• Four Money Management Tips for College Students

    by Matthew Dougherty

    Blog author Matthew Dougherty sits at a desk looking at two computer screens, both displaying financial documents.

    College is an important time in many people’s lives. For some, it is the first time they live independently and have bills to pay. The habits you form in college will impact your habits in the future, especially when it comes to money management. It is important to develop good practices and habits when it comes to your finances because what you do in college can either put you ahead in life or hold you back. Here are four topics to think about and/or actions to take while in college that will prepare you for the future.

    Understand Student Loans

    We can’t talk about how to effectively manage money in college without talking about student loans. Too many students go to college and agree to take out loans, without knowing the terms of the loans or realizing the impact these loans can have on them later in life. Every college student should work part time to make some money and gain work experience. You should aim to pay for as much of your living and tuition expenses as possible.

    Once you have a job and steady income, you can decide whether you will need to take out student loans, and, if you do, how much you should take out. Pay close attention to the interest rates on loans if you do take them out. Look for loans that have less than 5% interest rates. If interest rates are over 5%, you should try to look at alternative options. Generally, federal loans will have much lower interest rates than private loans and you should look here first. Additionally, you can look for opportunities such as scholarships and grants to help pay for the costs of college.

    Brains in Budgeting

    While working part time in college and paying bills, you should begin to track your income and expenses. This is generally referred to as a budget or cash flow analysis. You can make a budget in Excel, on a Google spreadsheet, on paper, or you can use a budgeting app such as Mint, Personal Capital, or EveryDollar.

    When making a budget, you will want to split it into income and expenses. In the income section, list the paychecks you receive from work, income from side hustles and investments (if applicable), and cash gifts. In the expenses section, choose categories that apply to your situation such as housing, utilities, transportation, food, etc. Once you have chosen your categories you can add subcategories underneath. For example, rent and household supplies could go under housing; electricity, water, and internet could go under utilities; gas and car insurance could go under transportation; and groceries and eating out could go under food. It is important to track your income and expenses, so you know where your money is going.

    Build an Emergency Fund

    If you have discretionary income remaining after paying for living expenses and tuition, focus on building an emergency fund with 3-6 months of expenses. This will ensure that you are still able to pay your tuition and bills in case you are between jobs. You can keep your emergency fund in a money market or high yield savings account.

    Start Investing Now

    Once you have a fully funded emergency fund, you can consider investing. The sooner you start investing, the longer your money will have to grow. It is important to get in the habit of saving and investing and this can start in college. Even if you are only able to invest $20 a month, this will start the habit of investing. Since you are young and in a low tax bracket, consider opening a Roth IRA so your money can grow tax-free. You can open a Roth IRA at a brokerage firm such as Fidelity or Vanguard. I recommend investing in a total stock market index fund and putting in the same amount of money each month.

    Doing things such as minimizing student loan debt, budgeting, building an emergency fund, and investing in college can help put you ahead in life and set you up for success in the future. It is important to build these habits in college so you can graduate in a good financial position and be prepared to manage more money after college when you are working full time and no longer must pay for school. If you can learn and implement these important lessons in college, you will look back one day and be glad that you started early.

    Do you have a compelling story or student success tips you’d like to see published on the Pearson Students blog?  If you are a college student and interested in writing for us – click here to pitch your idea and get started! 

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  • College Students: Develop Money Management Skills Now as an Investment in Your Future

    by Molly Hicks

    A young woman looks at a laptop screen showing investment information.

    As a college student, money management can appear daunting. It is natural to brush it off as a topic which only concerns adults. I am currently a freshman in college, and ten months ago, I had no true interest in investing. However, during quarantine, my dad began to explain the perks and advantages of investing. It certainly sounded attractive, but how was I supposed to invest my personal money when I did not even know the basics?

    I am excited to share four steps to encourage you to invest and lead you to long-term success.

