8 Important Money Lessons You Should Have Been Taught in School

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There are plenty of things that the standard education system doesn’t really teach that well, and that includes how to manage one’s money. You would think one of the most important things in life that one has to learn should be taught in school from a young age, but too many people end up unable to manage their own money and end up with little to no savings to get through in their lives.

But it’s not too late to learn these money lessons. If you are reading this now, you should take heed of these eight fundamental principles in managing money so you can then lead a more responsible life.

1. Budgeting and Making Money Last

It’s the simplest and most fundamental fact in money, yet also the most overlooked and underrated. Living within your own means is the most basic rule of personal finance, and everything else that follows that rule is beholden to it as well. How there are still people out there who don’t understand this basic fact is mostly due to how it hasn’t been taught to them properly from a young age.

If you’re having money problems, it’s most likely because you’re spending too much. The financial world has overcomplicated how money is thought of to such a degree that many think why they aren’t financially stable is because they don’t have enough investments and multiple income streams going instead of looking at their own finances and seeing if they have too much going on as far as expenses go.

This is all about two things—saving and budgeting. Both of these are prerequisite to all other money skills with no exceptions. If you don’t know how to properly save and budget, you won’t be able to get good at either investing or running a business. These two skills are necessary to know how to handle money better.

Spending habits tend to dominate how people are able to save their money, and most have not had the proper education as far as curtailing their spending goes. The first instinct people tend to have when they see bigger numbers in their bank account—whether it’s their salary or even their student loans—is to start thinking of what they can buy with it now. Everyone has those thoughts when they get money, but few are able to put those feelings aside to focus on the long term.

Many would start buying themselves something they’ve been wanting for quite a while, telling themselves that they deserve a reward for whatever they had to go through before getting money. They would have a meal in a restaurant or buy more groceries to celebrate the occasion. Before you know it, the money is gone again and they’re waiting for the next payday to do it all over again. This is a cycle that clearly goes nowhere. It takes discipline to instead put that money in the bank or in an investment to make it grow.

It’s not to say that it’s wrong to treat yourself every now and then, but that shouldn’t be the first thing that comes to your mind when you get your wage. Resisting urges and not making impulse purchases can go a long way to making your money last past your usual monthly budget.

Related: 5 Poor Money Management Habits that Filipinos Do

2. Haggling and Looking Around for the Best Deal

A lot of people still think of haggling as being a cheapskate and nothing more. However, you may actually be doing yourself and everyone else a favor by haggling with an unscrupulous merchant who wants to sell you a third-rate handbag for $35. Not only will you save a good chunk of change, but you also make sure the merchant knows he can’t just get away with overpricing his wares.

Unfortunately, most people don’t know to haggle unless they either grew up in a culture wherein haggling is the norm or have years of experience in a mercantile environment. It’s a skill that takes practice, so you’d want to take every opportunity to haggle whenever there’s an opening, like when you’re shopping at a market or messaging an online seller about an ad.

Haggling is about convincing the seller how serious you are with buying an item while also looking pained by how little money you actually can spare. Being able to convincingly deliver this double attack can help you bring down the price of an item slightly or considerably, depending on how good you are at it and how the seller’s mood is at that time. It’s a human skill that requires both sensitivity and persistence to successfully pull off.

Aside from haggling, you should shop around for the best deal. This may seem boring and a waste of time to many, but the importance of being patient and persistent when it comes to seeking the best deal possible can never be understated. Even when it comes to financial products,

Doing your homework every time you plan to purchase something substantial—or even just everyday necessities—can help you save thousands down the line. Whether it’s a new phone, a car, a house, or even just your groceries, taking the extra time to find a source of those goods that provide the most value can go a long way.

Just like with goods and services, you may want to keep an eye out for the best deals when it comes to bank accounts. Once you see something better, you may then want to switch.  You may think to stay loyal to your current bank helps keep things simple and doesn’t really cost you much, but it may actually be otherwise.

This is such common practice that banks now offer hassle-free switching and cash incentives to encourage people to switch to them. The hassle-free switching has them change your standing orders so you don’t have to sort them out yourself, which makes things a tad bit easier on your end.

And speaking of getting better deals for actual services, there are a ton of community-based sharing economy platforms these days that make haggling a little bit easier. A few prime examples of this is through enabling consumers to easily compare from a wide array of service providers (specifically in terms of pricing):

3. The Danger of Debt

Debt is the yoke that can weigh like the whole world around your neck. This isn’t the five bucks you owe your friend for a soda, but debt like loans for college tuition or mortgage for your dream home. If you don’t have the money to pay it off, it’ll follow you and haunt you like a ghost. It’s the past always chasing after you, and you can’t just move on with your life without paying it off.

That weight becomes even heavier with the inclusion of interest. Credit card debt can snowball uncontrollably if payments aren’t kept up. Payday loans are notorious for having such high-interest rates that they’ve been labeled as predatory, looking to find more people willing to risk their wages for a short-term reprieve. When the interest rate is sky-high, do avoid it even if you think you can pay it off right away as anything can happen in the meantime.

Managing personal debt is an important money lesson, and having no debt is the ideal scenario. When you owe someone big, they pretty much own you as they can make you do things you otherwise would never do. This is especially true if the people you owe are unscrupulous and questionable. Avoid getting into a serious predicament by avoiding debt altogether if possible.

