It seems that we live in a world with very different strata of financial awareness.  On the one side, the savvy investors of today have all the information they could possibly need at the tip of their stylus, and they know how to use it.  On the other side, there are a lot of people who do not use some of the most fundamental tools at our disposal.  I really wish that high school would focus a bit more time on financial awareness, considering how important a life skill it is.  Here are a few tips that I’d like to share with today’s youths (and anyone else who might need them).

Balance the checkbook

I know a lot of people never balance their checkbook, preferring to leave a “buffer” amount in checking to cover any mistakes that may occur.  Some people don’t even bother to make an attempt to keep track of transactions.  How often does someone in front of you pay with a debit card and not take the receipt?  Maybe the person has a great memory and remembers that McDonalds was $6.14 … but it’s more likely that the transaction is never getting logged.

Balance the checkbook every month, to the penny.  You’ll avoid overdrafts and you’ll sleep a little better knowing that your finances are in order.

If you have have never done this, if would take a bit of practice.  However, the process is pretty straightforward, and you should be able to master it pretty quickly.  Basically, it is a 3 step process.

  1. Write down the balance on your last bank statement
  2. Add any deposits that have been made (or processed) since the date of that statement
  3. Subtract any checks (or debit card transactions) that had not yet been processed by the bank on the data of the statement

Voila – you should have the balance that appears in your checkbook.  It might take some practice, and you might spend time tracking down occasional mistakes (especially if you have sloppy handwriting like me) but if you keep on top of it, it will quickly become second nature.  If you use software such as Quicken, it’s even easier.

Understand the tax system

I’m not suggesting that  everyone become a tax expert.  However, it would be nice if more people had a grasp of fundamental concepts such as income, deductions and credits.  Start with the easiest form – the 1040EZ.  Interestingly enough, the IRS actually published instructions for all of the tax forms.  You might be surprised at how thorough the instructions are.  Push aside tax phobia and read the instructions.

Understand unit prices

Until recently, it was a safe bet that the largest package of an item resulted in the lowest price per unit.  However, I have noticed some instances lately where this is not the case.  If you’re not good at mental math, bring along a calculator to help you determine if the 12, 18, 24, or 30 pack of Charmin is the best deal.  If you think that a caculator would kill the cool persona you have been grooming for years, pull out your cell phone and use the built in calculator – you can pretend that you’re texting someone.

Other topics

These are just the tip of the iceberg.  Once you get this far, charge onward.  Learn about mortgages (What are points?  How much more will I pay for a 15 year mortgage vs. a 30 year?  How are property taxes calculated), retirement plans (Roth vs. 401(k)), and the stock market (How much risk should I have at my age?  What is an indexed fun?).  Money is an important component of today’s society – those who work to improve their knowledge of personal finance have a leg up on those who do not.

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Kosmo is the founder of The Soap Boxers and writes on a variety of topics. Many of his short stories have been collected into Kindle books.

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