Striking out on their own for the first time is challenging for most young adults, but it’s likely easier if they’ve had a good grounding in basic financial topics. Many young adults find finances difficult to manage and understand, dreading such common, important tasks as managing debt payments, filing their tax returns and even setting up a personal budget.
A minimal (or missing) focus on financial education during their high school and college years may be keeping many young people from properly managing money, which may push them into significant debt or cause them to overlook opportunities to grow their savings. Here, 14 Forbes Finance Council members share financial topics they believe schools should be teaching to increase students’ overall financial literacy.
Members of Forbes Finance Council share their insights.
Photos courtesy of individual Forbes Finance Council members.
1. Understanding Income Taxes
Schools and colleges should teach students about income taxes and how our government funds itself on the collection of taxes on income (derived from any source). Many students who may have not worked a job or seen a W-2 form before are starting businesses; thus, they have no experience with the compliance needed to be in good standing with the Treasury Department. – Karla Dennis, Karla Dennis and Associates Inc.
2. Filing Tax Returns
A necessary part of life as an income-earning adult is filing the dreaded annual tax return. Most of the anxiety surrounding tax filing is driven by a lack of knowledge that could be alleviated with a Tax 101 course for students, who will inevitably find themselves filing a tax return when they enter the workforce. – Katelynn Minott, Bright!Tax
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3. Managing Debt
Understanding the essentials of debt is critical to financial success. There are an overwhelming number of examples where debt has financially crushed individuals and families. Conversely, some of the most successful people in business deeply understand the power of debt to generate wealth and use it to their advantage. – Jonathan Botros, Texas Tech University
4. Building A Budget
Students should learn the basics of how to budget money. With the ease of use of cards and other forms of electronic payment, the conscious act of handing over physical cash to pay for something isn’t felt in the same way it used to be. It’s more important than ever to teach students how to use debt wisely, save for an emergency fund and balance necessary expenses with wants in order to best set them up for success. – Michelle Prohaska, NYMBUS
5. Balancing Bank Accounts
It’s essential to understand debt management and monthly, quarterly and annual budgeting. With the ease of digital banking, people sometimes just check their balances in the bank with no regard to what might already be committed. Cash in versus cash out is a simple concept, but when you are not taught it, then disaster is just around the corner. Know your numbers, including committed versus free cash flow. – Cynthia Hemingway, Fourlane, Inc.
6. Understanding Debt
Every young adult should have a good working knowledge of debt (credit cards, loans and so on). Debt will likely play a huge role in their financial lives, and most enter these long-term contracts without fully understanding the pros and cons of what they’re agreeing to. – Ryan Pannell, Kaiju Worldwide
7. The Basics Of Investing
Developing good financial habits at a young age is critical. The benefits of developing good habits can be seen much later in life, but it is important to start building a nest egg at an early age. Train yourself to save every month, and start doing so early on—no amount is too small. Investing and saving early reaps huge rewards as a result of the impact of compound interest. – Sonya Thadhani Mughal, Bailard, Inc.
8. Navigating Inflation
Schools should teach about inflation, including how to make inflation work for you instead of against you. For example, if inflation is 9% and you buy an asset such as real estate that is not overvalued, you can leverage inflation four to five times using debt to make 40% to 50% returns on your equity. – Amariah Olson, Yield Crowd
9. The Psychology Of Money
It’s essential to understand that, at its core, one’s relationship with one’s finances is no different from any other relationship. One’s outlook on finances shapes the way in which one develops as an individual and professional. Education focused on the psychology of money fundamentally changes the probability of poor financial management in trying times. – Daniel Kachani, Aria Wealth Solutions
10. Maintaining Good Credit
Students should be taught about credit and be required to take exams and courses, just as they do in other classes. This will give them the knowledge needed to start a business, purchase a home and avoid the pitfalls of bad credit. Credit is everything, but if we aren’t making it a priority, then the cycle of bad credit will never be broken. If we want to make a change, it all starts with our youth. – Jose Rodriguez, Got Credit?
11. Entrepreneurship
Students need to learn the power of entrepreneurship. Considering small businesses are the backbone of America, there is a substantial benefit to owning a company. It’s beneficial not only for consumers but for the health and stability of our economy. – Antoine Sallis, Pacc 10 Enterprise
12. Value Versus Cost
It is important for students to understand that in business, value is not the same thing as cost. I always wanted my students, at any level, to understand that value, market value and present value are all trying to get to the same answer—what something is worth. – Dr. Philip Fischer, Micro Macro Infinity
13. Managing Cash Flow
Schools should teach the importance of budgeting and cash flow, as business and personal finance share common principles. Understanding how much cash is available, when money is expected to hit the bank and how to cover expenses is essential for success. Many tools in the market make cash flow management easy, and schools should teach students early on how to leverage them effectively. – Nick Chandi, ForwardAI
14. The Power Of Compound Interest
Students must understand compound interest as it applies to savings and debt. Compound interest is supercharged growth—both in terms of wealth and debt—and is compounded daily, weekly or monthly. On one hand, it’s a powerful tool to build wealth, but on the other, it’s a surefire path to financial ruin. Understanding this concept arms young adults with the knowledge to make better decisions. – Jared Weitz, United Capital Source Inc.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.