Top Financial Literacy Tips for College Freshman
Last week Governor Jerry Brown signed AB 166, an amendment to the Education code that requires California’s board of Education to implement financial literacy education in middle and high schools. Kids in California from the 7-12th grades will have to learn the ins and outs of basic personal finance. And while this is a great move, today’s incoming freshman might not have had such courses.
Aysha Pamukcu, at the Greenlining Institute told NerdScholar, “Today, teaching financial literacy to our high school students is a necessity. We can’t expect teenagers to automatically know how to handle credit cards or tens of thousands of dollars in student debt. Thanks to AB 166, students don’t have to be thrown into the financial deep end after graduating high school.”
In fact, today’s entering college class of 2017 is part of the 61% of American adults who are financially illiterate, according to an Investor Education Foundation study. Although California’s new efforts to implement financial literacy into their schools’ curriculum is in motion, today’s young college students need apt preparation to deal with the financial challenges of being in college and beyond.
From not blowing leftover financial aid money and properly budgeting to getting a part-time job to cover basic living expenses, NerdScholar talked to experts to get the tips that students can use to quickly and easily adapt to their new lives away from home.
Here are the 4 top financial literacy tips from the experts:
- Make sure you have good savings and checking accounts
- Make a budget and establish financial goals
- Be smart about building your credit
- Create money-saving habits
Get good savings and checking accounts
Entering college and being on your own means that you should have an established trustworthy savings and checking account. So do your research and figure out what accounts can work best for you.
When you are choosing a student checking account, you should consider three factors: accessibility, low fees, and other bonuses. Can you access the ATM on campus? It’s ideal if you can access your bank’s ATM machines on campus so as to avoid any extra fees. Convenience is key when most of your energy will focus on studying. Mitchell D. Weiss, Professor in the University of Hartford’s Economic and Finance Department, warns students, “about how repetitive ATM use (which most young adults do) can lead to budgeting problems, overdrafts and foreign ATM fees.” Knowing where there are available ATMs and having them be at a convenient place can help save you money on unnecessary fees.
The next step is to find out if you have to pay a monthly fee. Monthly fees can add up but the good news is that you can avoid them.
Rosemary Ferrucci, Associate Dean at New York Institute of Technology’s Office of Financial Aid emphasizes that “All college students should have a checking account and know how to balance a check book.” If you don’t know, don’t fret. You can always learn but keep in mind that the most important thing is to be aware of how much money is coming in and how much money you are spending.
Additionally, Ferrucci says that “If there is a refund provided from borrowed (student loan) money, deposit it directly into the highest interest producing account you have (e.g. money market or savings or checking) and only withdraw as much as absolutely needed, for EDUCATIONAL expenses.”
Having the right accounts will be the basis for being keeping track of your money during your first year of college and beyond. Try a checking account comparison tool to make sure you’re getting the best deal.
Make a budget and establish financial goals
Before you start your classes you should create monthly budgets for the semester that includes all expenses—your books, sorority/fraternity formals, and other expenses that may pop up. That said, you should also keep a broader school year budget in mind.
Professor Rakesh Gupta, at the Robert B. Willumstad School of Business at Adelphi University, advises students to “make a monthly budget [or a time frame that coincides with your paycheck]. Put it on paper [or spreadsheet] so that you can monitor your income and expenditures; review it regularly.” Make sure that you are aware of how much money you are spending so that you have enough to cover your basic living expenses.
Paul Goebel, Senior Director of the University of North Texas Student Money Management Center shared the best way that students could successfully budget in college, “Start small and stay strong. Find a method of budgeting your money that’s easy and works for you whether it’s an online program, software, or pen and paper. Start with a limited budget and stay committed to planning, tracking, and reviewing your money throughout the month. These basic money management skills will stay with students from their first day on campus to years after they retire. Students should seek out the support and help of their campus’s student money management center for free assistance.”
Additionally, you should be proactive and take full advantage of the financial literacy programs universities host for students. At the University of North Texas, their Student Money Management Center provides a wide array of workshops and class presentations in personal finance and they even have “Money Coaches” to help students strengthen their money skills. There are plenty of free resources that you can use to learn how to manage your money better, it’s up to you to use them.
Be Smart About Building Your Credit
One thing that is good to start thinking about upon entering college is building your credit. One day you are going to be shopping for a car or a mortgage and your credit will determine how affordable your loans will be. There are several ways to building credit—by having a credit card or by having student loans. You have to be careful with how you use credit cards, however.
Rosemary Ferucci, Associate Dean at the New York Institute of Technology, recommends, “ shopping for a credit card w/ some type of ‘reward’ (cash back or low interest rate or perhaps travel miles) so that they can use it if they must charge. There are times that a student may need to pay an open balance for school and with the card they will be able to do time payments and at least they will get the reward (miles to use to travel home at break, or cash to pay for books) by using it.” The key is to pay the balance in full and on time.
When it comes to student loans, there will come a point where your debt to income ratio will begin to impact you. Ideally, you would want your debt to income ratio to be low so that your credit score is strong. Ferucci also says, “Credit history is important for a student. One of the issues I always discuss is that borrowing loans for your education can be a way to build credit.”
Create money saving habits
Your school ID has the power to help you create the most effective money saving habits. This can get you so many discounts! In addition to taking advantage of low cost and free events on campus, Kristen Blasé, Director of Financial Services at New England College, tells us that “Many local and national retailers and restaurants offer student discounts so students shouldn’t be shy to ask if they can receive a student discount.” New England College and many other schools provide students with a summary of low cost/free events so make sure that you are checking that out.
And whenever you think about purchasing something that you don’t really need, take a step back to think about if you really need it.