A recent Money Matters on Campus survey revealed that more than 40% of new college students didn’t feel prepared to manage their money. Some were reluctant to even check their bank accounts for fear of what they might find. Clearly, some advice would be helpful.
Basic financial management skills are much easier to learn before becoming financially independent, as there are fewer financial factors to consider. Knowing a few basic principles now will leave you better equipped to deal with more complicated matters down the road, such as mortgages, healthcare and tradeoffs that may need to be made in retirement.
Start with these five basics.
Although most college students are more likely to consult an app than an actual paper bank statement, it’s essential that you understand what you're looking at. Understand any unfamiliar terms, such as “posted” vs. “available” balance to know exactly how much cash you have on hand.
College students are easy prey for predatory lending practices. Learn how to recognize the differences between good offers and bad ones. While it’s important to establish a credit history, it’s even more important to understand how credit works and how to use it responsibly.
Building a solid financial foundation requires understanding the difference between wants and needs. Since most young adults have had their needs taken care of by their parents, they’re used to spending their own money on wants. As they grow older, it’s crucial they learn to put needs before wants.
The sooner you learn to budget, the easier it will be to grasp the basic skills. Learn the importance of developing a plan for your income and how to prioritize. Perhaps build a spreadsheet or set up an app to track and categorize expenses.
Learn to think beyond today, and be encouraged to save for the future. It’s never too soon to save for retirement and to start thinking philanthropically. And everyone can use a rainy day fund to help get through the unexpected.