You’ve probably seen all of the news headlines – “U.S. Credit Card Debt Hits All-Time High”, “Most Americans Can’t Afford Retirement”, “Many Families Living Paycheck to Paycheck”.  Different stories, but all based upon a common theme.

Most people don’t know anything about personal finance.

Now when I say “don’t know anything”, I’m not exaggerating.  If you think I’m lying, take my little quiz below.

• What’s the APR on your most used credit cards?
• What is the difference between a traditional IRA and a Roth IRA?
• What is your current credit score, and how can you access it for free?
• What percentage of your household income is designated for housing?

See where I’m going?  If you could answer even half of the questions above, you’re miles ahead of most Americans.  The fact is, most people simply don’t know basic personal finance terms, concepts, or jargon, but the good news is – it’s not your fault.

As a rule, we do an absolutely terrible job of preparing young people to survive in the adult world of finance and money.  Talking about money is somehow considered a taboo subject, and unless your parents or a financial planner took the time to explain some of these concepts to you, you’re probably in the dark about a lot of this information.  Information that can make or break you in the long run – financially speaking.  I mean, we all want to retire someday, right?  Who wants to work their entire lives?  Yet, year after year, we fail to educate teenagers and college students on the basics of personal finance, and this failing can lead to a lifetime of bad decisions, poor money management, stress, worry, and in some cases, financial ruin.  

Personal Finance is a billion dollar industry.  Gurus like Dave Ramsey or Suze Orman charge top dollar to tell willing buyers and subscribers basic information that could easily be taught in a high school or college personal finance course.  How do I get out of debt?  How do I pay for college for my kids?  How do I plan for retirement?  All of these questions could easily be answered in a basic curriculum that could be offered in a classroom environment while kids are young – BEFORE they make the life changing mistakes that may haunt them for the rest of their lives. 

What would I put in a “basic” personal finance course?  Well, I’m so glad you asked.  Here would be my suggestions for a personal finance syllabus:

The Basics

• How do banks work?
• What is a checking account?
• What is a savings account?
• How do I write a check?
• The power of compound interest
• Pay yourself first!
• Budgets

Credit and Debt

• “Good debt” vs. “Bad debt”
• Credit Cards
• Credit Scores – What Are They and Why Are They Important?
• Loans (Student, Auto, and Mortgages) – how do they work?
• Bankruptcy!

Taxes

• What are taxes used for?
• How do tax rates work?
• What is my tax rate?
• What is a W-4?
• What is FICA (aka “How to read a paystub”)?

Investing

• Stocks vs. Bonds
• Mutual Funds
• Commodities and other investments
• Dollar Cost Averaging

Retirement

• What is Social Security and how does it work?
• Pensions – what are they?
• What is a 401(k)?
• Investing for retirement – Traditional IRA vs. Roth IRA

Insurance

• Why do I need it?
• When should I use it?
• Life/Home/Auto/Health – How Much Do I Need?

I could go on and on.  The outline above is just the tip of the iceberg.  The point is, it really is a disservice to our society as a whole that we toss folks into the working world and expect them to know how to handle their finances when they were literally given no instruction at all on how to deal with all of this new-found responsibility.  We wouldn’t put a teen into the pilot’s seat of a plane and say “fly me to Peru” without months or years of training and instruction, yet we literally do the same thing every week when we hand a 20-something a paycheck and basically say “you figure it out”.

If you’ve got teens or college-aged kids, sit down with them and start talking about this stuff – or if you’re not savvy about it yourself, sit down and learn it together.  A little bit of info now can save years of heartache and unnecessary stress down the road.  It’s a gift that really does keep on giving.