Teachers, we salute you. You work hard every day to make sure your students have the education they need to succeed in the future. And whether they say it to your face or not, your students can tell when you care about them. Your dedication makes an impression that lasts way past graduation.
Another way you show your students daily that you’re invested in them is by helping them navigate the often-confusing world of personal finance. (Remember when you were trying to learn how to be an adult and found yourself staring at an unbalanced checkbook, saying “Why didn’t I learn any of this stuff in school?” Yeah, that won’t be the case for your students!)
It’s true—personal finance isn’t taught in schools nearly enough, and it’s really taking a toll on young people these days. With a $1.6 trillion student loan crisis and a nation full of people who are trapped in a cycle of monthly payments and living paycheck to paycheck, it’s easy to see that something needs to change.1
Are you a teacher? Help your students win with money today!
By teaching Foundations in Personal Finance, you are that change. You’re investing in your students, and guess what? It’s paying off! Students all across the country have told us how much these concepts have helped them feel confident about the future. Let’s take an in-depth look at The Five Foundations and how they’ve impacted students just like yours. Plus, we’ll give you some helpful hints for keeping the lessons fun and engaging in the classroom!
The Five Foundations: A Closer Look
As one of our rock star teachers, you already know that The Five Foundations are Ramsey Education’s basic steps that any student can and should follow in order to kick-start their money success! Because you’re teaching them these principles, they’ll be way ahead of the game when they get into the real world—and who knows, they might become millionaires before they’re even ready to retire!
Foundation #1: Save a $500 emergency fund.
It might sound like a huge deal to get a middle or high schooler to save even $50, especially if they’d rather spend it on Forknife (Forthright? Fort-knight? What the heck is it called?). But with 500 bucks in the bank, they’ll feel confident knowing they can handle a flat tire, a cracked phone screen, or whatever disaster might come their way. And it’s actually not as difficult to save money as they might think—there are plenty of creative ways to stack that cash.
Journal prompts are a great way to help students connect these concepts with their everyday lives. Try asking them questions about times when they’ve wished they had more money saved, situations that have prevented them from saving money in the past, and future goals they want to save for. Then help them reach those goals by giving them some practical strategies for growing their bank accounts. Chapter 3 of our middle school curriculum has some ideas for simple and fun businesses they can start to help grow their savings account, and Chapter 2 of our high school curriculum has a long list of ways to save $500 quickly!
To save $500 fast, your students can:
- Save any allowance, birthday money or Christmas money they get from family
- Have an online auction or yard sale for old stuff they don’t want anymore
- Become entrepreneurs by advertising their babysitting, lawn care or dog-walking services
- Get a part-time job during the school year (if their schedule allows)
- Talk about their money goals with their parents and ask if there’s any paid work they can do around the house
- Tutor other students in academics, music or whatever else they’re good at (this can sometimes pay $20/hour!)
- Work full time during their summer vacations as a lifeguard, camp counselor, etc.
Remind them to create a budget for any money they earn. They should put as much as possible into a savings account or money market account that’s just for their emergency fund. It might be hard to keep from dipping into their savings at first, but once they have that $500 emergency fund in place, they will feel super accomplished—and then they can have more flexibility on how they spend their earnings.
Here’s a fun fact: According to a study done by our Ramsey Research Team, students who completed a personal finance course in high school were over three times as likely to say they’d rather have $500 in the bank than own a smartphone! Seems unbelievable, right? That just goes to show how much of an impact personal finance education really makes on students.
Hailey, a Foundations student, had this to say: “I used to be horrible at saving money. But now I make a budget every paycheck. I have my emergency fund, and I have money left over—which is good because my car seems to break down every month, so the emergency fund is nice to have just in case.” We hear you on that one, Hailey. Cars can be the worst. (Except when you pay for them with cash––more on that later!)
Foundation #2: Get out of debt.
You might be thinking: They’re teenagers! What kind of debt could they possibly have?
Unfortunately, debt can still be a problem, even for your students. Some of them might already have car payments, a credit card, or an ever-growing amount of IOU money they need to pay back to their parents or friends (yes, that counts as debt). And that can really put a damper on their future plans!
That’s why the next step after the emergency fund is to make sure they get rid of any debt they have as quickly as possible by using the debt snowball method.
What’s the debt snowball and how does it work?
No, it’s not a fun, winter-themed activity—it’s a simple and motivating way to get rid of debt! Here’s how it works: Your students start by making the choice to stop going into debt. They should cut up their credit card (if they have one) and start using a debit card and cash only. Then, they list all their debts in order from smallest to largest. They’ll pay as much as they can on the smallest debt, while still making the minimum payments on their other debts.
When the smallest debt is paid off, they roll the money they were putting toward that payment into the payment on their next smallest debt. That way, they’ll pay off their debts quickly and gain momentum, which will give them the push they need to keep throwing all their extra money at those payments until they don’t owe anyone a single cent.
Whenever possible, students love hearing real stories from real people—not only does it help them connect what they’re learning in class to the world around them, but it also gives them hope if they (or their family) are in a similar situation. If you have a story about how you or someone you know has dealt with debt, don’t be afraid to share it with them. It’s okay to be honest if you’re still paying off debt too! It might encourage them to hear that someone they look up to shares some of the same challenges.
You can also check out The Dave Ramsey Show YouTube channel for clips of families who’ve done their “debt-free scream,” where they tell Dave the story of how they got out of debt and then celebrate at the top of their lungs! Show some clips in class to give your students extra motivation.
