- We asked six financial literacy teachers which lessons surprised their students the most.
- People are surprised to learn that student loans can build credit, even if they are in deferral.
- Take control of your 401(k) or IRA investments by doing deeper 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, however everyone’s knowledge and behavior about money varies in their community. If you grew up in a family that managed their money well, you might assimilate wealth building tips just by sitting at the dinner table. On the other hand, if you grew up in a society that constantly faces financial hurdles, your personal financial journey will likely be more about survival than building wealth for generations.
With this in mind, we asked six financial literacy teachers which lessons their students are most surprised to learn about money. This is what they said.
1. A bad credit score can prevent you from getting jobs
Theodore R. Daniels teaches financial education to college students, primarily at Historic Black Colleges and Universities (HBCUs) and his students were surprised to learn that a bad credit history can prevent you from getting jobs.
Some employers check credit records to assess your level of responsibility, or to see if you are fit to handle large amounts of money. Bad credit can be a red flag for some employers, while others think it is irrelevant to the hiring process.
2. Stocked credit cards can ruin your balance
Manisha Thakor, MBA, CFA, CFP of MoneyZen says, “10% off your purchases when you check in at the checkout desk sounds like a smart financial move, but the devil is in the details.”
Store credit cards tend to have much higher interest rates than regular credit cards, and have “very punitive” consequences for late payments. Aside from late payment fees, interest rates on any late payments will rise, costing you significant money over time.
3. The stock market is not as volatile as you think
Blaine Pearson, a specialist in financial behavior and financial education at Kansas State University, says students were surprised to learn about this stock market.
It is being shown dramatically by news outlets.
Sure, there are ups and downs, but over time “the market always recovers,” says Pearson. If you are investing long term with a brokerage account, or watching the returns of your retirement accounts, try not to panic when the market goes up and down. Prices tend to eventually stabilize, Pearson says, and that investing in the market doesn’t have to be too stressful.
4. Student loans can help you build credit, even if it’s deferred
At Champlain College in Burlington, Vermont, students have access to a financial wellness program called InSight run 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 are deferred and haven’t made any payments on them yet, they are building a credit history.” If you’re looking to improve your credit score without opening a new credit card, try directing more attention to student loan payments instead. While just having an open credit line contributes to the average life of your credit (older is better), payments on time have a particularly strong positive effect.
5. You have more control over your 401(k) investments and IRAs than you think
Tiffany James leads a community called Modern Blk Girl for black women who want to achieve financial freedom by investing in the stock market. James says her students were surprised to learn that they could get a second opinion from a financial planner to maximize the rate of return on their investment accounts.
James warns, “Stop thinking employers know what’s best for your money. They don’t. Take time to consider your 401(k) or other benefits, and how they can work for you. Never take what was initially given to you without Do your own research, or worse, leave the benefits behind. You could lose thousands.”
6. Medical bills are the most common reason people file for bankruptcy
Vice President of Customer Services, Kim Bacai at DirectPath, who guides clients through navigating complex medical insurance benefits and paying off medical debt, says people have been surprised to learn how devastating medical debt can be.
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 with company-sponsored healthcare understand what the words “shared,” “deductible,” and “in-network” actually mean. This can lead to a last-minute scramble for answers during an emergency and making poor choices.
If your employer provides you with health insurance, start your research and ask questions about your benefits as soon as possible. If you qualify for state health care, it is important to register and get benefits to prevent falling into medical debt during an emergency.