Our department is in the implementation stage of an exciting outreach activity. We want to share it with you. Last spring, we were awarded a gift from the State Farm Youth Advisory Board. The resulting program is titled the “Top Ten Teen Financial Tips” and teams of upper-division undergraduate students are delivering the program to personal finance courses in fifty Missouri high schools. Our goal is to reach 6,000 students. Today, our tip is to briefly outline these tips and ask you to consider how well you are doing in reaching the goals implied in each.
- Education for Income! – We all know that people with greater education, on average, earn greater incomes. Economists call these investments in education, investments in human capital. Clearly, this investment is the best one you can make for it is the one type of capital you fully control.
- Budget Your Money! – Living within ones means, including savings, is a goal that many fail to reach. Yet, living beyond ones means is the recipe for financial disaster. Budgeting is not hard. Budgeting instills a sense of discipline and empowerment to your money management.
- Establish Good Credit! – Learn how and when to use credit. Begin with a starter card. Use it only for necessities, like gasoline, and then pay it off at the end of the month. Credit does make many transactions easier, even possible. Yet, when one ignores the annual percentage rate (APR), the transaction costs, or the extra expense involved in using credit for non-appreciating assets, they begin the downward spiral toward financial failure.
- Emergency Money! – Establishing an emergency fund of three to six months’ living expenses is a key to a household’s financial strength. Doing so allows you to increase insurance deductibles, thus saving insurance premium dollars. It also provides the freedom to search for another job, should you lose the one you have. An emergency fund is not optional.
- Manage Your Risks! – Retain those risks you can afford. (See Tip #4 for how.) Reduce your exposure to hazards by being responsible in your decision making and actions. Transfer the risks you cannot afford to retain: personal liability, loss of income following your death when you have financial dependents, loss of income from disability, loss of property, or loss of health.
- Compounding Power! – Do not forget the power of compounding on your invested savings. Start as young as you can to allow the power of time to add to your investments. Albert Einstein once said, “The most powerful thing in the universe is compound interest.” The power is within your reach, if you start young and continue. (Hint: You’re not getting any younger, so you might as well start today.)
- Smart Investing! – Maintain a well diversified portfolio of assets, starting with educating yourself about investing. Try to keep your investment management expenses low. Thus, low-cost index mutual funds or Exchange Traded Funds (ETFs) are powerful. Don’t forget international investing, real estate, and other investments as you accumulate the funds to broaden your diversification. Research continues to demonstrate the superiority of portfolios with international and long-run equity exposure.
- Don’t Forget Taxes! – Taxes must be paid on your earnings, your investment gains, your purchases, your home, your car, your boat, and, ultimately, your death – if estate taxes are reinstated next year. You must pay them. Taxes also buy things we need like education, roads, defense, social-security, and et cetera. If you don’t like taxes, then tell your elected representatives those things on which you want them to spend less money.
- Think Outside Your Box! – Don’t follow the crowd. Chart your own course. Keep focused on your destination, even when others are jumping ship. Buy low and sell high, contrary to your emotions. Eat well. Exercise. Take care of your future. Remember, just because no one in your family has been financially successful doesn’t mean you can’t.
- Believe You Can – Dare to dream dreams and then seek your goals. I’ve heard it said that, in the context of goals, “success” has five S’s. You must first See it. Second, Say it to others to improve your commitment. Sign it by writing it down and putting it somewhere to remind you. Support it with your actions and, finally, Stick to it when things seem to be harder than you expected.
Well, that is a brief summary. In fact, it reads like a summary of several of the financial tips we’ve published in this blog over the years. We want to share this program with your high school, if you’re in Missouri. Contact us by email at the Office for Financial Success and someone will contact you to put you on our calendar. Soon we’ll have a website, linked through the Office for Financial Success website for you to access a .pdf of the PowerPoint slides for this program. Or, just look through the website for other teacher resources or look at the library of resources provided by the Missouri Council on Economic Education. If you have questions, let us know what we can do to help you on your way to financial success.