Financial Literacy

When should you build financial skills?

You may think that college is too early to begin to understand and apply the basic skills of finance. The truth is, waiting until after college would be too late. Developing good financial habits in college will set you up for a fiscally responsible path into the future. Here are some basic best practices to implement right away!

Step 1: Create A Budget

The path to financial independence begins with creating a budget. You can’t possibly know how much money you can spend if you don’t know how much money you have coming in, and how much money you have going out. Budgeting is a simple way to track your money and make sure you’ll never find yourself “underwater” financially.

If you are spreadsheet averse like me, consider utilizing a free budgeting tool such as Mint or Every Dollar to easily track your expenses. Download their app to your phone as well so that your budget calculations are always within reach!

Review your income and categorize your expenses into two main sections: mandatory and discretionary. Pay all mandatory bills such as rent, phone service, and credit cards first before moving on to other expenses. It’s ok to treat yourself to fun things like movie nights and dinners out as long as you are continuing to pay for those less exciting expenses without issue.

Creating a budget means nothing if you don’t stick to it! You might want to consider committing to only using cash for certain purchases (preventing overspending). A good rule of thumb for discretionary purchases is if you can’t afford to pay in cash, you can’t afford it at all.

Step 2: Start To Build Up Your Credit

Open up your own credit card. Take some time to find the card that’s right for you. Would you prefer a card that offers cash back or a card with no annual fee? Most financial institutions even have credit cards aimed specifically for students who are looking to build their credit from scratch.

If you’re starting from a not-so-great credit point, look into opening a secured credit card. Although this requires a small deposit, virtually anyone can be approved for a secured card and they will report to the credit bureaus just like a regular credit card.

Once set up, the two biggest ways to grow your credit fast are to: a) always pay on time and to b) keep a low balance. Limiting yourself to small purchases when starting out is a great way to ensure you’re able to pay off the card in full each month. Lateness in paying credit cards can quickly have a steamroll effect that lowers your credit rating, piles up late fees, and raises your interest rate.

It’s also important that your financial future is exactly that: yours. Do not co-sign for any friends, even if they are well-meaning and will “totally pay on time”. Point your friends in the direction of a secured card and wish them luck.

Your credit is affected by more than just credit cards. Car loans, student loans, and any other lines of personal credit are all reported to the three major credit bureaus. Make sure you set all of these up as mandatory payments in your budget and pay them on time. Don’t let a missed payment in college ruin your chances for a financially independent future.

Finally, if you are living off campus, ask to have your rent payments reported to the credit bureaus. If your leasing office agrees to do so, it’s an additional great way to build onto your growing credit rating.

Step 3: Build Up Your Savings

With a budget in place and your mandatory expenses are under control, it’s time to look towards your future by building up your savings. We’re going to look at two commonly recommended first steps in saving: the emergency fund and the retirement account.

Plenty of banks offer a no fee, low interest savings account that would work great for your emergency fund. You’re not looking for a volatile, aggressive investment here; just a safe place to keep your money while gaining a little bit of interest on it. Ideally this emergency fund will hold three to six months of your living expenses in case something unforeseen takes your income stream away. It’s also ok to lean on your emergency fund for things such as medical bills or car repairs, just be sure to replenish the fund as soon as possible. And remember: a friend’s trip to Cancun is never, ever an emergency.

Once your emergency fund is going it’s recommended to start a monthly contribution to a retirement account such as a Roth or Traditional IRA. No matter how small, any contribution now will have major implications in the future through the magic of compounding interest. Your money will start making money on its own and the earlier you start the more it will make. Simple, right? We know a “retirement account” isn’t the most exciting way to spend your money now but your future self will thank you when you’re sitting on a beach while your peers are all still working.

Here is a not so novel thought: Less money spent equals more money saved! Identify areas where you can either cut expenses completely of at least swap them out for less pricey alternatives. Some examples include:

• Sell back your textbooks at the end of each semester.


• Utilize your meal plan to the fullest. The last thing you want is to end the year with a stockpile of unused meals or money.


• Use coupons! Browser extensions such as Honey and Rakuten will either find automatic savings online or send you a literal check in the mail just for using their app.


• Your student credentials can get you deep discounts for virtually anything these days. Movies, software, travel, insurance, cell phones, and Spotify are just a handful of examples that offer savings for students.


• Cook for yourself! Recipes and videos for healthy meals are available online for any budget. Swap one night of pricey take out with a cheap home-cooked meal and your bank account will thank you.


• Budget, pay off debt, and save for tomorrow. It’s a simple theory in practice but we understand it can be complicated and will take some work. But financial stability requires financial literacy and the four steps listed above will have you well on your way to a bright financial future.