    1. Identify a trading platform that fits your needs and interests. Charles Schwab, TD Ameritrade, and Robinhood are reliable and safe companies, and I know many people using each. For a beginner, Robinhood is the easiest platform to use. All three of these platforms have little to no fees for investing.
    2. Open a Roth IRA account, as well as a normal brokerage account. An IRA is designed for long-term investing, which usually means your money stays in the account until retirement. A brokerage account gives you access to invest and withdraw your money at any time. Opening both an IRA and a brokerage account allows you to do long-term investing and short-term investing.
    3. Create an investment plan. At this point you are ready to invest! This is an exciting time in your life, especially if you are a first-time investor. It is important to identify your goals and purpose for investing, and then to plan and research based those goals.
    4. Identify investments that interest you. Look for steady, reliable, well-performing companies that are in good financial standing and have a positive outlook for the future. As Warren Buffett says, “if you wouldn’t hold your investment in a company for 10 years, don’t even think about owning it for 10 minutes.” Do not make spur-of-the-moment investment decisions, as I can tell you from personal experience, they usually lead to mistakes. Identify an investment that interests you, think over it for an extended period of time, and then execute.

    My best piece of advice is to invest in an index fund. In simple terms, an index fund is a form of investment that tracks the performance of hundreds of different companies. The S&P 500 Index is the most famous, and there are plenty of funds that follow this particular index.

    Warren Buffett has stated numerous times the importance of investing in a low-cost index fund. Buffett recently said in a 2019 Yahoo! interview, “in 1942, if I put $114 into an S&P 500 fund instead of buying a single stock, it would be worth about $400,000 today.” This is arguably the most risk-free and reliable strategy for investing.

    Make it your goal every month to put at least $10 or more into an index fund in your IRA. You are not only investing in your future, but the future of your family.

    Commit to learning, save your money, and invest it wisely. Also, have confidence, because you are making one of the best decisions for your future, and beginning a lifelong journey of excitement!

    Do you have a compelling story or student success tips you’d like to see published on the Pearson Students blog?  If you are a college student and interested in writing for us – click here to pitch your idea and get started! 

     

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  • The importance of investing as a college student

    by Tanner Vandermark

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    April is Financial Literacy Month and it’s an appropriate time for college students to focus on developing the skills and learning about the tools there are to help make smart money decisions throughout their lives. Investing often seems like a strange concept for many college students to grasp. “Why should I invest now?” “How do I even get started?” “How much money do I need to have in order to invest?” Those are just a few of the questions students ask themselves when presented with the idea of investing. My family has always stressed the importance of saving money and preparing for your future. I was able to take these teachings and evolve them into investing rather than just “saving”. Here are some of the realities of investing so that you can be financially prepared for your future. 

    Invest now!

    One of the best things you can do as a young adult is to take advantage of your age and invest NOW. The more you invest today, the more your investment will be worth in the future. For example, if a 20 year old invests $1,000 in a brokerage account that grows at an average rate of 10%, that money will be worth $72,890 when they are 65 and ready to retire. And that’s just one investment! Imagine if they keep putting money into that account. You don’t necessarily have to save money just for retirement. If you want to take a fun trip next year or want to have a college fund for your future children, investing your money is a quicker way to reach your financial goals than just stuffing cash under your mattress. Every day that you wait is an opportunity missed, so take advantage of your youth and invest now. 

    How to get started

    Many students are intimidated and assume that investing is too complicated and too hard. This is a total misconception. It’s actually fairly simple and easy to start investing because almost all students have smartphones and computers now. All you have to do is sign up with an investment bank, like Fidelity or TD Ameritrade. Robinhood is gaining popularity among young people because they offer free online trading and don’t charge a commission, making it even easier to invest on a budget. Once you sign up, your money does all the work for you.

    How much money do you need to invest?

    Another misconception about investing is that only wealthy people have enough money to buy stocks and bonds. However, the reality is that if you only have 30 dollars to spare, you can still invest it! Many brokerage accounts do not require a minimum investment amount, meaning that if you can only afford to buy one stock of a company, that’s ok! Just remember to keep investing as you make extra money so you can grow it at an even faster rate. 

