Personal Finance: The Ultimate Guide to Financial Literacy for College Students
You should never stop learning, regardless of your age. It is a sign of life and growth. We can’t deny the fact, though, that it is still much better to learn things while one’s still younger. Not only will this give you a head start, but it is also scientifically proven that younger brains can store information more efficiently.
The problem is, financial literacy is not something that is frequently taught in college. A lot of parents also don’t talk to their children about finances for a variety of reasons. They probably lack the expertise themselves, or they are simply not too keen to discuss the current state of their finances. Fortunately, the internet has made resources more accessible than ever before. In fact, there are even a lot of online classes on personal finance provided by the best in the industry if you only have the patience to search for them.
Taking the time to learn personal finance while you’re still a college student also prepares you to prevent and overcome financial issues while you’re still young.
We understand how overwhelming it is to learn something new, though. Hence, we’ve decided to create this guide as an overview of the pillars of personal finances.
Bank Accounts
There are various financial products and services that one can avail of. However, bank accounts remain to be the most popular. Chances are, it’s also going to be the first one a college student will sign up for, especially if you want to set yourself up for a major purchase or an incoming life event.
There are three types of bank accounts that an average person commonly opens:
Savings
This is a basic deposit account that usually offers a small interest in return. These factors will largely depend on your bank. Banks tend to offer multiple savings options as well. Be sure to explore your options and weigh them according to your needs and preferences.
Checking
A checking account can also be considered a savings account since it allows you to make deposits and withdrawals. It’s a great option for those who need a more liquid way to move their money around. Checking accounts usually don’t limit the number of your withdrawals and deposits, after all. Their interest earnings can be quite limited, though. Some checking accounts are even especially designed just for students.
High-Yield Savings
This is a special type of savings account that pays 20 to 25 times more interest compared to the basic deposit account. Expect it to have more strings attached, though, such as higher initial deposits, maintaining balances, and transaction fees.
Credit Score
Credit score is definitely one of the most essential lessons you need to learn as an adult. In a nutshell, your credit score shows the current state of your finances based on your credit history, open accounts, debt, and repayment habits.
Building and maintaining your credit score even as a college student is crucial since it not only shows one’s creditworthiness but it can also significantly impact your quality of life.
Simply put, a good credit score can make car loan and mortgage applications faster. It will also put you in an advantageous spot to negotiate better terms.
A bad credit score, on the other hand, will not only limit your lending capacity. It can also limit your employment options as well.
Budgeting
A lot of financial experts say that budgeting is the secret to achieving a good credit score. Most people seem to think that budgeting is just the process of writing your expenses down and dividing your income among them.
However, budgeting is actually more complicated than that. More accurately, budgeting is the complex art of planning your cash flow.
It includes estimating how much you’re going to earn, and what your expenses are going to be.
This will then help you determine the best course of action you can make within a set period of time. Finally, it will also require recording each spending so you can reference it to your initial plan to see if everything went smoothly.
It is also ideal to include savings and unexpected expenses into your college student budget as well.
Investing
Finally, there’s investing. It is one of the most efficient ways to earn a profit. Unfortunately, it can also be intimidating too, especially if you don’t have a good grasp of its basic principles.
In essence, investing is the act of allocating your resources to a financial product or endeavor with the intention of earning profit. It can be as simple as purchasing a product to resell it at a higher price (usually called “flipping”) or starting a small business at home.
There are various institutions that offer financial products that you can invest in as well. These are typically more structured compared to other types of investments. It’s best to do your research to determine the most suitable option for you.
There is definitely more to learn about personal finance. However, the four pillars we’ve shared above give any college student a great foundation to start your financial journey. Good luck!
Jim Hughes
Guest Blogger
Jim Hughes is a content marketer who has significant experience covering technology, finance, economics, and business topics. At the moment, he is the Director of Content at OpenCashAdvance.com.
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