– By Karin Maloney Stifler, CFP
What do high school students want to know about personal finance? This week I had the opportunity to find out when I met with a group of curious and industrious students at an all-girls independent school. The purpose of the visit was to introduce basic personal finance as part of the school’s commitment to students’ overall wellness. Read on for a sample of the students’ questions, and answers from a financial planner and parent who has guided her own three boys through their teen years.
1. “Why is this important to me?”
You are the Chief Financial Officer (“CFO”) of your life. No matter what career you choose, you are responsible for your own financial decisions and wellbeing.
2. “I’m not good at math and finance is too complicated.”
No one is born a CFO. Personal financial management skills are learned over time, just like life skills such as communicating, reading, driving, and getting along with others.
Don’t be intimidated; you can do this. You don’t have to be a math whiz to be able to handle money effectively. Most personal finance involves common sense math, not AP Calculus. Personal financial management is more than numbers; it’s establishing good habits like setting goals and saving.
3. “Do I need a bank account?”
If you have money, you should have a bank account. A bank account protects and organizes your money. Clothes belong in closets, books belong in backpacks, and money belongs in banks. Otherwise it’s tucked in your nightstand or jeans pockets where it could be easily forgotten or lost. Most banks have special accounts with no fees for students.
Once you have a bank account, get the bank’s mobile app for your phone. Set up alerts so you receive text messages about your balances and transactions in order to easily know what’s happening with your money. This is good fraud protection too. With a mobile app, you can even deposit checks without going to the ATM or local bank branch.
4. “How much should I save?”
One of the best financial decisions you can make is to save part of every dollar you earn. While you are living at home, you probably don’t have a lot of expenses other than what you choose to spend on clothes, Chipotle, Starbucks, movies and other fun stuff. Even if you work part time, you should be able to save at least 20% of what you earn.
The key motivator is WHY you are saving. Dedicate your savings to specific goals, such as prom and college. Knowing why you are saving will make it easier to deal with spending temptations. Keep your savings out of reach and in the bank.
5. “How much will I need for college besides tuition, room and board?”
The answer depends on what expenses you will be your responsibility. Talk with your parents about what you are expected to pay towards college expenses. Ask specifically about books, computer, trips to and from school, supplies, dorm room set up, and health insurance and costs. Total up the cost of what is your responsibility and plan ahead. It pays to do the math. Total up the costs and divide the total by your hourly pay. This tells you how many hours you have to work to save enough. Check how realistic it is to afford your goals. If you won’t have enough, there are two choices: Earn more or spend less.
As for college spending money, it depends on how you want to live. If you plan to eat all meals at the dining hall, take advantage of free social activities on campus, and put shopping on hold, you won’t need as much as someone who wants the opposite. An average budget is about $25 per week. With nine months of school, you’ll need to save about $900 for spending money each year in college.
Parting advice for future CFOs: Use your free time during the school year and summers wisely to earn and save money. Once you get settled in college (after first semester or freshman year), consider getting a part-time job on-campus to earn money. Studies show that working 20 hours or less each week during college can improve students’ engagement on campus and their academic performance. Holding down a part time job while posting good grades is impressive, enhances your resume, and makes you a strong candidate for paid internships too.