Things About Money That Every College School Student Should Know

Posted by scarletmartin on April 4th, 2024

Financial management as a young adult can be quite difficult. Most of the college students do not think about the importance of saving money, but this is the crucial stage to make some wise decisions, from which college you should go to how to pay for schooling, which will have a significant impact on your finances down the line.

Although student loans are valuable to help you meet the cost of your higher studies, do not forget the onus of paying off your student debt is on you, and this loan will not cover all of your expenses to get by , such as unforeseen expenses.

So, what you should you do then? There are some money lessons that you should learn to ensure that you will not have difficulty getting along despite unexpected expenses.

Things about money that every college student should know

Here are some most important money lessons you should learn and act upon:

• You are never too young to save

Even if your parents are willing to support you, you should never forget the fact that they are not responsible for funding all of your expenses, and they will not be either. What you earn from your part-time job should be used to meet your daily expenses but a portion of it should be put by. Your savings will help you cover emergency expenses.

It is not necessary at this stage to set a bigger savings goal, like 10% of your income; however, that will not be possible either with a part-time income source. Just be consistent. Even if it is a paltry sum, that is fine. In case you need a larger sum and your savings have fallen short of cash, you ca seek financial help from your parents.

• Compound interest is both a good and a bad thing

Compound interest is a good thing as it lets you earn interest on interest, so try to open a savings account that lets you avail yourself of compound effects. Start with as little as £1,000. If you save this much money for 20 or 30 years, you will see your money grow with a compound effect. It is crucial to start thinking about stashing away money for your retirement at this age because, in later life, you will be focused on planning for mortgage and car payments.

However, compound interest is bad in terms of loans and credit cards. If you continue to roll over, say, instalment loans for bad credit from a direct lender in the UK, you will end up paying a lot of money in interest payments because interest will be charged on unpaid interest as well.

• A car may not be a good investment at this stage

There is nothing wrong with owning a car, but at this stage, when you are not completely dependent and pursuing a fully-fledged career, you should avoid investing your hard-earned money in a car. First of all, it is not easy to qualify for a car loan when you are a college student. You must be able to prove your repaying capacity. Your parents’ finances can help you get a car loan, too, if they serve as a guarantor.

A car is a depreciating asset. At this time you can use that money for your education and avid taking out too much student debt. However, if you need a car to commute every day, that is fine, but it is a good idea to be able to pay for it outright or keeping a loan-to-value is much lower. Secondhand cars can help save you a lot of money.

• Not all debt is bad debt

It is always suggested that you live a debt-free life, but that cannot be feasible all the time. Sometimes, emergency crops up and you may need to take out cash loans today. It is vital to bear in mind that not all debt is bad. As long as you can repay the debt on time and you need it for urgent reasons, they will help you build your credit score, improving your chances of getting a mortgage and a car loan at lower interest rates in the future.

If you use a credit card, you should be able to pay off the balance in full within the interest period. As long as you do it, it is good debt. Debt becomes bad when you fail to manage payments.

The final word

As a college student, you may think that it's too early to think about managing your finances, but that is very important. Every single step you take at this moment will define and shape your future finances.

If you struggle with managing your money, you should get help from your parents. They can help you make better decisions about your finances.