Going away to college is a major life event. Even students whose parents have prepared them well for the realities of adulthood can struggle.
At Addition Financial, we understand the importance of financial planning for college students. Learning the ins and outs of personal finance is a must. The more educated you are about the basics of personal finance for college students, the more likely it is that you will stick to a budget and set yourself up for financial success later in life.
With that in mind, here’s what you need to know about personal finance and financial planning – before you go away to college.
The first thing you need to do to prepare for going away to college is to acquire some personal finance basic skills. We asked financial experts which basic skills they thought college students should have. Here are some of their responses:
We wish that schools taught personal finance basics as part of the general curriculum but most do not. If you don’t have the basic skills you need, you should learn them as soon as possible. At Addition Financial, we’re happy to help our clients with basic personal finance.
A big part of managing your finances responsibly is understanding the role that common sense plays in spending, saving and investing. Learning the basics can help you to manage financial stress. Let’s look at a few examples as they relate to top-down savings.
You can choose where to attend college. There’s a lot of attention on high-profile private schools with high tuition. It’s undeniable that people get excited when they hear someone’s been accepted into an Ivy League university – but is that really the best place for you to go?
In many cases, the answer is no. You can save thousands of dollars – possibly even tens of thousands – by attending a lower-priced state school or community college. You can obtain a quality education anywhere if you put in the work. This is an example of an area where a little bit of common sense, and a focus on top-down savings, can make a big impact on your financial health.
Another example of top-down savings involves buying a car. You can, of course, choose to buy a new vehicle in a fancy model that costs a lot of money. It will get you around – and it will also saddle you with thousands of dollars of debt.
By choosing a used car that’s reliable and affordable, you’ll get the same benefits as with a new car minus the debt. Since new cars depreciate the instant you drive them off the lot, buying a used car in good condition is a far more sensible option.
A lot of college students take the path of least resistance to pay for school. That means they:
A more creative approach would be one that assumes you can find ways to offset all (or nearly all) of the expenses of attending college. That might mean:
The bottom line here is that student loans may not be necessary. If you can graduate without debt, you should do it – even if it means attending a community college and working your way through school.
Part of managing your personal finances responsibly is having the tools that will allow you to do so. Since technology is such a big part of our lives, it makes sense to take advantage of it and use software and apps to help you with financial planning.
Since budgeting is such an important part of financial planning for college students, let’s start there. Here are some budgeting apps that we (and our favorite financial experts) recommend.
Addition Financial has a free monthly budget calculator to help you get started. It doesn’t track your expenses, so it may be best to start with our calculator and then use an app to help you track your daily spending and expenses.
The bank and investment accounts you open should play a significant role in helping you to manage your money effectively. Here are some examples of accounts you may want to have:
Just as important as opening the right accounts is choosing the right credit union or bank. Ultimately, you need a financial institution that will work with you to help you achieve your financial goals. There are advantages to choosing a credit union instead of a bank. For example, at Addition Financial, we have an array of online resources and calculators available to our members.
Investing some of the money you save now is the best way to build financial security for your future. Even if you don’t have a lot to invest, you can still start investing and take advantage of compound interest to build wealth.
Here are some of our favorite investment tools:
You may prefer to work with a financial advisor. At Addition Financial, we offer an array of retirement accounts, including traditional and Roth IRAs. Our members can choose to speak with one of our financial advisors as well.
If you’re going away to college, you should avail yourself of any personal finance education and tools you can find to ensure that you spend your money wisely. Financial planning is not something you should leave to chance – even when you’re just starting out.
Need some assistance with your financial planning for college? Click here to learn how Addition Financial can help!