Five Things College Students Should Know About Their Finances
Finance (Photo credit: Tax Credits)
College is a time where people learn a lot about themselves. They have a lot of fun, learn a lot of lessons and sometimes go into a lot of debt. This debt follows them after graduation, so students should be aware of their finances and learn to start managing them before they leave campus and enter the real world. Here are five things college students should know about their finances:
1. Budget Simple
The most important thing college students should understand about their finances is simple budgeting. They should know how much they make and how much they spend so they can form an appropriate budget. After knowing their budget, having the discipline to stay within that budget is the bedrock of a solid financial life.
Basic budgeting is the most important thing that everyone, not just students, should know about his or her finances. However, it is especially important for college students to understand their budgets so they don’t have to take out more loans than they need to. This might mean that they have to live a little less lavishly than when they were younger and living at home, before the burden of financing a college education.
2. Keep Good Credit
The second thing students should understand is the importance of keeping good credit. Students need to pay their bills on time and not take on any more debt than they can afford. So many aspects of adult life are dictated by credit scores today, making it crucial that students now more than ever cultivate and develop good credit as early as possible. Students’ abilities to get the job that they want or the house of their dreams will be determined by how well they have managed their debt.
3. Save and Invest
Another thing students should know about their finances is how to save and invest. Saving and investing is a skill set that needs to be trained and developed just like an exercise program. The sooner that one starts, the easier it is. It might hurt a little bit at first. If a student waits ten years after graduation, when all they have been doing the whole time is spending and spending, then starting a savings program is going to feel like torture.
A good way to start saving if you haven’t had a defined savings program before is to set up an automatic investment program. These work each month and most will let you start out with as little as $25 or $50 a month. If you start small like that, ten years down the road putting away 10% of what you make will seem easy.
4. Recognize Needs vs. Wants
Students should learn the difference between what they “need” and what they “want. Spending should be prioritized around the difference between the two. Sometimes it is easy to forget that a lot of things we spend our money on are things that we want. If you buy something that you want frequently you can forget that it isn’t really necessary, so sometimes it is good to take a step back from all your purchases and organize them into categories of what you want and what you actually need.
5. Knowledge is Power
As with many other areas of life, knowledge is power when it comes to personal finances. The more students know about how personal finances work, the better decisions they will be able to make about how to save and invest their money throughout their lives.
Gregory M. Reed is a Certified Financial Planner (CFP®), who works with Raymond James Financial Services, Inc., and is a member of FINRA and SIPC. He’s located at 3201 S. Providence Road, Ste. 102 in Columbia, Mo 65203 and can be contacted at 573-777-1934. Visit his website for more information about financial planning.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Gregory M. Reed, CFP® and not necessarily those of RJFS or Raymond James.
Category: Family Finances
