You may think that college is too early to begin to understand the basics of Financial Literacy. The truth is, waiting until after college would be too late. Developing good financial habits in college will set you up for fiscally responsible living in the future. In Part One of our Financial Literacy series, we discuss some basic best practices to implement right away!
Transcript
You may think that college is too early to understand the basics of financial literacy. The truth is, waiting until after college would be too late. Developing good financial habits in college will set you up for physically responsible living in the future. Here are some basic best practices to implement right away. (upbeat, instrumental music) Step one, create a budget. A great way to start is by making a categorized list of income and expenses. This can be done by using a budgeting template from an Excel-type program or by choosing from a variety of free online budgeting tools and apps. Committing to use cash for certain purchases, such as takeout or entertainment, is a proven way to prevent overspending. With a new budget in place, try to set aside an emergency fund that can ideally cover two to three months of living expenses. Give yourself the peace of mind to know that an unexpected car repair doesn't equal instant ramen for the next six months. Step two, start to build credit. Your credit is your financial lifeline that unlocks future opportunities, such as qualifying for student loans, renting an apartment, or buying a home. There are credit cards that offer student-specific rewards and discounts. Keep in mind that a positive payment history is essential to building credit and can be affected by anything with your name on it. Therefore do not co-sign for any friends. Make sure that all of your bills are paid on time and limit the use of your credit to small purchases that can be paid off each month to avoid paying any interest. Step three, build up your savings. As you start to build your savings, choose a high interest savings account with no fees. No matter how small the contributions, start adding to it. People with not so great impulse control might benefit from this being an automatic transfer each month. With a basic savings plan in place, consider looking towards your future, by contributing to a retirement account, either through an employer offered 401k or an IRA, an individual retirement account. Identify where you can cut expenses while still in school. Selling back textbooks, utilizing your meal plan to the fullest and cooking at home more often, are great ways to cut back on spending. And don't forget to investigate all of the discounts available with your student credentials. Any savings plan is better than nothing and today is the perfect time to start. (rhythmic energetic music)
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