News 12/21/2021

Insider: 6 Basic Facts People are Always Surprised to Learn About Money, According to the Experts Who Teach Them

  • We asked six financial literacy teachers about lessons that surprised their students the most.
  • People are surprised to learn that student loans can build credit, even if they’re in deferment.
  • Take control of your 401(k) or IRA investments by doing deeper research on your investments.

There’s always something new to learn about money.

Personal finance is taught in high school, yet each person’s knowledge and behavior around money varies based on their community. If you grew up in a family that manages their money well, you might absorb wealth-building tips just by sitting at the dinner table. On the other hand, if you grew up in a community that faces financial obstacles constantly, your personal finance journey is probably more about survival than generational wealth-building.

With that in mind, we asked six financial literacy teachers what lessons their students are most surprised to learn about money. Here’s what they said.

1.A bad credit score can prevent you from getting jobs

Theodore R. Daniels taught financial education to college students, primarily at historically Black colleges and universities (HBCUs) and his students were surprised to learn that poor credit history can prevent you from getting jobs.

Some employers check credit histories to assess your level of responsibility, or to see if you’re fit to handle large sums of money. Bad credit can be a red flag for some employers, while others believe it’s completely irrelevant to 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 the checkout counter seems like a smart financial move, 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. Aside from a late payment fee, interest rates on any late payments will soar, costing you significant money over time.

3. The stock market isn’t as volatile as you think it is

Financial behaviorist and financial education professor at Kansas State University Blain Pearson, Ph.D., CFP says that students are surprised to learn that stock market volatility is dramatized by news outlets.

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 returns on your retirement accounts, try not to panic when the market goes up and down. Pearson says prices tend to level out eventually, and that investing in the market doesn’t need to be so stressful.

4. Student loans can help you build credit, even if they’re in deferment

At Champlain College in Burlington, Vermont, students have access to a financial wellness program called InSight directed by Jimena Huaco. Huaco’s students are always surprised to learn that student loans help you build credit.

Huaco says, “If students have federal loans, even if they are in deferment and have not yet made any payments on them, they are building credit history.” If you’re looking to improve your credit score without opening a new credit card, try directing more attention to your student loan payments instead. While simply having an open credit line contributes to the average age of your credit (older is better), on-time payments in particular have a strong positive effect.

5. You have more control of your 401(k) and IRA investments than you think

Tiffany James leads a community called Modern Blk Girl for Black women who want to achieve financial freedom through investing in the stock market. James says her 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 warns, “Stop thinking your employers know what’s best for your money. They don’t. Take time to look into your 401(k), or other benefits, and how they can work for you. Never take what’s initially given to you without conducting your own research, or worse, leaving benefits behind. You could be losing thousands.”

6. Medical bills are the most common reason people file for bankruptcy

Vice president of client services Kim Buckey at DirectPath, which guides clients through navigating complex medical insurance benefits and medical debt repayment, says people are surprised to learn how devastating medical debt can be.

According to the National Bankruptcy Form, medical debt is the most common reason that people file for bankruptcy.

Research from DirectPath shows that less than half of Americans with company-sponsored healthcare understand what the words “copay,” “deductible,” and “in-network” actually mean. This can lead to scrambling at the last minute for answers during an emergency, and making poor choices.

If your employer provides health insurance, start researching and asking questions about your benefits as early as possible. If you’re eligible for state healthcare, it’s important to enroll and get benefits to prevent going into medical debt during emergencies.

Read the article here.

(Leo Aquino (they/he) is a reporter at business insider covering spending and saving.)

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