6 Finance Lessons They Should Teach You in School
The national curriculum requires children aged 14-16 to be taught about savings and investments, insurance, pensions and mortgages.
But new research from The London Institute of Banking and Finance (LIBF) shows that 58 per cent of 15 to 18-year-olds didn’t receive any form of financial education, presenting a lack of awareness when it comes to financial assistance.
Deborah Vickers, personal finance expert at moneyguru.com said,
“A worrying number of young people have a limited understanding of personal finance and are even taking out credit cards or loans without really understanding the consequences, which can cause problems further down the line. Learning to be responsible with money and being able to budget are key life skills that will stand you in good stead for the rest of your life. We’ve highlighted six financial lessons we think everyone should know. You’re never too old to learn a few new skills, and they could even save you a penny or two.”
Starting your pension early
The retirement age continues to rise, and the current crop of students are likely to face longer working lives. Pensions are a real taboo discussion amongst teenagers, but it’s something we should be thinking about pretty early on in life. Starting to think about your pension early in your career could allow you to reap the rewards of a more financially stable retirement. It may even give you the option of retiring a little earlier.
The art of budgeting
Financial management is a sought-after skill in many industries, but basic budgeting essentials are often overlooked in the classroom. Learning to budget at any age is good for your career and personal life. And the majority of jobs will see budgeting skills as a big win. Developing an appreciation for financial responsibility is a trait of good business ethics. Incorporating this lesson during school years will draw a skill and understanding of the real value of money.
Mounting debt is a big issue, and understanding how to manage your personal finances from a young age could stop bad habits forming later down the line. Understanding APR (Annual Percentage Rate) would be a good place to start and can help stop you borrowing more than you can afford. APR is the interest rate for a whole year – it represents how much interest you’ll be charged annually. You can use this figure to find the best loan for you. For example, a loan with 15% APR is more expensive than one with 10%.
Why your credit report is important
The significance of a credit report has a ripple effect on what you can do in later life, especially when buying property or big-ticket items like a new car or an engagement ring. Did you know that looking at your credit report is much more important than your credit score, which is simply one aspect of your credit rating? Banks check your credit report before approving you for credit cards and loans, including a mortgage or car loan. It might even come up during the job application process.
Check your credit report regularly and remember that every credit application you make is recorded on your credit file, whether it’s successful or not. Take a step back for a while, and don’t be tempted to keep on applying. Making a flurry of applications for credit might make lenders think you’re in financial difficulty.
How to invest
‘Investment’ sounds like a scary word, but there are many easy ways to invest, even when you have a small amount in the pot, to begin with. Micro-investing – the act of saving very small amounts of money regularly – is a great way to make investing manageable. Start off with the simple money jar approach, put away £10 a week, and watch your savings grow.
If you’re committed to this approach, then try putting this money into a savings account that offers interest on your total amount. If you leave it, you’ll rack up some serious pennies. There are many online and app-based platforms like Moneybox, which can make it easier than ever to get your finances off the ground.
How to choose a mortgage
With house prices skyrocketing it’s only natural to feel disheartened and left wondering, ‘Will I ever afford my own house?’. The key to not falling knee-deep in debt is to go for a house or mortgage you can afford monthly. Lenders will assess what level of monthly payments you can afford, after taking into account various personal and living expenses as well as your income. This is called an ‘affordability assessment’, and it’s better to be honest to avoid financial worries further down the line. Take into consideration your future goals – you need to ensure you can still pay your mortgage during big life changes such redundancy, having a baby, or taking a career break. Do your research – there’s a house waiting for you and your budget somewhere.
Written by Robert Bester
Published on 8th October 2018