    By investing money now, you are preparing for your future. There are many resources available online and on most college campuses to help you get started. Start letting your money work for you by investing instead of just saving. 

     

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  • Money saving tips for college students

    by Jill Kelly

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    College is by far the most expensive times of our lives. Whether your tuition is $50,000 a year or $10,000, it’s easy to neglect how much you need to save. Academics are important, but social life can also be an important part of every college student’s life. It can also have a big impact on your budget. If someone asks you to get lunch, it’s hard to say no and there goes $10. Two more dates and there goes another $30. For someone who only gets $50 a week, that’s more than half your money. What if your car breaks down and it is $50 to get it towed and you don’t have that? If you ask your parents for help they’ll ask you where the money they already gave you went? This is a time where we probably shouldn’t be spoiling ourselves. Instead we need to realize the many ways we can save money while still making the most of college life.

    Prioritize

    Putting your academics over your social life can be a difficult task in college. Many students struggle with finding a healthy balance. Almost everyone has made the mistake of attending a late night activity when they have to be up at 7 am for class the next morning. I personally believe keeping a strong social life helps me stay sane through all of the work we deal with on a daily basis. Not to mention, making connections is important for any career you could end up in. But we all know that in the long run, partying won’t help you land your dream job. Students should feel more compelled to involve themselves in paid work, internships, and externships. 

    By working more, you are making more money so that you don’t feel as guilty when you do excessively spend, but you spend less because your time is already preoccupied. I spent a lot during my freshman year because I wasn’t working and had so much free time. People that do have an income, however, will sometimes tend to spend more than they need to. Whether you work or not, look for ways to be social without spending a lot of money.

    Save and Save More

    Saving money in college is important so that you don’t graduate with a financial burden. Begin by making an income. We all like to think that by making money, we can spend it. You won’t be able to save or build an emergency fund by living paycheck to paycheck. Making more income doesn’t necessarily working more hours, but rather spending less. 

    There’s something called “the latte factor.” The $4 latte that people buy at a coffee shop every day amounts to $124 a month. That is over $1,000 a year! Though $4 sounds insignificant when you’re spending it, $1000 is a lot when you want to take a spring break trip to another country. We get caught up in the idea of spending more than we can afford. Many students have loans and everything beyond their budget leads them into debt before they can even begin to pay off loans. 

    Use Your Breaks

    Most students consider summer break to be a time to relax and not worry about work. During breaks, I try to work 40 hours a week to save money for the school year. This way I don’t have to ask my parents for money when they are paying so much already. The job gives me a sense of accomplishment and cancels out my problem of wondering what Netflix show I can binge watch next. It also encourages me to keep a healthy sleep schedule, something we all tend to struggle with. 

    Budget Friendly Ideas

    In addition to the ideas above, here are three of my favorite money-saving ideas for college students:

    1. Use public transportation! We all know parking on campus isn’t easy and we end up wasting more gas than we expected to by driving around trying to find a spot to park. You can even encourage a friend to walk with you and spend quality time with them. Bam! You are enjoying your social life on your way to succeed in your academic life!
    2. Make the most of your tuition and activity fees. Chances are when you visit a free event at your school or use those recreation facilities, you will feel more grateful for the university you attend and realize how much is offered to you at minimal to no extra cost. 
    3. Look for student discounts. Many stores and restaurants close to college campuses offer student discounts. I’ve been to three different nail salons in the area around my school and each one offers a student discount. My local Salvation Army sells their items at half off on Wednesdays. There is even a free app you can download on your mobile device called “Unidays” that gives students exclusive discounts to all the top brands such as Pacsun, Under Armour, Calvin Klein, and so much more!

    Budgeting can be hard, but not impossible. Your future self will thank you for making smart financial decisions in the moment.

     

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