Along with their first high school experiences, Connecticut’s class of 2027 will also be the first to have a personal financial management course as part of their required learning.
Financial decisions made as a young adult can have a long-term impact. That’s why Gov. Ned Lamont signed legislation in July requiring high school students to complete training to ensure basic knowledge prior to graduation.
Long before this requirement, UConn Extension has offered a variety of personal financial training to help youth and adults understand the ramifications of their financial choices. In collaboration with the UConn Digital Experience Group, UConn Extension also created an online game that lets the player make financial decisions about employment, housing, and regular expenses to up their financial knowledge and performance in a simulated setting.
If you can’t make it to a UConn Extension workshop, here are some basics to help you and your children plan for an informed financial future.
More than Money
Financial management knowledge includes goal setting, budgets, saving, insurance, investments, credit, debt management, and taxes. These topics are important in adult life. Financial knowledge as a teen and young adult can help prevent decisions that may lead to economic instability.
Students can jump-start their personal financial management education by addressing a series of topics on their own or with family and mentors. These topics include:
- Wants versus needs
- Money management, bank, and credit union accounts
- Creating and following a budget
- Saving for specific goals and having an emergency fund
- Responsible use of credit
Helping youth understand wants versus needs helps them determine their priorities, make tough choices in the future, and stay disciplined with their personal finances. It can be hard to make sacrifices, but it’s an important skill. Adults can model this behavior and communicate why it’s important.
How to set up accounts with financial institutions such as banks and credit unions, basic money management, and understanding credit are important topics for youth to understand. Forbes reported that the average credit card debt per consumer was $5,733 in the first quarter of 2023, and debt, along with the high interest rates on credit cards, can cripple personal finances. Helping high school students and young adults understand the financial responsibilities of debt also increases the likelihood that they will use it responsibly.
Making a budget and then being disciplined and adhering to it are the next steps for high school students and young adults on their personal finance journey. They can start now with school supplies, lunch money, snacks, and extracurricular activities. Those who work after school, on weekends, and/or during the summer, may also take responsibility for more of their personal expenses such as clothing and transportation. Their responsibilities for personal expenses can expand as they head off to college, get their first full-time job, and experience other life milestones. When young people earn their first paycheck, it is a great time to educate them about taxes. They are likely to want to know what that money was taken out of and what it is used for. Young people often learn best when the information is relevant to their immediate needs and interests.
Emergency savings are essential for everyone, and students can get a jump start on their savings as they are creating a budget. Some parents and mentors recommend that teens and young adults use the rule of thirds. For each paycheck, one-third goes to long-term savings – in this case, their emergency savings, one-third goes to saving for a bigger purchase like a car, and the final third can be spent now.
Investments and the power of compound interest are another topic that teens and young adults should learn about. Taking advantage of these at a young age can make saving for their first car, home, or retirement much easier than for those who start saving and making investments much later in life.
Similar to other topics, all teens and young adults have a different level of personal financial management knowledge. It’s also important to stress that it’s never too early or late to start building knowledge about personal finances. The key is to select an area where there is a gap in knowledge and help them learn and create new financial habits. Each piece of education can build upon other existing knowledge to create a better financial future for your high school student.
Visit UConn Extension for more financial literacy programming.
This work relates to CAHNR’s Strategic Vision area focused on Enhancing Health and Well-Being Locally, Nationally, and Globally.