We’ve mentioned teaching your kids about money before here on Financial Planing & Budgeting, but we were a little surprised to see that some kids may know more than adults about money. How, you ask? It turns out that in order to become an Eagle Scout when you’re a young boy scout, you have to get something call a Personal Management Merit Badge, which, is mostly a Personal Finance Merit Badge. This may seem like a bit of a joke, but the requirements taught are important financial lessons that anyone should learn. You may want to see if you can go back and earn your own personal finance merit badge.
How To Earn a Personal Finance Merit Badge
1. Learn The Difference in Savings and Investing
This may not seem like an important distinction, and while both are beneficial, it’s important to know what your money is doing. You can save and save a lot, but to invest is to increase, with the knowledge of risk. You should know how to define interest and compound interest and how to measure your return on investment and the risk of that investment.
2. Learn How to Choose Publicly Traded Stocks
To gain your Personal Finance Merit Badge, you can practice by picking five publicly traded stocks from the business section of the newspaper or online. Take note of the current price, the difference of the price from the day before and the 52-week high and low prices. This may seem Greek to you, but it should just be motivation to find out what all of this means and get involved in trading stocks for profit.
3. Learn Different Ways to Save and Invest
If you have enough money to save or invest, look into each of these options and learn all you can about each:
- Common stocks
- Mutual funds
- Life insurance
- A certificate of deposit (CD)
- A savings account or U.S. savings bond
4. Learn How to Effectively Borrow Money
Borrowing money can be a really good thing, or a really … really bad thing. To get your Personal Finance Merit Badge, you need to learn what a loan is, what interest is and what the annual percentage rate (APR) is for a loan and what that means. Learn all you can about credit cards and charge cards and the best way to pay them off. And, last but not least, learn the best way to pay off debt.
I think we can all agree, learning these skills at a young age would’ve been very helpful and are helpful to those who are still young and have the chance to gain such financial knowledge. However, just because it’s something a boy scout would do, shouldn’t stop you from learn all you can and improving your financial knowledge and situation.
For an indepth look at what goes into earning a Personal Management Merit badge, visit here: Personal Management Merit Badge.
You can also download the Personal Management Merit Badge Worksheet here: Worksheet.