Starting out with solid financial habits can help build a good foundation. Instead of spending years recovering from their mistakes, you could start out ahead on the right foot. Here are some smart financial habits you should think of.
When is it too early to start learning about money or finances? Easy answer right. It's never too early! Early financial education for kids and young adults lays a solid basis for their future financial stability. Before leaving home to go off to college, every student must at the very least receive the fundamental financial guidance to be able to go off to college comfortably. Many college students are experiencing their first time away from home during this period. Additionally, this will be the first time they have to consider making decisions on their own. For example:
Making the appropriate choices requires an understanding of how fundamental money systems operate. We've compiled some crucial advice on handling money in college that every student should be aware of.
Understand where your money goes and how it is handled. For example:
Money Masters has some great content on everything on banking, see more here.
You'll have a clear understanding of how much money you have when you create a budget. You'll need to set aside a sizable portion of money for necessities like tuition, housing, stationery, textbooks, and food. You can now clearly see how much money is still available for non-essentials. It's tough to keep track of your spending without a solid budget in place. Additionally, you're more prone to overspend. Free apps like Mint and You Need A Budget will keep your budget on track for you with barely any work on your end.
Read more: 7 Budgeting Tips for College Students
This may have a bad rep because of advice from people like Dave Ramsey but College students can get a lot out of credit cards. With cash back and other discounts and deals, you save money. It lets you buy what you need even if you don't have cash on you. The best thing about it is that it can help you build your credit. This is SO important when you have to apply for loans, or rent, buying a car and how much interest you pay later on in life.
Here are the Best College Student Credit Cards of November 2022
That being said, you can only get the benefits of a credit card if you know how to use it right. If you use your credit card too much, you'll find yourself in more and more debt. One of the most important things for students to learn about money is how to choose and use a credit card.
There is a credit limit on your credit card. Up to that amount, you can buy anything you want. But keep in mind that just because you buy something on credit doesn't mean it's free. In no way. By the due date, you'll have to pay back the full amount. Don't spend as much as you can when you use your credit card. Instead, only spend what you can pay back by the time it's due. From the day you use the credit until the day you have to pay it back, you have about 30 days. That deadline will come up much more quickly than you think. In that time, a lot can happen. It's best not to spend too much and hope to get the money in time. As a rule of thumb, you shouldn't use credit unless you're sure you'll have the money to pay for it when the bill comes.
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Even though having the newest iPhone might make you look cool, ask yourself if it's worth it. Do you really have extra money to waste just to be "in trend" ? What could you do with that money that would be better? If you think that saving a few dollars won't make a difference, it definitely does! In the long run, those few dollars will add up and make a big difference.
Better ways to use that money could be to pay off a big purchase faster. If you do this, you will have much less debt to worry about when you graduate. If you take out student loans and start paying that off earlier instead for example, it means you'll pay less in interest and get out of debt a lot faster. Don't underestimate how much those few dollars can help you.
Read more: Savings - How Much is Enough?
Having a high credit score might significantly expand your options. Loans like mortgages, credit cards, and car loans will be much simpler to obtain. Furthermore, if you have good credit, you will pay a reduced interest rate. As a college student, you are in the ideal position to begin establishing a credit history. It's also not an overly challenging task. To establish and maintain a solid credit history, prompt and complete payment of all debts is essential.
Learn how to improve your credit while you're in school.
The bank systems can mess up sometimes, it’s a fact. For instance, you can be billed for something you didn't actually buy. Or you can end up paying twice for something you already bought. It's possible that ATM withdrawals on your bank statement that you're positive you didn't make. You won't be aware of these false entries unless you examine your statements. You will pay the price even though you did nothing wrong.
Read more: How to Use an ATM
So always make it a habit to check in on your online banking when you can. Set reminders on your phone to do regular checks. The sooner you find an error in an entry, the sooner you can fix it. Correcting recent errors is so much simpler than trying to update a post from several months ago.
