- We asked six financial literacy teachers what lessons surprised their students the most.
- People are surprised to learn that student loans can increase credit, even if they are on borrowed time.
- Take control of your 401(k) or IRA investments by researching your investments further.
- 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 knowledge and behavior when it comes to money varies depending on their community. If you grew up in a family that manages money well, you might absorb tips for building wealth just by sitting down to eat. On the other hand, if you grew up in a community that constantly faces financial obstacles, your personal financial journey is probably more about survival than generational wealth building.
With that in mind, we asked six financial literacy teachers what lessons their students were most surprised to learn about money. Here is what they said.
1. Bad credit can prevent you from getting a job
Theodore R. Daniels taught financial education to students, primarily at historically black colleges and universities (HBCUs), and his students were surprised to learn that a bad credit history can prevent you from getting a job.
Some employers check credit history to assess your level of responsibility or to see if you are fit to handle 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, “Getting 10% off your purchase when you register at checkout sounds like a smart financial decision, but the devil is in the details.
Store credit cards tend to have significantly higher interest rates than regular credit cards, and they have “very punitive” consequences for late payments. Besides late payment fees, the interest rates on any late payments will skyrocket, costing you a lot of money over time.
3. The stock market is not as volatile as you think
Financial behaviorist and professor of financial education 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 recovers,” Pearson says. If you’re investing for the long term with a brokerage account or watching your retirement account returns, try not to panic when the market goes up and down. Pearson says prices eventually stabilize and investing in the market doesn’t need to be as 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 credit.
Huaco says, “If students have federal loans, even if they’re on deferment and haven’t made any payments yet, they’re building a credit history.” If you’re looking to improve your credit score without opening a new credit card, try paying more attention to your student loan repayments instead. While just having an open line of credit contributes to your average credit age (older is better), one-time payments in particular have a big 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 that they can get a second opinion from a financial planner to maximize the rate of return on their investment accounts.
James cautions, “Stop assuming your employers know what’s best for your money. They don’t. Take the time to review your 401(k) or other benefits, and how they can work for you. Never take what was originally given to you without conducting your own research, or worse, leaving benefits behind. You could lose thousands.
6. Medical bills are the most common reason people file for bankruptcy
Vice President of Customer Services Kim Buckey at DirectPath, which guides customers through the complex navigation of medical insurance benefits and medical debt repayment, says people are surprised to learn how medical debt can be devastating.
According to the National Bankruptcy Form, medical debt is the most common reason people file for bankruptcy.
DirectPath research shows that less than half of Americans with company-sponsored health care understand what the words “copay,” “deductible,” and “in-network” really mean. This can lead to rushing to emergency answers at the last minute and making poor choices.
If your employer provides health insurance, start researching and asking questions about your benefits as soon as possible. If you qualify for public health care, it is important to register and get benefits to avoid going into debt in an emergency.