College is a significant transition period into adulthood for many individuals. According to EBSCO Information Services, over 40% of students attending 4-year college programs are not proficient in financial literacy and knowledge. This statistic is alarming because it suggests that students are not equipped with the skills to manage their financial responsibilities during school and after graduation. Fortunately, there are some simple strategies for students to practice to improve their personal finances.
The first is straightforward: to cut down on spending. There are a couple things students can do to reduce their spending. One is to avoid impulse spending- any unplanned spending decisions like eating out, emotional retail therapy, or going out for drinks. Impulse spending can cause financial strain and, ultimately, debt. Planning your purchases in advance can help avoid impulse spending. This brings us to the next strategy: budgeting.
To create a budget, students should start by calculating their monthly net income so that they can figure out how much they can comfortably spend each month. Next, they should categorize their expenses into fixed and variable expenses. Fixed expenses are necessary costs such as housing, food, and utilities, while variable expenses are unnecessary such as nice dinners, workout classes, and organizational dues. Track spending in this way makes it easy to identify where cuts to spending can be made. Reputable online tools like Pocket Guard can be linked to your banking statements to automatically categorize spending to help keep you on track.
Lastly, saving for the future is crucial for financial security and growth. It is important to organize your funds into the right accounts: a checking account for everyday expenses and a savings account to accumulate funds. A good savings habit is to save a set percentage of your net income or a set amount into a high yield savings account for rewarding results. Mobile banking apps make it easy to check your account balances.
Sources:
https://www.pnc.com/insights/personal-finance/borrow/money-management-tips-for-college-students.html
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