Financial literacy is the one skill students will definitely need throughout their lifetime, but enter adulthood without the training needed to manage it.
Did you know that 21 states have passed legislation to require the study of financial literacy as a requirement for high school graduation? Ten of those states require that students take a full semester of study in personal finances. The other half includes it within another course, but here's the kicker: Research shows that only one in three students will receive the instruction within those other classes. Whoops!
Now let's imagine that a high school student decides to continue on to higher education. They will likely have expenses and financial aid, possibly a student loan or two, and maybe scholarships. They will be responsible for tuition and fees, transportation, and food. Rent, utilities, books, and materials may also be added to the mix. What training have they had to learn how best to manage these expenses, and balance them with incoming funds?
Ultimately, this boils down to the fact that there’s an 80% chance a new college student was not taught a single semester of personal finance education. Consider that from the time the student sets foot on campus until they reach the end of their life, regardless of their field of study, their career path, or their long-term income, they will have personal finances that require their attention. Hmm, how's that for a math problem – the one skill students will definitely need throughout their lifetime, they enter adulthood without the training needed to manage.
Welcome to college! The wolves (and gators and hawkeyes and longhorns and huskies) have been waiting for you.
Getting started – freshman initiation
College freshmen, if you aren't armed with personal finance skills, college finances will certainly be Greek to you. As if the FAFSA wasn't enough of an introduction, the financial aid process will certainly kick your introduction to money management into high gear.
Early on, make friends with the staff at the financial aid office. They will have answers. It's right there in the name: financial aid. They aren't going to be an expert in your finances, but they do know all the nuances of due dates and the possibility of a tuition payment plan. The financial aid staff answer questions about college finances all day every day. Ask questions.
As for your finances, that's where the "personal" in personal finance comes from. If you lack the skills to manage the dollars coming in and the cents going out, it's really no different than any other class in which you are enrolled. It's study time. It's too late for that high school course, so consider the textbook definition of quick study: podcasts. We can suggest some podcasts just for students to learn how to balance the daily budget of matriculating.
Making choices both wise and foolish
Sophomore, from the Greek, literally means "wise foolish," and often that's the fact facing college students. You're going to make mistakes and find yourself scraping by, but you're also going to develop college hacks to help you survive.
Now that you have gotten a little education, it's time to consider your financial need versus your financial want. Just like you picked up on the shortcut to the library, you need some tricks to help keep your money tight. Everything from becoming your own favorite barista to finding the free events on campus will tip you towards the "wise" and away from the "foolish".
One way college students consider a quick-and-easy solution to their personal finances is credit card offers. Quick, yes. You can apply in moments and start shopping immediately. A few foolish expenditures later, however, you'll find yourself owing more than you can pay. Getting out of credit card debt becomes harder and creates more of a burden. If you think you might need a little extra money for expenses, consider a personal loan. With fixed payment amounts and interest rates, it may be the wiser choice.
Consider junior college if your finances are snug
Sometimes bigger financial choices will guide your college plans. While it would be great to have your own place, or even live in the dorms, living at home for part of your early study years may make more financial sense. A strategic plan to work and study from home for a year or two may prepare you both financially and academically to be ready for the on-campus experience.
Another choice is to enroll in community college ahead of a full university. If you know you will need to work while attending school, or you want to avoid signing up for a federal student loan (or even a way-more-risky private loan), this might be one of those tough choices now that will pay off when you graduate. Consider that it might give you the ability to be more flexible, especially with a work-school schedule, while keeping the cost per credit hour down.
Take your time to consider all your financial aid options. Talk with a financial aid counselor to determine if you might qualify for a Pell Grant or other less common sources of community or federal aid. Scholarships may be offered to second-, third-, and fourth-year students, so take the time to apply for those extra dollars like you are the financial expert you are becoming.
Hint: If you belong to a community bank or credit union, they often sponsor local scholarships. Go apply for one of those.
Senior-level mastery of your money
Educating yourself on how to manage your college expenses won't take four years, but it will require you to make some changes to your routine and your spending habits. Submit your financial aid application early. Utilize available student services. Accept financial assistance advice from older students who have been in your shoes, especially when it comes to the specifics of your school.
Most importantly, never stop learning, even when it comes to financial literacy. One day you'll want to understand more about your 401k, your retirement plan, life insurance, or saving for your kids' college fund. At Kasasa, we support local financial literacy at every age.
For now, we have more than a dozen additional hacks for college students to help make your money stretch until... well, until you get more money. But the best money management tip is to know your money, know what you can afford, and ask for help when you need it (especially if you find yourself getting into debt).
Oh, and one more important tip: Have fun, and enjoy learning!