- We interviewed six financial literacy teachers about the lessons that surprised their students the most.
- People are surprised to learn that student loans can constitute credit even if they are deferred.
- Take control of your 401 (k) or IRA investments by doing more in-depth research on your investments.
- Read more stories from Personal Finance Insider.
There is always something new to learn about money.
Personal finance is taught in high school, but each person’s money knowledge and behavior varies depending on their community. If you grew up in a family that manages their money well, you might absorb tips for building wealth just by sitting at the table. On the flip side, if you grew up in a community that constantly faces financial hurdles, your personal financial journey is probably more about survival than generating generational wealth.
With that in mind, we asked six financial literacy teachers which lessons their students are most surprised to learn about money. Here is what they said.
1. A Bad Credit Score Can Keep You From Finding A Job
Theodore R. Daniels has taught financial education to college students, primarily at historically black colleges and universities (HBCUs), and his students were surprised to learn that a bad credit history can keep you from getting a job.
Some employers check your credit history to gauge your level of responsibility or to see if you are good at handling large sums of money. Bad credit can be a red flag for some employers, while others think it has nothing to do with the hiring process.
2. Store credit cards can destroy your credit
Manisha Thakor, MBA, CFA, CFP of MoneyZen says, “10% off your purchase when you sign up at checkout sounds like a smart financial decision, but the devil is in the details. ”
Store credit cards tend to have much higher interest rates than regular credit cards, and they have “very punitive” consequences for late payments. Late payment fees aside, interest rates on late payments will skyrocket, costing you a lot of money over time.
3. The stock market is not as volatile as you might think
Financial behaviorist and financial education professor at Kansas State University Blain Pearson, Ph.D., CFP says students are surprised to learn that the stock market
is dramatized by the media.
Sure, there are ups and downs, but over time, “the market always bounces back,” Pearson says. If you are investing for the long term with a brokerage account or monitoring the performance of your retirement accounts, try not to panic when the market goes up and down. Pearson says prices eventually stabilize and investing in the market doesn’t have to be so stressful.
4. Student loans can help you build credit, even if they’re deferred
At Champlain College in Burlington, Vermont, students have access to a financial wellness program called InSight led by Jimena Huaco. Huaco students are always surprised to learn that student loans help you build your credit.
Huaco says, “If students have federal loans, even though they’re deferred and haven’t made any payments yet, they’re building credit histories.” If you’re looking to improve your credit score without opening a new credit card, try paying more attention to your student loan payments instead. While just having an open line of credit contributes to your average credit age (the older the better), one-time payments in particular have a strong positive effect.
5. You have more control over your 401 (k) and IRA investments than you think
Tiffany James runs a community called Modern Blk Girl for black women who want to achieve financial freedom by investing in the stock market. James says his students are surprised to learn they can get a second opinion from a financial planner to maximize the rate of return on their investment accounts.
James cautions, “Stop thinking that your employers know what is the best bang for your buck. without doing your own research, or worse, leaving profits behind. You could lose thousands. “
6. Medical bills are the most common reason people file for bankruptcy
Vice President of Client Services Kim Buckey at DirectPath, who guides clients through navigating complex medical insurance benefits and paying off medical debt, says people are surprised to learn how the medical debt can be devastating.
According to the National Bankruptcy Form, medical debt is the most common reason people file for bankruptcy.
Research from DirectPath shows that less than half of Americans whose healthcare is funded by the company understand what the words “co-payment”, “franchise” and “network” actually mean. This can lead to looking for last-minute answers in an emergency and making bad choices.
If your employer offers health insurance, start researching and asking questions about your benefits as soon as possible. If you are eligible for state health care, it is important to register and obtain benefits to avoid incurring medical debts in an emergency.