There's a lot of discussion nationally about the financial challenges facing today's college students. With the rising tide of college costs, increasing student loan debt and continuing tight job market, students are eager for a leg up in keeping their finances on track. During National Financial Literacy Month in April, for example, students were asked to take part in a number of financial literacy challenges aimed at helping them hone their money management. These included estimating their loan payments, checking their credit report and visualizing the power of savings. Students also were asked to examine their bank statements and receipts, and identify purchases they thought were more wants than needs.
Providing these "mental moments" is a great way to draw students into thinking about what are sometimes uncomfortable and stressful topics. Providing tools such as online calculators that engage students in ways that are interactive and fun can really help. As one student remarked after using an online savings calculator:
When examining spending habits and thinking about the differences between wants and needs, another student observed:
"If I saved $125 from each paycheck, which equals $250 per month, until my son graduates in 16 years at only 1.5 percent interest, I could easily use the $54,000 to pay for his college. I know now that if I did this easy saving, he will never have to struggle to pay for school like I am now."
"Eating out may be convenient, but I could probably make the same thing at home for 1/3 of the cost."
College students, whether they are traditional-age or adult learners returning to school, want to be fiscally responsible and would be well-served by more proactive financial literacy "moments" while in school. Starting with the basics such as knowing where your money is going, living below your means, and paying yourself first is a place to start. But given the complexities of the major decisions they are making to finance their education, they require and should expect more help along the way. Here, for example, are some proactive steps that every college student should know and/or complete:
- All student loans must be paid back even if you don't complete your degree, so try to minimize the amount of loans you take out. Remember, you don't have to accept all the loans that are offered to you as part of your financial aid package.
- It's important to estimate your student loan payments each year, and aim to keep them to no more than 10 percent of your expected monthly salary when you graduate. (The U.S. Department of Labor provides some good estimates of wages by occupation and region.)
- When choosing a bank account, be sure to shop around, compare fee schedules carefully and choose an option that works best for you. Stay clear of high-cost alternatives such as check-cashing stores and payday loan services.
- Understand the difference between a debit card (spending money your already have) versus a credit card (borrowing money you don't have which must be paid make later with interest charges if not paid in full).
- Monitor and review your spending habits often. You may find you have to cut back and/or find ways to earn a little more money to balance your budget and avoid taking out more student loans or adding to your credit card balances.
- Keep your focus on completing your degree. It is, after all, the reason you are investing your time and resources. Make sure you take a full course load if you are attending full-time.
- If you're feeling overwhelmed, ask for help right away from your parent, school and/or trusted peer.