Financial Literacy for College Students
Teaching financial literacy to a student is a necessary part of going to college, since college is a place for new experiences and a lot of firsts. That can be exciting but it also can be very expensive, especially if you’re not careful with your money. The best approach is to plan ahead and create a ‘college student budget’—a budget uniquely suited to your specific financial situation while in school. But if you’ve never been responsible for your own cash before, or had to truly watch what you spend, then the lesson can be a hard one to learn.
In light of that, a few lessons we learned the hard way (we ate a lot of Ramen in school too—mainly because we spent all of our money on stupid things):
Lesson #1: New Surroundings + Independence = Vacation-like Mindset
And what are vacations usually about? Overspending and having a stellar time. Unfortunately, college isn’t a vacation. Still, new and even returning students often spend cash on campus like they’re actually on a beach. Maybe it’s the fact that they have a brand new bank account that’s got a bit of money in it. Maybe they just got their loan disbursement and like the feeling of a full wallet (even if all the money is borrowed). However, loan disbursements have to last a whole semester and much of that money is spoken for before it even arrives: there’s tuition, books, and rent to consider, after all. But the thrill of being in school, of having lots of friends nearby, of the constant desire to socialize, eat out, go to movies, et cetera—that’s just a recipe for financial disaster.
Suggestion: Make a college student budget and stick to it. Factor in a few extra dollars a month for entertainment or a night on the town, but once you spend that, don’t dip into other parts of your college student budget. Remember this mantra: the more you spend, the more you’ll eventually have to borrow to maintain the cost of your education. And borrowed cash comes with interest, meaning every dollar you spend is more than a dollar you have to pay back. Stay cheap and get money-wise.
Lesson #2: College students are prime targets for identity theft.
There’s a lot of people looking to take advantage of college students, who are often newly introduced to the financial side of life. Maybe they don’t know how much they should be paying, or how to protect their information, or how to weasel out the scams. Whatever it is, college students are targets. And the only thing more stressful than being short on cash is being taken for a financial ride and having money taken.
- If you plan on making online purchases, banks offer separate accounts for online shopping as a means to protect the “main” checking account from potential fraud and related complications. Investigate your options. Or shop only from reputable places, like Amazon.
- Avoid scholarship scams. Never pay to apply to one and never give out your social security number on a scholarship application. Also avoid anything that guarantees you’ll win.
- Never leave your wallet out. And never let people borrow your debit or credit cards. Or even your driver’s license. Not even friends.
- Don’t use public computers to log into your bank or credit accounts. And don’t keep important financial information in your email accounts.
- Create strong passwords. Don’t use any dictionary words. Mix letters, number, and symbols. And don’t use the same password for everything.
- Use a complicated pin number for your ATM/Debit card. Using “2222” isn’t a good idea.
- Regularly check your bank/card statements for fraudulent activity. If you see a charge you don’t remember making, call your bank immediately.
Lesson #3: Credit cards are dangerous.
Having a credit card in college can be really convenient. But those credit lines often come with really high interest rates, meaning if you spend more than you can pay back in a single payment period, your debt will grow—and fast. And there’s really nothing worse than being a college student in credit card debt. Next to student loans, credit card debt is the single biggest financial burden on college students. And credit cards make resisting large purchases more difficult because you can “pay back later” and do so “over a longer period of time,” making things seem more affordable when in fact you end up paying more for things because of interest.
Suggestion: Perhaps the easiest solution of all: just switch to debit and resist the urge to take advantage of any college student credit card offers. That way you can’t spend more than you have, and you never run the risk of creating debt you can’t pay back. This will help you maintain your college student budget as well, since you’ll be less inclined to spend big.