Read more: 5 Financial Mistakes To Avoid In Your 20s
This goes without saying. Even if you have no credit history, it may not be hard to get a student loan. It's important to remember that "can" and "should" are not synonymous. It's important to remember that student loans come with a price. In spite of the fact that you may not have to make payments on your student loans throughout your time in school, interest will continue to be charged on the principal balance. Six months after graduating, the sums will be due plus interest.
Don't take out more of a loan than you absolutely need. Borrow only what you'll actually need to cover your educational expenses, including mandatory fees and living expenses. I know it can be difficult to forego some of life's finer things at the moment. But~ When it's time to make that repayment, though, you'll feel a great sense of relief.
Read more: What is a Stafford Loan?
So first things , first. There are a lot of investing myths out there. For example, investing is definitely NOT just for the rich and you don't need loads of money to invest. These days, you can get started in the game for as little as $20 or $30, thanks to the plethora of free or cheap options out there. Opening a high-yield savings account is a simple way to start investing your money. Even though you can get the money in your account at any time, the interest rate is much higher than what you would get from a standard savings or checking account. Bear in mind the rates of interest on these accounts will go up in 2022.
Here are the 6 Best High-Yield Online Savings Accounts of November 2022
Using an investment app can help make saving and investing even easier. When you use the Acorns app, any spare change from your debit or credit card purchases is automatically put into one of several ETF portfolios. A standard membership to Acorns costs $3 per month, while the family plan costs $5.
So, start investing asap. You have the advantage of starting early! Why? It’s called the power of compounding interest.
Compound interest is defined as interest that is calculated on both the initial principal and the interest accumulated over time. Consider it as a cycle of earning "interest on interest," which can quickly snowball wealth. When compared to simple interest, which is calculated simply on the principal amount, compound interest will cause a deposit or loan to grow more quickly. You receive income not just on your initial investment, but also interest on top of interest! This explains how compound interest can enable your wealth to increase exponentially and how the concept of compounding returns is similar to putting your money to work for you.
Here’s a visual from Money Masters on how it works:
Talk to a Vincere Wealth advisor for a FREE 1:1 to find out the BEST possible place to start investing and building your wealth today. Are you interested in crypto? Speak with an advisor to learn more.
“Future you” aka retirement accounts Okay, you are probably thinking, huh? Now? Josh, what are you talking about? But stick with me!
You can actually become a millionaire with little effort if you begin saving for retirement as soon as you have a job! Starting early will make it easier to accumulate $1 million in retirement savings. It could seem premature to start planning for an IRA while still in school. However, if you are a working student, an IRA might be a fantastic way to save for the future. You can reduce your taxable income by the amount contributed to your IRA, and you can delay paying taxes on any gains or dividends you may receive. The longer you give compound interest a chance to work for you, the larger your tax-deferred account will grow.
Want to learn strategies that save you big bucks when it comes to your taxes? The team at Vincere Tax can show you, speak with an agent here.
A great blog by Vincere Tax on Student Loans and Taxes: Some Basics to Know
Contributing to a Roth IRA (the best retirement account) is another smart move when you're first starting out. Roth IRA contributions are made with after-tax monies, so there is no immediate tax benefit, but withdrawals in retirement are tax-free. Contributing while in school (when your income tax rate is probably low) can help you avoid a greater tax payment later in life when your income is more likely to be taxed at a higher rate. Your money will grow tax-free in a Roth IRA, just like it would in a standard IRA.
If you are ready to get started with a Roth IRA today, speak with an advisor at our affiliate, Vincere Wealth today!
Having money set aside for unexpected expenses is crucial to financial stability. Without an emergency fund, you may have to tap into other resources or use credit cards to cover the cost of unexpected expenses like these. As a starting step, amass a $1,000 cushion for unexpected expenses. This is the bare minimum that should be in your bank account. If you save $50 from each paycheck, you'll have $1,000 in your emergency fund after 10 months. Then, after factoring in your regular bills, set smaller, achievable objectives. Three months' worth of savings is usually recommended. While six months is recommended by others.
How much money you can put away is, of course, entirely subject to your financial predicament.
Read more: What is a Sinking Fund?
Making wise financial decisions even before you enroll in college will serve you well as an adult. Start mastering these tips and see your money working for YOU!
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