4. Borrowing Wisely and the Importance of Credit Reports

When you are going about in life chasing your dreams but you weren’t born in very fortunate circumstances, you’re going to need every bit of help you can get. Therefore, even when it was previously mentioned here that you shouldn’t go into debt, you may have to break that rule and borrow money when it’s absolutely necessary.

When applying for a financial product—anything wherein you “purchase” money or get credit—you will be assessed according to your credit history in order to determine whether you are worth the risk of lending money to. The credit reports basically show how trustworthy you are and capable you are of paying off your debts, mostly in regards to how much money you make in a year and how much you do have.

The credit report (similar to US’ credit scores) takes from your financial and borrowing history through reports from a select number of credit referencing agencies (such as CCAP, TransUnion, and CIC).

A good credit score is reflected by you having paid your debts on time all the time; while a poor credit score is from either frequent delay in paying off your debts, not having paid at all, or even declaring bankruptcy at some point.

Having a poor credit score from your personal credit history can be a significant obstacle as it can keep you from taking out a mortgage when you finally decide to get a housing loan, car loan, or even getting a mobile phone contract. It can get worse as every single time you get declined for something due to your bad credit, that’s a black mark on your record that stays there for years.
The best way to prevent these problems from happening to you is to never get bad credit in the first place. Early education regarding credit can help young people keep themselves from falling into this chasm. There are also ways now to check your credit report and be able to report inaccuracies and instances of fraud.

Being able to prevent these from messing things up for you is something that used to be a luxury, but some top-rated credit agencies now graciously offer that service for free to curtail credit fraud.

5. How Interest Rates Work

Having mentioned debt and credit here, we must now look at the topic of interest. It’s the one constant in the world of finance that you must always contend with, and it can be either your friend or enemy depending on which side you are on in the equation. It makes both investors rejoice and debtors weep.

Interest can work for or against you, depending on what you do with your money. Someone who is diligent with saving money may earn around 3% interest on top of the cash in the bank each year, while someone who takes on shopping as a sport and maxed-out on their credit card may have to pay a whopping 20% interest on top of the cash they borrowed.

Then there are the different forms of interest, from a simple interest that’s easy enough to compute to compounding interest that accrues over time. The latter can either make people who diligently invested their money very happy in the end and those in deep debt very anxious.

There are some overdrafts, credit cards, and mortgages that tend to advertise low-interest rates, but you can’t completely trust these due to changing economic situations. They may be low now, but it may not be as low later on. Also, the lowest rates are mostly reserved for people with the highest credit scores, so you’re out of luck if your credit score isn’t that good.

6. Investing Early and Often

You may think the days of retirement or even just being an independent adult who must self-finance everything are distant, but they’ll come sooner than you think. What you don’t want to happen to you is being caught with your pants down, unprepared for that inevitability and having no money to get you through from there on. Saving is important, and investing is even more so.

While not everyone can be a high-rolling trader in the stock market with business ventures left and right, everyone can save up money and invest whatever is not being spent on something that will help it grow over the years, beating inflation in the process. It’s not some get-rich-quick scheme that will turn you into a billionaire overnight, but a responsible way to create a passive income stream to supplement your primary source of income.

You can get into it by starting small. Being able to start investing is a victory in itself. You then learn about the landscape, the different ways to invest, and all the intricacies of each one. As your money starts to grow, you then learn to diversify by investing in different things that would become your portfolio.

Read Next: How to Avoid Ponzi Schemes on Multilevel Marketing

7. Not to Trust Everything Ads Say

Nothing is really given out for free without anything in return. Whenever you see an ad that is promoting something as “free”, the first question you should have in your head is, “Why is it being given out for free?” You never know if that ad may be somewhat misleading or at least not saying something related to that free thing.

When you are shopping for groceries, you would want to take up whatever money-saving offers you may need, but you need to be wary of offers that come with buying multiple things at once. You are essentially “saving” on things that are not even on your shopping list at all. As cheap as they may be, it’s still a waste if they’re not what you actually need.

Advertising is there to get your attention and convince you to need something you really don’t need. Therefore, you can never trust them to have your best interest in mind. You need to be wary of them and make sure they never at any point become what sways your judgment, even if the offer is really sweet.

8. Experience is the Best Teacher

Whether it’s money or even life itself, the most valuable lessons you may learn won’t be from books, school, seminars, TED Talks, or even from your own parents. They mean well and they may be right, but the only true way you’ll ever have a valuable lesson stick in your heart is through the flames of experience.

Failure is always an option, and things aren’t that different with money. If you’re into investing in things like stocks and futures, you will find yourself in less-than-ideal situations every now and then. You may also find yourself at the bad end of a deal whenever you’re buying something expensive or even just encountering something unusual during the week’s shopping.

Whatever it may be, do know that failing in something should not necessarily mean the end of the world. You will find yourself losing money needlessly at times, and it should be okay as long as it’s not your entire life savings. When such things happen, it’s important to take that lesson to heart and move on. If there’s a good solution to the problem, act on it. If there’s nothing else you can do, move on and do something else productive.

As long as you are able to learn from the experience, that is what counts most. You will then remember that lesson whenever you encounter that situation again. The earlier you learn that lesson, the better.

Conclusion

These aren’t the only money lessons you can learn, but they are the basics. You must understand that just about everything in the outside world is out for your money, so you have to hold on to it tight so you can save up for the future.

Whether you are a kid who is still in school, a young adult looking to make it in the world, or even someone who already has a family of their own, you should be able to find these money lessons useful.

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