Getting and staying debt-free will give your students a leg up on their future financial plans and will lay the groundwork for them to cash flow their college degree (more on that later). When we asked Jewel––another Foundations student––about her experience with the second Foundation, she said: “I’m still paying off debt, but I got a second job and paid off my credit card! It’s cut up now––it’s done with! I would definitely say that The Five Foundations have helped me budget better and are guiding me through my financial decisions.” Way to go, Jewel!
Foundation #3: Pay cash for your car.
Maybe your students haven’t bought their first car yet, but they’re probably going to need one so they can stop asking their mom to drive them to the mall to hang out with their significant other. When the time does come to get their own set of wheels, they need to pay with cash.
A decent used car will cost about $3,000, which might sound like a ton to a teenager. If they break it down, though, they could save $300 per month and have enough to buy the car in just ten months. If they saved $200 per month, they could buy their car in fifteen months. That’s not too shabby.
When they put in the work it takes to save up for the car before they buy it (what a concept, right?), the purchase will mean even more to them and will probably inspire them to be a lot more careful on the road. Plus, they won’t have to worry about payments, so they can focus on their next financial step!
Have your students research solid, affordable used cars and do the math on how many months it would take them to save up and pay for it with cash. Then have them adjust the numbers to see if they could buy it faster by saving more money per month. What adjustments would they need to make in the rest of their budget? Are there any wants (like new clothes or lattes) that they could go without to save an extra $50–100 for their car fund?
And just for fun, have them research their dream car and come up with a realistic plan to pay for it with cash!
We promise you: This stuff works (even with teenagers). One of our Foundations teachers told us, “One of my students bought a used car and a brand-new laptop for school. I couldn’t believe it! She went from wanting a $10,000 car on payments to buying a car with cash! I was so proud!”
Foundation #4: Pay cash for college.
Alright, we know this is a big one. But contrary to popular belief, it is actually possible to get a college degree without taking out any student loans. Imagine what your students’ futures could look like without the burden of debt and monthly payments weighing on them!
A lot of high schoolers just accept student loans as part of the college experience—as normal as having a roommate or eating ramen for dinner. But it doesn’t have to be that way, and even though our culture at large won’t tell you this, plenty of students have gone to college without loans. Take former Foundations student Tiffany, who said, “I’ve spent about $80,000 on school, but I will be graduating debt-free thanks to the scholarships that I’ve applied for.” Just imagine how great it feels to get that diploma knowing you don’t owe anyone a dime!
This is another great time to have some real-world conversations with your students. It’s okay to be honest about any student loan debt you have and what you would have done differently, or you could have them talk to family members or friends about their experiences with student loans. Then, give them some practical steps for cash flowing their education.
To fund their college degree without loans, your students can:
- Apply for scholarships. College-bound students today have plenty of resources to search for scholarships. Especially while they’re in high school, they should apply for as many as possible. The more applications they fill out, the better their chances of getting funds! They should also take their GPA and ACT and SAT scores seriously, since those can be deciding factors for colleges in giving partial or full-ride scholarships.
- Find a school they can afford. Your students need to keep in mind that tuition at public, in-state schools is way less expensive than private, out-of-state universities. They should also consider starting out at a community college until they can afford to transfer. Remind them that in the end, where their degree comes from is not as important as the degree itself.
- Fill out the Free Application for Federal Student Aid (FAFSA). This is the form colleges use to determine how much financial aid students can receive. Students can fill it out on a yearly basis to get as much money as possible. This aid can come in the form of scholarships and grants (which they won’t have to pay back) or loans (which they will have to pay back). So be sure to warn them not to sign up for any loans they might be offered!
- Complete a work study or teaching assistant program. Many colleges offer these programs that allow students to work their way through college, even as undergraduates.
- Have a part-time job during college. If they can’t get into a work study or teaching assistantship, a regular old part-time job in their college town will help them pay for their degree.
If your students really stick to it, they can avoid graduating with a mountain of student loan debt and start adulthood off on the right foot.
Foundation #5: Build wealth and give.
What if your students had their car and college paid for and were free to start investing at a young age? If a 19-year-old invested $2,000 per year (or $167 per month) until the time they were 26 and then let the magic of compound interest do the rest of the work, they could wind up with over $1.8 million by the age of 65!2 That’s not a bad way to retire.
If your students can be free to pursue their dreams and goals without the stress of debt, that’s amazing. And if they can start building wealth early so they can leave a legacy for their future family and show incredible generosity to people in need—that’s even better!
Have your students brainstorm different ways they could be generous with their family, friends and strangers—and encourage them to make a line in their budget for miscellaneous giving so they can actually carry out that plan. Even if it’s small, the practice of generosity is what matters most.
Take a look at the journal prompt in Chapter 1 of our middle school curriculum, which asks students to write about a time when they were able to do something for others and how they felt as a result. You might also want to check out the case study activity in Chapter 12 of the high school curriculum and come up with your own scenarios to help your students think about how they could solve serious problems through generosity.
Like Brandon, former Foundations student, said: “The value this class brought me is forever changing my life and my family’s lives.”
As their teacher, when you give your students the tools and knowledge they need to win with money while they’re young, you start a ripple effect—and you never know how many lives it could change.
Want to see how one of your fellow teachers has been putting The Five Foundations into action in her own classroom? Read her Teacher Spotlight here.