How early is too early to teach children money lessons? Most experts agree that it’s never too early. Teaching children basic financial lessons early on in life sets a good foundation for their financial future. At the latest, every child absolutely must learn basic tips and financial advice for college students before leaving home.
For many college students, this is the first time they are away from home. This is also the first time they’ll be facing the prospect of making independent decisions. Does your student know how interest works on student loans? Do they know how to budget or how to use a credit card smartly? Understanding how basic money mechanisms work is the key to making the right decisions.
We’ve put together some important tips that every student should know about managing finances in college.
Financial Advice For College Students
1. Learn how to create a budget
Most college students are on a tight budget. The cost of tuition, fees, boarding, and accommodation leaves very little room for luxuries. If you’re not careful, they’ll run out of funds very quickly.
Creating a budget will give you a clear picture of how much money you own. From this, you’ll have to allocate a large chunk towards essentials – fees, dorm, stationary, textbooks, and food. Now you can see exactly how much you have left for nonessentials. Without a proper budget in place, it’s impossible to track your expenses. And you’re more likely to spend more than you have.
2. Cut down costs where you can
It’s tempting to splurge on the latest gadget to keep up with your classmates. And, without having anyone to account to, it’s easy too. While owning the latest gizmos may make you appear trendy, ask yourself, it is worth it? Do you really have spare cash to throw away on frivolous items? How could you put that money to better use instead?
You’d be wrong if you thought saving a few dollars won’t make a difference. Those few dollars will add up over time and make a huge difference. For example, you can put that money towards paying off student loans early. Doing this will help you graduate with far less debt than your peers. It also means you’ll pay les in accrued interest AND you’ll pay off your debt much earlier.
Don’t under-estimate the power of saving those few dollars. You can do a lot with it.
3. Get a credit card and learn to use it smartly
It’s a misconception that college students shouldn’t get a credit card. Credit cards offer several benefits to college students. You save money with cashback and other discounts and offers. It allows you to buy something you need but don’t have cash on you. And it can come in really handy in an emergency. The biggest benefit of all is it can help you build your credit score.
But, you’ll only enjoy the benefits of using a credit card if you use it properly. Abuse your credit card privileges and you’ll find yourself getting deeper and deeper in debt.
Learning how to choose and use a credit card is one of the more important financial lessons for students.
4. Don’t use credit unless you can afford to pay it back when it’s due
Your credit card has a credit limit. You can purchase anything you want up to that limit. But remember, buying something on credit doesn’t mean it’s free. Not at all. You’ll have to pay that full amount back by the due date.
When using your credit card, don’t spend up to your credit limit. Instead, spend only what you can afford to pay back by the due date. You have about 30 days from the day you use the credit till the time you have to pay it back. That due date will come by a lot faster than you expect. And a lot can happen in that time. Best not to over-spend and hope to get the money by the due date.
As a best practice, don’t use credit unless you’re 100% sure you have the money to cover it on the payment date.
5. Learn how to build good credit
A good credit score can open many doors for you. It’ll make it easier for you to get a mortgage, credit card or auto loan. What’s more, you’ll pay a lower interest rate too if you have good credit. The best time to start building credit is now, as a college student. It’s not too difficult either. The most important thing to do to build good credit is to make all credit payments in full and on time.
Take time to learn how to build your credit score while you’re in college.
6. Only borrow what you need- no more
Getting student loans can be quite easy even with no credit history. But just because you can, doesn’t mean you should. Thinking about taking extra in student loans ‘just in case’? Don’t! Student loans are not free. You may not have to make payments while you’re in school but those loans are accruing interest right through. Those payments will come due with interest six months after graduation.
Don’t be tempted to borrow than you need. Only borrow exactly what you need for tuition, fees and basic essentials. No more. You may have to do without some luxuries right now and that may hurt. But you’ll be relieved when the time comes to pay back that debt.
7. Make it a habit to check your bank account and credit card statements regularly
Wrong entries in your bank account or credit card statement can upset your carefully planned budget. For example, you may be charged for something you didn’t actually purchase. Or you may be charged twice for something you did purchase. Your bank statement may show ATM withdrawals that you’re sure you didn’t make. Unless you check your statements, you won’t know about these inaccurate entries. And you’ll pay the price for no fault of yours.
The sooner you spot an inaccurate entry, the sooner you can get it resolved. Sorting out recent mistakes is so much easier than trying to correct an entry going back several months.
Establishing good financial habits even before you start college will hold you in good stead throughout your adult life. You’ll find lots more financial advice for college students here.