Only 17 states in the U.S. require high school students to take a personal finance course, according to a 2014 survey by the Council for Economic Education. Many American students graduate from high school without knowing even the basics of money management -- and then they immediately take on student loan debt to help pay for college without understanding the scope of that debt.
Whether they're going on to college, entering the working world, joining the service or traveling, high school graduates should know these personal finance basics.
1. Track your spending.
Many people spend blindly -- if there's money in their bank accounts, they feel like they can buy something. But these are often the same people who find themselves unable to pay their bills at the end of the month, unsure of where their money went. Tracking your spending allows you to understand exactly where your money has gone -- and it helps you identify places where you're wasting money. For example, you might be eating lunch out a lot when you could be packing a lunch at home for less.
2. Make -- and follow -- a budget.
Tracking your spending and following a budget are two halves of the same whole. Once you know where your money is going, a budget can help define where you want it to go. Basically, a budget is your guide to good financial health. Earning and spending money without a budget is like driving across the country without a map -- sure, you'll probably be able to get from Maine to California eventually, but it will be a lot faster and more effective if you have a guide.
A tool like Mint.com is especially helpful for budget creation, because in addition to helping you build a budget, Mint also automatically pulls in your spending information so you can easily see if you're actually adhering to your plan. Basically, if you make a reasonable budget and follow it, you'll never have to worry about not having enough money at the end of the month.
3. Compound interest will make you rich -- if you let it.
When you save or invest money, it earns interest. And then that interest -- well, it earns interest too. All it needs is time. That's why it's a good idea to start saving money as soon as you can -- even if it's only $5 or $10 a week. If you put $100 in an investment account that accrues an annual 5 percent rate of return, and you add just $5 a month, after 50 years, you'll have over $14,000. Do the same thing for just 20 years, and you'll only have a little over $2,000. Open a Roth individual retirement account , and start saving as soon as you can.
4. Financially, you are the only person you can trust in an emergency.
This isn't to say that you don't have wonderful people in your life who would be happy to help you out in a jam -- but having an emergency fund is the best way to know that you'll be OK if disaster strikes. That way, if you lose your job, your car breaks down, your cat needs to go to the vet or any other emergency happens, you can pay for it without going into credit card debt. Start with an emergency fund of $1,000, and try to build up three to six months of living expenses.
5. Money can help make you happy -- if you buy the right things.
Money isn't bad -- it's simply a tool that can help us get the things we really want in life. When we use money to buy experiences instead of things, it makes us happier, according to research by Harvard Business School professor Michael Norton. Even if you are using your money to buy things, you can help control how happy it makes you -- the important thing is to buy items that are what you truly want. For example, if you want a new pair of pants, don't just buy a mediocre pair because they're on sale -- chances are, they'll sit in the back of your closet. Instead, do some research, and wait to buy until you find what you really want.
6. Our brains help us spend more on credit than with cash.
Research shows we're more careful with our money when handing over cash than when swiping a card. This isn't to say that credit cards are bad; when used properly, many offer benefits like airline miles or cash back. The important thing, if you do choose to use credit, is to never put more on a credit card than you can pay off that month. And if you think you can't handle it, just don't touch the plastic -- nobody needs a credit card.
Meg Favreau is the senior editor for the personal finance blog Wise Bread, which covers rewards credit card mistakes and other personal finance tips.
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