4 Ways for College Students to Improve Their Finances

Money is a crucial aspect of daily life in the modern era, and finding ways to master your personal finances is the best way to build toward the life you want and deserve. Most techniques that can improve your finances are best implemented early and often, so it’s important to start these techniques as early high school graduation, meaning that part of preparing your children for higher education is preparing them to approach their finances in an independent and productive manner. Here’s what you and your child need to know.

Budgeting

The first step to creating a financially secure future for your child is to encourage them to learn how to create a budget and how to benefit from financial planning. Budgeting is the foundation of a person’s personal finances, because it allows them to reign in unnecessary spending in order to promote preparedness and, more importantly, long term savings. Creating a budget starts with taking notes of your current expenses and spending and organizing those records categorically. This allows you to tailor your spending in each category in order to make sure that your essential expenses are covered and that your recreational spending is kept to a healthy minimum. Once this is done, you’ll be able to commit a part of your budget, preferably about 20% of your income, to your savings account in order to encourage the all important long term growth that a savings account can provide.

Cutting Costs

The primary way to reduce your monthly spending is to trim the fat from your budget in regard to unnecessary spending on luxury items and hobbies. For example, many people succumb to the urge to choose fast food instead of cooking their own meals, a vice that is all too common among college students. Simply committing to cooking for yourself can save you a ton of money on the necessary expense of keeping yourself fed. Hobbies like video games are fine, and they are even valuable for maintaining morale and mental health, but spending as much as you can on this kind of activity is doing yourself a disservice in the end. Regulating this kind of spending is an important part of building a better future for yourself.

Savings

Once you can guarantee that your savings account is receiving substantial deposits on a regular basis, you will have guaranteed the reliable increase in wealth over time. Your savings account will help you save money by tricking your brain into disregarding your savings as accessible assets until you absolutely need them, and this alone encourages growth over time. Moreover, your savings account will receive annual interest, and that interest is essentially free money. Interest will be a certain percentage of your existing balance, usually around 1%, which means that the amount you’ll receive will increase as your balance continues to grow from your deposits and from the interest itself. While 1% or less might not sound like much, interest can eventually become so substantial that a person can live on their interest alone and never have to work again, although this is an extreme case achievable only later in life after a lifetime of successful financial management.

Credit

Your credit score is an incredibly important part of your long term financial health. Your credit score will suffer if you fail to pay bills such as your rent or phone bill on time, for example, a mistake that’s easy to make if you’re not careful. You can also employ a credit card strategically to boost your credit score if the need arises. A good credit score is essential for borrowing money for things like buying a car or a house later in life, so prioritizing good credit health early on is vital for later success.

Easing your child into the college experience means many things, but none will have a greater impact on their later life than imbuing them with the tools with which to build the future they desire. These tips will help you help your child understand their personal finances at the best possible time for them to start shaping their future.