![]() Jared Weitz, United Capital Source Inc.A financial advisor is a professional with credentials and years of experience managing investments, solving tax problems, creating financial plans, and more. Understanding this concept arms young adults with the knowledge to make better decisions. On one hand, it’s a powerful tool to build wealth, but on the other, it’s a surefire path to financial ruin. Compound interest is supercharged growth-both in terms of wealth and debt-and is compounded daily, weekly or monthly. Students must understand compound interest as it applies to savings and debt. Many tools in the market make cash flow management easy, and schools should teach students early on how to leverage them effectively. Understanding how much cash is available, when money is expected to hit the bank and how to cover expenses is essential for success. ![]() Schools should teach the importance of budgeting and cash flow, as business and personal finance share common principles. I always wanted my students, at any level, to understand that value, market value and present value are all trying to get to the same answer-what something is worth. It is important for students to understand that in business, value is not the same thing as cost. It’s beneficial not only for consumers but for the health and stability of our economy. Considering small businesses are the backbone of America, there is a substantial benefit to owning a company. Students need to learn the power of entrepreneurship. If we want to make a change, it all starts with our youth. Credit is everything, but if we aren’t making it a priority, then the cycle of bad credit will never be broken. This will give them the knowledge needed to start a business, purchase a home and avoid the pitfalls of bad credit. Students should be taught about credit and be required to take exams and courses, just as they do in other classes. Education focused on the psychology of money fundamentally changes the probability of poor financial management in trying times. One’s outlook on finances shapes the way in which one develops as an individual and professional. It’s essential to understand that, at its core, one’s relationship with one’s finances is no different from any other relationship. For example, if inflation is 9% and you buy an asset such as real estate that is not overvalued, you can leverage inflation four to five times using debt to make 40% to 50% returns on your equity. Schools should teach about inflation, including how to make inflation work for you instead of against you. Investing and saving early reaps huge rewards as a result of the impact of compound interest. Train yourself to save every month, and start doing so early on-no amount is too small. The benefits of developing good habits can be seen much later in life, but it is important to start building a nest egg at an early age. Ryan Pannell, Kaiju Worldwideĭeveloping good financial habits at a young age is critical. Debt will likely play a huge role in their financial lives, and most enter these long-term contracts without fully understanding the pros and cons of what they’re agreeing to. Cynthia Hemingway, Fourlane, Inc.Įvery young adult should have a good working knowledge of debt (credit cards, loans and so on). Know your numbers, including committed versus free cash flow. Cash in versus cash out is a simple concept, but when you are not taught it, then disaster is just around the corner. With the ease of digital banking, people sometimes just check their balances in the bank with no regard to what might already be committed. It’s essential to understand debt management and monthly, quarterly and annual budgeting. It’s more important than ever to teach students how to use debt wisely, save for an emergency fund and balance necessary expenses with wants in order to best set them up for success. With the ease of use of cards and other forms of electronic payment, the conscious act of handing over physical cash to pay for something isn’t felt in the same way it used to be. Students should learn the basics of how to budget money. High schools and colleges could help young adults build this discipline so they can continue it as their income grows. Being able to allocate income toward savings and investments, needs, and wants is critical for financial well-being. Young adults struggle with this discipline because it’s usually never taught. Jonathan Botros, Texas Tech Universityįinancial education should start with the basics, such as budgeting and paying yourself first. Conversely, some of the most successful people in business deeply understand the power of debt to generate wealth and use it to their advantage. There are an overwhelming number of examples where debt has financially crushed individuals and families. Understanding the essentials of debt is critical to financial success.
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