Accounting 101 & Today's Youth

There is a major importance of giving our youth a basic foundation in accounting. When I say accounting, I don’t necessarily mean debits and credits, but rather the fundamental accounting tools they will need to be successful in life regardless of which career path they choose.

As I get older, I’m encountering more and more young adults that have made some critical mistakes when it comes to their personal finances, but they are mistakes that could have so easily been avoided with understanding the right principles and a little bit a guidance.

The following are accounting skills and fundamentals which I believe should be part of a mandatory course for all high school students.

Budgeting/Forecasting:

Budgeting and Forecasting is not something that should only concern a Fortune 500 company. Continuously through adult life, there is a need to understand the concept that expenditures cannot be greater than the cash flow coming in. Depending on when you make the move away from your parents’ nest, this might become a harsh reality directly after grade school.?

For the average teenager, while they do understand that money does not grow on trees, they sometimes don’t realize all the expenses that are part of living on your own and the newfound stress they may encounter after becoming financially responsible for themselves.

Laying out all the regular known expenses and making sure there is a plan in place for proper saving for the unexpected is an invaluable skill that all young adults should possess. Not only will this help them stay on track but may alleviate unnecessary panic and problems for them in the future. Now more than ever, with the ability to purchase whatever your heart desires at the tap of a card, or swipe of a finger, youth need to be more conscious of what their spending habits really are.

Credit Cards & Lines of Credit:

To me, debt has a slightly negative connotation, however, sometimes debt is necessary and makes sense, but what today’s youth need to understand is how debt works and the snowball effect that can happen after a swipe of the plastic.

For the average teenager, they do understand that at some point they will need to pay back the balance they have accumulated on their credit card or personal line of credit, but their understanding falls short when it comes to interest.

By having a basic knowledge of how interest is calculated and whether the percentages being offered are good or bad, youth would be aware of the adverse effects that would come with the non-payment of balances. With the accessibility of credit being reasonably robust to youth, having the awareness of the importance of rate selection, payment dates, and total cost of interest over time would also provide the added benefit of teaching accountability and respect for deadlines. ?

Renting vs Buying:

Unless they plan on living in their parents’ basement forever, at some point in every young adult’s life they will need to decide if renting or buying is the right next step for them. There are so many different factors that need to play into this decision. Some examples of these components to consider would be short-term and long-term living plans; current and predicted market conditions; interest rates; and overall spending budget. The previous two areas of discussion go hand in hand with making the right decision on whether to rent or buy. It’s not enough to just understand the current real estate market, many elements must be considered, and this is where having a basic understanding of fundamental accounting would aid in guiding young adults to the decision that is going to be most beneficial for them.

Aside from gaining the knowledge of various life skills, a basic accounting course in high school might trigger a passion in someone that they did not know existed given they never had any exposure to the subject.?Many people hear the term accounting and immediately associate it with numbers and calculators and anyone in the profession is automatically a boring “bean counter”. That couldn’t be further from the truth, especially with the all the new and exciting changes in technology and rapidly evolving business environment.?

At a minimum, high school students should be informed that accounting and business-related university and college majors are always amongst the most profitable professions. Accounting is a skill that can open so many other doors and there are a vast number of different areas of expertise that you can choose to focus on. With constant changes in financials laws, corporate governance regulations, and just worldwide growth in general, the need for accounting positions is far from declining.?

In every person’s life they will come across more than one situation where they could utilise accounting, whether they realise it or not. Being armed with the foundational skills required in these circumstances would prove advantageous and hopefully prevent people from making a mistake they may carry with them the rest of their life.