need to make it
a lifelong habit.