For most young adults just starting to gain financial independence, instant gratification takes priority over thinking twice about buying something they want. However, this mentality can lead to an adulthood of bad spending habits and financial struggles. To prevent this, students must build good financial habits early on.
The first step in building money management skills is budgeting. To create a simple, student-friendly budget, start by identifying all sources of income throughout the month: allowances, birthday or holiday money, and money earned from a part-time job if you have one. Add these up to create your monthly income, then record different categories of expenses, such as transportation, food, entertainment, and savings. It’s also not a bad idea to keep a buffer of $50-$200, depending on income.
To avoid going over budget, it’s important to put how much things cost into perspective. Eating out all the time, impulse buying, and little treats may seem like small luxuries in the moment, but they add up quickly. Going into adulthood, it is important to realize that needs have to come before wants. One strategy for resisting unnecessary purchases is breaking down and relating expensive items to smaller purchases: for example, concert tickets that cost $160 equal four tanks of gas. Money can also be equated to time: if an hour of work yields $12, then $120 shoes are worth ten hours of work.
Students can gain an even clearer sense of their savings by opening a checking account under their parents. This introduces things like interest and overdraft fees without the risk that comes with having a credit card. It also comes with advantage of being able to check your account balance through your bank’s app. When the time does come for a credit card, Elly Szymanski, Assistant Vice President of Credit Card Products at Navy Federal Credit Union, recommends students “Ensure whatever you put onto your card is within your normal budget. It’s critical that you track your spending and pay your balance in full every month to avoid debt from late fees and interest charges. If doable, I recommend setting up automatic payments, along with text alerts on your mobile device, to guarantee on-time payments.” Starting off on the right foot with a credit card sets students up for a good credit history, making it easier to reach their money goals.
The key to being smart financially is to be consistent when working on your goals. These goals build motivation and savings that can make it possible to achieve bigger things in the future, like going on a trip abroad or being able to afford the dream car. Remember, every discount, sale, and dollar saved paves the way for a better financial future.
