First off, you are a student and that is a job. Focus on your academics. With that said, financial literacy has never been more important. For most, college is our first taste of financial independence, and it comes with more responsibility. Managing money is not just about budgeting for rent and groceries; it's also about understanding the long-term consequences of financial decisions. Without proper financial education, you can easily fall into the trap of overspending, accumulating credit card debt, or underestimating the burden of student loans. In this article we’ll help you understand key financial ideas and avoid common pitfalls.
Budgeting
In college you may have to manage limited funds—-balancing the costs of tuition, textbooks, housing, and day-to-day living expenses. Learning how to budget early on can help you avoid financial struggles. It’s essential to track income (such as allowances, part-time job earnings, or student loans) and plan expenses accordingly. Setting aside a portion for monthly savings—even small amounts—can help build good habits that will last a lifetime.
Credit Management
While credit cards can be useful tools for building a credit history, they can also lead to significant debt if not used wisely. Understanding how credit works, including interest rates, fees, and the importance of paying bills on time, is crucial! Mismanaging credit cards in college can lead to long-term financial difficulties, including poor credit scores, which may affect the ability to secure loans, buy a car, or even rent an apartment in the future. But it's always better to be safe than sorry, and if you're concerned about the responsibility of a credit card, don't open one.
Writer's Tips
Pay off your debt month to month (set up autopay to make sure you pay even if you forget) This is the single best way to build good credit!
Mastercard and Visa cards are the most commonly accepted cards.
Be careful about cards with foreign transaction fees if you go international,
If you’re going to withdraw cash, use a debit card (unless you want extra withdrawal fees).
Get a card with .5-2% cashback (categories/other rewards are just annoying).
A credit card is no excuse to spend more money! You still need to pay!
Navigating Student Loans
Understanding the nuances of student loans—including federal versus private loans, interest rates, and repayment plans—is vital. Taking out loans to pay for education is often necessary, but you need to manage the long-term impact and debt. Make sure you understand the options available for repaying student loans. For instance, federal student loans often come with more flexible repayment options, such as income-driven repayment plans or deferment during financial hardship. Ensure you are aware of loan interest and the repayment terms. You may consider starting early on making payments—even small ones—can help reduce the long-term burden of student loans.
Taxes
If you’re earning an income, either from a part-time job on campus, a summer internship, etc. you’ll need to consider filing a student income tax return if your earned income exceeds the minimum income to file taxes. Beyond wages, you should also be aware of unearned income, which includes interest, dividends, or investments.
However, if you meet the IRS guidelines, your parents can claim you as a dependent and you don’t have to file taxes. One of the requirements is the student must be related to the parent by blood, adoption or fostering, under 19 or under 24 if a full-time student. However, you should do your OWN research!
Beyond College: Financial Literacy for Life
Transitioning to adulthood involves handling new financial responsibilities, including rent, utilities, insurance, and savings. Learning to invest and understanding the concept of retirement savings (accounts like a 401k or Roth IRA) should be on your radar, even if you don’t plan to have one soon. As long as you have income you can start to invest in regular investment accounts or retirement investment accounts like a Roth IRA (do your own research!). The earlier you start saving and investing, the more time money has to grow, thanks to compound interest. Joining a finance-related club in college is a great way to introduce yourself to the world of finance without putting your money on the line.
Writers tip: start investing early with small amounts in ETFs that track the total US stock market .
Conclusion
The basics of personal finance like setting financial goals, managing debt, understanding taxes, understanding credit, and saving for retirement become even more crucial after college. As you graduate and transition to working full-time, you will navigate a new set of challenges. Saving for big expenses like buying a car or a house, paying off student loans, or building an emergency fund should be priorities. Without financial literacy, individuals may find themselves living paycheck to paycheck, unable to manage unexpected expenses, or burdened by excessive debt.
Bonus tips!
Talk to your friends and family about finance.
Do your own research and talk to professionals.
Cars are generally not good investments. A new car you buy will depreciate by 20% value within the first year and will generally continue to decline in value!
Investments in the US stock market have increased an average of ~10% every year for the past 20 years.
When you have money you should do things in roughly the following order: save money, pay off debt (loans, credit card, etc.), create an emergency fund in a high yield savings account that covers 3-6 months of your living costs (rent, insurance, food), contribute to a retirement account, and invest money. You can do many of those things in parallel, but that is the rough order of importance.
If you still have any lingering questions, why not schedule a consulting session with one of our experts at Hermiona and learn how you can make the most of college!
Please note that all advice and opinions expressed in this article are the writer's; it is essential to do your own research and seek professional financial advice if you need it.
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