College is a time of learning the most important skills you may need as an adult. While your college major may teach you how to do a job in the future, it is equally vital for students to learn how to manage finances before they officially enter the post-grad world. According to a survey reported by Teach for America, 53 percent of college students felt more unprepared to handle their finances than any other area of adulthood. Although life as a college student involves fewer bills than an average adult, building your financial health during this time can help start you out on the right foot after graduation.
Credit Cards Aren’t Just for Shopaholics
If there’s one thing that can steer your finances more than anything else, it’s your credit score. Your score is a three-digit number that reporting agencies assign to you to indicate how financially stable and trustworthy you are. Lending institutions and other organizations look at your credit score to assess whether they’ll offer favorable terms on car loans, mortgages, and rental leases, for example. Some employers even look at your credit score during a background check!
“Broke” college students who have never taken out a loan or line of credit usually have a neutral credit score. In the future, though, a neutral score simply shows creditors and lenders that you’re an unknown. They can’t be sure if you’ll stay on top of your payments or not.
So, college is the perfect time to start building credit. The easiest way to do so is via a credit card. By making small purchases on your credit card, you can start improving your credit score. You don’t need an absurdly low interest rate or a high credit limit on your card, either. If you would pay for gas or groceries with a debit card, pay with your credit card instead. Afterward, immediately pay off the full balance. This ensures you are seen as responsible by your credit card company and prevents you from falling victim to high interest rates and overwhelming credit card debt.
Even College Students Can Budget Their Finances
You don’t have to be saving for something in particular to benefit from a budget. With very few recurring monthly bills, college students often don’t pay much attention to their finances and spending habits. However, getting into the habit of budgeting can help you break the “broke college student” stereotype.
There are lots of ways to budget, but the most important element of any budget is consistency. Budgets keep you accountable and grounded, even though it may feel restrictive. However, when your paychecks from your part-time job are only a few hundred dollars, a budget can offer you more financial freedom in the future. Consider it this way: although you may have to say no to takeout or drinks with friends occasionally, that money saved can be put elsewhere like a nicer apartment, a larger student loan payment (which means you pay off your loans faster), or more travel.
Save Up for a Rainy Day
Budgeting can be hard, but it pays to be cautious with your money. You never know when disaster will strike. For many college students, a blown tire or a hefty medical bill can completely demolish their bank accounts. But it doesn’t need to be this way.
You could benefit from starting an emergency fund – an account that can help you pay for sudden, problematic expenses. The typical rule of thumb states that an emergency fund should amount to roughly three months of living expenses. As a college student, that’s a tall order. So, start with smaller, more realistic goals (like $500.00) and contribute every paycheck. Remember that this fund should remain untouched except in cases of emergency like losing a job or falling ill.
College Students Could Be Vulnerable to Unfair Fees
Whether or not you choose to budget, unfortunately, it’s difficult to protect yourself from predatory fee structures implemented by your bank or credit union. Unscrupulous banks have been unfairly targeting the most financially vulnerable populations in the country, including college students, with exorbitant overdraft and NSF fees. Although a budget can help prevent you from overdrawing, a single overdraft could cost you a significant amount of money, especially if your bank or credit union employs underhanded tactics to charge you as many fees as possible. If you’ve been the victim of unfair overdraft and NSF fees, the Financial Services attorneys at McCune Wright Arevalo, LLP, can help you reclaim what’s yours. With a $203 Million verdict against Wells Fargo and more than $1 billion recovered for our clients, we can seek justice for you and protect your hard-earned money.
Contact us or call (855) 976-3154 today for a free consultation!