It’s Financial Literacy Month! Get Educated on Finances In These Steps
April 28, 2017 : H&R Block Dollars & Sense
Spring is here, which means summer is just around the corner. And if you’re like most people, you’ll want to start getting in shape and sculpting that perfect beach body. But there’s one muscle that will benefit you for many summers to come and can’t be toned in the gym—your financial muscle. What a perfect coincidence then that this month is Financial Literacy Month!
Much like the muscles in your body, your financial literacy becomes stronger when it’s being put to use. If you start to ignore it, its effectiveness will begin to wither. That’s why it’s important to put in the work now and lay the groundwork for successful financial habits in the future. Here are four ways to flex your financial muscles this spring.
Ask your parents about the filing taxes
As Tax Day draws near, now is the perfect moment to lay a couple of questions on your parents while tax filing is still fresh in their memory. Taxes and tax returns are an unavoidable adult responsibility, so it’s a good idea to get some firsthand experience. Think of a tax return like a yearly check up—you can see how healthy your finances have been over the past year.
How much income did you earn? How much in taxes was withheld from your salary? Did you contribute to a traditional IRA? Did you have any other type of income, such as interest from a bank account? Do you qualify for any credits? All of these questions (and more!) factor in to the whether or not you will owe the government money. If you crunched the numbers right and did your homework, you won’t have anything to worry about come Tax Day. In fact, you may even be due a refund! Ask your parents questions and develop a basic understanding of taxes now so you won’t have to learn when you file.
Start saving for a summer trip, or a car, or whatever! Just Save.
What’s the best part of summer? Hard to say exactly, but having free time to do fun things is certainly high on the list. Whether you’re planning a trip with friends to an amusement park or dreaming of a once-in-a-lifetime vacation abroad, you’ll need to have money to enjoy yourself once you get there. The solution: open a savings account. By putting away a little bit each week, you’ll get a better idea of what it takes to save up a suitable amount. You can go one step further by budgeting your savings for specific needs. Maybe you start saving up for the flight or gas money first, then you put away some cash that will be used for food, and then a little extra for spending. By the time summer rolls around, you’ll be good to go. Apply these habits to all of your spending and your financial muscles will stay in shape.
In the last decade, the cost of college has increased immensely. According to a report from The Institute of College Access and Success, the average student graduated college in 2015 with $30,100 in student loan debt. Get a head start on the logistics and talk to your parents about which schools you’re interested in and what they cost. It will give you a better idea of what type of loans you might need to take out and if you’ll have to work while in school.
If you find these financial tips to be a lightweight exercise, you may need to move up a weight class. Test your knowledge with this quiz to see how much financial knowledge you can lift:
- If you open a savings account with $200 and the account has an interest rate of 10 percent per year, how much money would you have after one year?
- What is the definition of “gross income?”
- The amount of money you’ve earned before taxes are taken out
- The amount of money you’ve earned after taxes have been taken out
- The amount of money you’ve earned after you’ve paid all your debt
- The sum of all the interest you’ve earned
- If you have many different types of debt (student loan, credit cards, etc.), in what order should you pay them back?
- Whichever has the highest debt
- Lowest interest to highest interest debt
- Whichever debt you have had the longest
- Highest interest to lowest interest debt
- At what point in life should you start saving for retirement?
- When you get your first job.
- As soon as possible, regardless of age
- When you start college
- When you have paid off all your debt
- What does your FICO score determine?
- How much you have in savings
- Your credit score
- Your interest rate
- The amount you owe the IRS
Correct answers: 1.) b 2.) a 3.)d 4.)b 5.) b