3580: [Part 2] 7 Personal Finance Lessons I Wish Everyone Learned in High School by Jeff Rose of Good Financial Cents

[00:00:00] I sold my car in Carvana last night. Well, that's cool. No, you don't understand. It went perfectly. Real offer, down to the penny. They're picking it up tomorrow. Nothing went wrong. So, what's the problem? That is the problem. Nothing in my life goes to smoothie. I'm waiting for the catch. Maybe there's no catch. That's exactly what a catch would want me to think. Wow, you need to relax. I need to knock on wood. Do we have wood? Is this table wood? I think it's laminate. Okay, yeah, that's good. That's close enough. Car selling without a catch. Sell your car today on Carvana. Pick up fees may apply.

[00:00:30] This is Optimal Finance Daily. Seven personal finance lessons I wish everyone learned in high school. Part two by Jeff Rose of goodfinancialcents.com. Number five, how to build credit. Your credit score is an important part of your overall financial health, and it can make a huge difference in how you manage your finances as an adult. With good credit on your side, it's a lot easier to buy a house or qualify for an apartment.

[00:00:57] With bad credit or no credit, on the other hand, most of life's biggest milestones can be harder to reach. Students need to know why credit is important, but also how to build credit while they're young. Most of the time, getting a basic student credit card or student loan, for example, can provide the introduction to building credit for students who need to get started. But that doesn't mean building credit is easy. Sometimes it's difficult for many young people to get approved for a credit card or any type of loan.

[00:01:26] My old intern, Kevin, found himself in this exact scenario several years ago. Kevin listened to his parents and avoided credit cards altogether. But when Kevin decided to start his adult life on solid financial footing and buy a house and his own car, his credit wasn't established enough to get approved for the loans he needed to purchase these things. Fortunately, Kevin stumbled onto the idea of signing up for a secured credit card.

[00:01:51] With a secured credit card, he had to put down a cash deposit equal to his credit limit. But once he started using his card regularly, he was able to boost his credit score an amazing 100 points within six months. How did he do it? Well, secured credit cards require a cash deposit to get started. They do report all of your credit movements to the three credit reporting agencies, Experian, Equifax and TransUnion.

[00:02:17] Over time, Kevin's responsible credit use let him build his credit from scratch and help to accomplish his goals of buying a house and car. Number six, investing and stock market basics. As a financial planner, I meet with so many full-fledged adults who don't know the first thing about the stock market or investing in general. While we can't do anything about that now, we can help young people start their own lives with a basic understanding of how investing works.

[00:02:44] While we probably want to avoid overwhelming students with too many details, I recommend that we introduce them to investing concepts that they can rely on as they get older. They need to understand what the stock market is and how investors make and lose money. And yes, I think they need to understand how investing could make them rich. Here's an awesome example. Earlier this year, I showed a 16-year-old how to turn $500 into $520,367.

[00:03:15] While he thought I was crazy at first, he got it once I showed him how investing worked. Basically, I used historical data to show him how even a $500-valued front-loaded mutual fund purchased in 1970 could grow to $68,684 with average earning returns and then eventually total $520,367. That's pretty good, right?

[00:03:42] The thing is, this $68,684 figure could grow even more if he added just a nominal amount of money every month. If he invested $25 extra to this fund every month or $300 per year, then the total investment would surge to that sweet $520,367 over roughly the same timeline. I believe the earlier we teach students about financial basics, the better off they'll be.

[00:04:12] It would be a shame for young people to miss out on building wealth with stocks, especially since you don't need to invest a lot of money if you start early enough. On the other hand, it's important for students to know the difference between safe investing and investing scams. While investing with a reputable company like Vanguard or Fidelity can be smart, young people need to know to choose reputable firms when investing their money. It pays to research any company you plan to invest with,

[00:04:40] read reviews, and make sure you know what you're getting into. I'd also say it's important for students to know how much risk they're willing to take on with their money. Investing in a startup company with lower stock share prices, for instance, could eventually reap big returns, but also could be more likely to fail with the stock value dropping. This is called higher risk, higher reward. Those students looking for a more conservative investment option should consider investing in established companies,

[00:05:08] or a compound of companies called a mutual fund. This is a longer term investment strategy that could grow money over the decades consistently. Number seven, how to start a business. I understand that starting a business might be a lot for any high schooler to take in, but what better opportunity to get an introduction? I didn't come from a family that had business building expertise, and neither did my friends. Thankfully, someone put books in front of me like Rich Dad, Poor Dad

[00:05:37] that at least gave me a basic intro into these concepts. The bottom line. Personal finance is such an important part of life that I can't believe we don't teach students more about money in school. When you really think about it, it's no wonder household debt levels are at all-time highs. When people don't know better, they don't do better. Let's try to make a positive difference in our students' financial futures now by teaching our children financial basics, and to advocate more financial education in schools.

[00:06:11] You just listened to part two of the post-titled Seven Personal Finance Lessons I Wish Everyone Learned in High School by Jeff Rose of goodfinancialcents.com. Summer's almost here, and I've been daydreaming about our next vacation, not stressing about whether we can afford it. That peace of mind comes from organizing my finances so I can enjoy the trip knowing the money's handled. Monarch is the personal finance app that tracks everything, accounts, investments, savings goals, and spending.

[00:06:41] Get your first year of Monarch Core for half off, just $50, with promo code OPTIMAL. Monarch has completely taken the mental load of tracking my finances off my plate, and their weekly AI recap can even catch a spending spike before it becomes a problem. It's like having a financial advisor in your pocket. The AI assistant is a game changer. I can ask, how much did I spend on travel last summer? And get an instant answer.

[00:07:09] Use code OPTIMAL at Monarch.com to get your first year of Monarch Core half off at just $50. That's 50% off your first year at Monarch.com with code OPTIMAL. Fred Meyer makes it easier than ever to satisfy all your protein and fiber needs with our exclusive brands. Now you can find these extra benefits in the foods you already know and love.

[00:07:35] Snack smarter with Simple Truth Protein Salsa Verde Tortilla Chips, or grab a Simple Truth Protein Energy Bar or flavored protein water when you're on the go. Stop by Fred Meyer and discover new favorites today. Fred Meyer, fresh for everyone. While I do think a credit score is important, it's only important at key inflection points, like when you're buying a house.

[00:08:01] Many people want a good credit score like they want a good grade in school. But a good score will be the natural result of good financial habits. So get yourself a credit card, treat it like a debit card, build some good payment history, and don't stress too much about it. And again, I'm not saying a good score isn't important, just that I think other things are more important, like learning how to budget, live below your means, and have a gap between your expenses and income that you're putting towards saving and investing.

[00:08:31] You can have a perfect credit score while living paycheck to paycheck, in debt, and with no savings. I know that was the case for me because I always paid on time and I had enough open lines of credit to have a healthy debt utilization ratio. I think the good score gave me the illusion that I was doing just fine financially. And I loved Jeff's thoughts here on investing. I want to say this one line a little bit louder for the people in the back.

[00:08:58] You don't need to invest a lot of money if you start early enough. I always thought that I would start investing later when I was making more money, not realizing that investing small amounts over long time horizons is the way to go. And that's a wrap for another Monday show. Have a great rest of your day and start to your week, and I'll be back tomorrow as usual where your optimal life awaits.