Personal finance lessons for college students
Leaving home and heading for college is exciting and daunting at the same time. A whole new set of responsibilities are thrust upon the shoulders of these young adults. Financial obligations suddenly become real.
Financial Literacy Challenges for Teens
Recent studies found that 73 percent of teens reported needing to learn more to feel that they’re financially literate. Three-quarters of teens said they lacked confidence in their personal finance knowledge.
To some, it might feel like setting out to sea for the first time, excited but as yet, untested. College students need guidance to navigate their finances and build a secure financial future.
Understanding Budgeting
Budgeting is the art of managing your money wisely. It’s about balancing what you earn with what you spend to ensure your financial ship stays afloat. Think of it as a map that helps you manage your resources, prioritize your money goals, and avoid financial problems.
“In essence, budgeting is about taking control of your financial destiny. It’s not about limiting how much you spend, but making sure every dollar has a purpose and matches your financial goals,” advises David Beckerman, Senior Vice President of David Lerner Associates. “Budgeting is a dynamic process -life’s currents may change, requiring adjustments to your financial course.”
Creating a Personal Budget
Creating a personal budget is like plotting your course on a map. It starts with listing your sources of income, including your salary, side hustles, and any other funds coming your way.
Next, catalogue your expenses, label them as either fixed (like rent or mortgage) or variable (such as groceries or entertainment).
Once things are in order, deduct your expenses from your income. Aim for a surplus after all the money that has to go out or, at the very least, try to get to a point where you are breaking even. You can then direct this surplus toward savings or debt reduction.
The Critical Role of Tracking Expenses
Tracking your expenses is the lighthouse that keeps you from straying into rocky financial waters. Without a clear understanding of where your money goes, it’s challenging to make informed financial decisions. Keep track of all your expenses, down to small things like coffee as well as regular bills. This will help you see how you spend money and find ways to save or manage your finances better.
Building and Maintaining Credit
Basic budgeting is the foundation upon which college students will build a financial future. Once they have mastered budgeting they can begin to build and maintain credit.
Credit, often referred to as your financial reputation, is an essential component of modern financial life. It’s not just a number but a reflection of your trustworthiness in the eyes of lenders and financial institutions. Credit is important for getting loans, good interest rates, renting an apartment, and getting a dream job.
Why Credit Matters and Tips for Using It Wisely
- Access to Financial Opportunities: Your credit score opens doors to financial opportunities. A strong credit profile allows you to qualify for loans, credit cards, and mortgages with lower interest rates and better terms. This can translate into significant savings over time.
- Lower Borrowing Costs: Good credit doesn’t just make borrowing accessible; it makes it more affordable. Lenders reward borrowers with high credit scores by offering them loans with lower interest rates. This means you’ll pay less in interest over the life of a loan, saving you money.
- Rental and Housing Prospects: Landlords often use credit checks to assess prospective tenants. A good credit score can make it easier to secure a lease on your desired rental property. It’s a testament to your reliability in meeting financial obligations.
- Employment Opportunities: Some employers check credit reports during the hiring process, especially for roles that involve financial responsibility. Maintaining good credit can boost your chance at getting a better job by demonstrating your financial responsibility. If an employer searches your credit history and finds a horror show you probably won’t get hired.
The journey to mastering your money is an ongoing process, but it promises a lifetime of rewards. Implement these personal finance lessons immediately to fortify your financial foundation. Financial literacy is important for managing money and ensuring a successful future with opportunities and peace of mind. With knowledge as your guide, you can confidently navigate personal finance and reach financial success.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.