Guide / Finance / 9 Money Lessons Don’t Teach You at School

9 Money Lessons Don’t Teach You at School

Updated on May 19, 2022 | by Alena Maxwell

Have you ever thought that money is difficult to manage? There are money lessons that we were never taught in school.

In this article, I want to share valuable money lessons that will help you understand how money works. It allows you to know how to take advantage of it and stop thinking that it is a topic exclusively for financial experts.

Like other aspects of your life, money plays a fundamental role. And it is mandatory to learn how to manage it so that it works for you and not the other way around. So, let’s look at those money lessons they didn’t teach you in school.

Inflation

Have you ever heard of this concept, and do you know what it means? Inflation shows you the purchasing power of money. The more inflation goes up, the less purchasing power your money has.

In other words, inflation tells you how much your country’s prices of goods and services are rising. So, inflation of 10% means that the prices of products have increased, on average, during the year by 10%.

Compound Interest

Compound interest is cataloged as the eighth wonder. And it is arguably responsible for the wealth of many millionaires. 

What compound interest does is that it multiplies money as a function of time. And the more time that passes, the more likely it is to grow. 

What is the reason for this growth? The interests that your invested capital generates become part of your capital so that the interests will be greater each time.

If you invest 10 dollars at a 10% annual rate, you will have a profit of 11 dollars the following year. When reinvested, your capital will no longer be 10 dollars, but 11 dollars, which will leave you with an annual profit of 12.1 dollars, and so on. 

Start investing as soon as possible to take advantage of compound interest with your money. The sooner you do it, the more time your capital will have to multiply. For example, you can invest in the stock market and let your money follow the market. The key is not to take your money out of it and take a long-term view. 

Invest from a Young Age

As I mentioned in the previous point, you must invest from a young age. On the one hand, you will be able to take advantage of compound interest, and secondly, you will develop a long-term mentality that is fundamental to building your wealth. 

If you have never invested, this does not mean that it is useless or that you missed your chance. While your money may not have as much time to grow, it is preferable to start investing what you have today and not keep putting this off. Suppose you’re a student – you could spend your money to hire a writer from an essay writer service (which is helpful too) or buy new clothe… Or you can save them and invest them. I think that the last choice is better for your financial future.

Many people believe that the formula to become millionaires is some secret trick or a method only available to a few. They are very wrong.

The formula has always been clear and revealed: if you want to build wealth, you must save, spend less than you earn, and invest your money in such a way that it grows for you, regardless of your work, and reap the benefits of compound interest over the years. 

Good Debt vs. Bad Debt

Understanding the differences between the two types of debt is one of those money lessons they don’t teach you in school, and it’s critical to good financial health.

Bad Debt:

It consists of that debt you incur to solve short-term needs or cravings, which do not generate future profits or returns, and whose value depreciates. All emotional purchases, desires, and things you acquire because you don’t have the money available and access through debt constitute bad debt.

Good Debt:

Unlike bad debt, this type of debt allows you to have capital that will be used to generate additional income. It is the case of obligations to invest in a project, for your education or training, to start a business.

Beyond destroying value, these debts are capitalizing on you to invest that money in a project whose profitability will generate enough cash to cover the interest on your debt and keep a surplus. Good debt is how financially intelligent people decide to work with other people’s money.

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Currency Devaluation

Think of this concept as the amount of local money you must give to receive one dollar or one euro. The more you have to offer, the more your currency is devalued. That is, it’s worthless.

Your purchasing power is reduced. If you want to take a trip to the United States or any other country, you will need dollars. And for this, you will have to give more local money.

Cryptocurrencies 

The world economy is completely transforming from the blockchain that seeks greater security in capital transactions worldwide, with greater privacy and without relying on governments, and as a new cryptocurrency investor, there are several things to know.

It is mandatory to learn how these cryptocurrencies work, how many exist, the different investment options you have with these digital assets, and how to invest in them. This goes beyond Bitcoin, as there are hundreds of cryptocurrencies, investment platforms, and wallets to store your virtual coins.

Another thing worth mentioning is that there are applications like JumpTask, that offer a risk-free way of getting cryptocurrencies. This doesn’t require any initial investment and it is totally up to you on how and how much you will earn. With these apps, you can do various micro-tasks like watching ads, rating apps, doing surveys, etc., and in exchange get paid in cryptocurrencies. This is a perfect option for those that want to get acquainted with the world of cryptocurrency without having to invest. 

Invest for the Long Term

A Chinese proverb says that “the best time to plant a tree was 20 years ago, the second-best time is now”. This truth applies to your investments.

We often feel guilty for not having started investing our money much earlier. We think it is too late for us and that we will not achieve the expected results.

However, the best time to invest your money is now. You should start today and have a long-term investment horizon.

Concept of Frugality

Let me ask you a question, what image do you have of the richest men on the planet? Generally, the vast majority assume that they are people with ostentatious habits who squander their money and lead an expensive lifestyle.

The common factor found among people who have accumulated more than a million dollars is that they lead a frugal lifestyle; they are not interested in living for appearances and are more interested in making money work for them instead of spending it on luxuries.

What’s the point of making a million dollars if you’re spending twice as much? Learn to control your expenses and lead a frugal lifestyle. This is one of the money lessons that we were not taught in school and that we should apply to our lives.

Conclusion

To conclude, I would like to invite you to start investing in your financial education; either through financial books, courses, articles on the Internet, audiobooks, counseling, or any other resource you have.

One of the worst mistakes schools make when it comes to money is that they have led us to believe that finance and money management are only for financial experts. We have been sold the idea that it is a complex subject, that we need advice, and that we should delegate its management.

It is why we never start investing money, we ask for credit cards without knowing how to manage them, and we end up paying interest and debts due to financial ignorance.

If you want to avoid these economic problems, start studying on your own, understand how money works, understand the basic concepts of investment, and take care of your current financial situation.

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