4 Ways to Get Students Financially Fit
From learning new routines to understanding graduation requirements to finding their way around campus, incoming freshmen have a lot on their minds. But there's an essential element to starting out that sometimes gets lost in the shuffle; becoming financially literate. Without this crucial knowledge, students risk making financial errors that are costly hurdles to overcome.
With the proper guidance, students can learn to manage their finances like a pro. Plus, learning good money habits today, can lead to achieving financial freedom in the future. All while building better credit scores, limiting stress and improving their ability to make sound choices.
FAIRWINDS is here to help freshman start out on the right foot with these four lessons that are essential to becoming financially fit throughout college and beyond.
Create a budget:
It's difficult to overstate the importance of creating and sticking to a good budget. In doing so, students will gain a clear picture of where they stand financially, and if they can truly afford daily visits to the campus barista or treating friends to sushi at the Student Union. Moreover, they'll hone a crucial skill that's needed throughout life.
Start by jotting down all income sources (i.e. part-time jobs, scholarships, financial aid, grants), and break it up into manageable monthly increments. Next, factor monthly expenses. Be sure to account for every expense; from tuition to tacos. Students can gain insight into their expenses by tracking their purchases. This will help them identify how much to set aside for food, self-care and miscellaneous purchases. Lastly, compare expenses to income and confirm that they balance out.
The end goal is to ensure expenses don't exceed income, and that there's a little cushion of cash leftover. If students discover there's an imbalance, it's time to cut back or seek additional sources of income.
Start saving a little:
It may seem like a bit of a stretch to tell a financially strapped student to save money, but the fact that they're faced with thin margins is even more reason to save. When starting out, students can save just a few dollars every week. This will multiply with time, and establish an important habit
The money students save can be there for them when faced with an emergency. They can even make plans for some of their savings, like buying a bike or taking a trip with friends; whatever motivation they need to stash away their extra cash, instead of blowing it on fast fashion or dining out.
Use credit cautiously:
Credit cards get a bad rap. But it's not always the credit card that’s bad. It’s credit card abuse that can land cardholders in hot water. Instead of demonizing credit cards, students should learn responsible use. That way they'll know what to do with the card when the time comes to get one. First and foremost, this means paying the balance in full, monthly. Carrying a balance — especially in college when income is both scarce and unpredictable can be costly once interest rates are factored in. Not to mention, students may find they're unable to pay back what they borrowed — damaging their credit.
If students feel they are responsible enough to begin building their credit, they'll want to start small. Really, really small. One way to that, is to use the card for an inexpensive bill that they can pay off right away, like a streaming service or monthly membership. It’s important that they not rely on the card for emergencies if they don't have a plan to pay it off soon. Instead, they should look to their savings or other resources to cover those costs.
Spend money smartly:
Tracking expenses isn't just for creating budgets, it can also reveal how much is spent on late-night takeout and afternoon pick-me-ups. What may seem like a few dollars today, could pile up over time. Realizing this can help students recognize when they’re spending unwisely. To make the slicing and dicing of spending automatic, employ a digital solution. For instance, FinanceWorksTM is a tool available to FAIRWINDS members through online banking, so they can see their spending analysis and account details side-by-side.
Beyond tracking what they've already bought, students will want to determine their spending priorities by comparing needs against wants. Items in the "need" category should be given priority. While items in the "want" category should be given greater scrutiny, and purchased after their needs are met and they've contributed toward their savings.
At the end of the day, students are bound to have a little slip up here and there. These are teachable moments, and should be handled gently. That way students can be confident in seeking help immediately if trouble arises again. Financial follies are much easier to fix if addressed sooner rather than later.
To learn more about financial literacy for students, visit UCF's online Centsible Knights page. Or check out the FAIRWINDS financial literacy blog for information on attaining financial freedom, wherever you are in life.