Information for this post was provided by Chime Bank.
Graduating from college is an exciting time. Between the rush of finals, commencement, and settling into your new life and routine—whether back home with your parents or off on your own—this is a busy time.
It’s also one of the biggest transitions that you’ll go through as a young adult. Socially, financially, and professionally—in every regard, finishing college brings about a number of changes that can seem overwhelming and difficult for the uninitiated.
Case in point? Personal finance.
Most high school students enter college without having ever taken a personal finance course. Sadly, most will also leave college without ever taking a personal finance course, setting them up for a rude awakening—especially for the millions of students relying on student loans to pay for college.
Right as you’re trying to get your footing in life, you’re faced with a number of new challenges that can derail you if you’re not careful. You’ve probably got millions of questions—What financial goals should I be working towards? How should I adjust my lifestyle to reach my goals? How do I start building and using credit? What the heck should I do about my student loans?—and don’t know where to start.
The truth is, waiting until after graduation to start thinking about these questions is a big mistake. Taking some time now, before graduation, to learn about certain financial topics can set you up for a much easier time after you’re walked down the stage, collected your diploma, and packed up the dorm room.
Below, we discuss some of the most important financial concepts all college students should learn.
Credit is a tricky thing. As long as it’s used responsibly, it can be a powerful tool that helps you work towards important life goals (like buying a house, for example). But used incorrectly or irresponsibly, it can cause a lot of damage.
There’s no doubt that after graduation, you’re going to get hit with flyer after flyer from credit card companies trying to promote their cards services to you. Some of them even come with rewards that make them sound pretty tempting. But before signing up for one, you should first aim to understand what credit is, how it’s built, and what impacts your credit score will have on you over the course of your life.
Only after you understand those things should you even think to ask yourself whether or not you should have a credit card. If you do decide to sign up for a credit card, use it wisely and make sure that you pay off your balance in full each month to avoid costly interest payments.
2. Investing for the Future
People invest for a lot of reasons, and there’s really no wrong reason to invest. But one of the most important reasons that all of us should be thinking about is retirement.
As a graduating college student, the thought of retirement may seem too far down the road to even think about. But the sooner you can start investing for your future, the better you will be in the long run, because it gives your money more time to compound and grow.
Retirement savings can take many forms. Many for-profit companies offer a 401(k) option to their employees. Non-profits offer something called a 403(b). And individuals have IRAs. Though the specifics of each is different, the basic premise is the same: You invest money for your retirement needs (and earn a nice little tax break in doing so). Even just a small amount each month can make a big difference over the 40+ years that you’re likely to be working.
A few tips:
- Bone up on the meaning behind these common investing term and concepts so that you can better speak to and understand what it’s all about.
- If your employer offers an employer match, try to contribute enough money to at least earn that match. It’s free money!
- Even if you don’t think you have room in your budget for investing, there’s a good chance that you do. Start small, and try to increase your contributions by 1 or 2 percent each year until you’re contributing the recommended 10 to 15 percent each year.
- Remember not to touch your retirement funds until retirement—you’ll pay some pretty hefty fees if you do.
Want to invest for a goal other than retirement? Here are some other ways you can invest to put you money to use growing for you.
3. Budgeting and Spending
While it can be easier to plan out long term financial goals, it seems that managing day-to-day spending and budgeting can become a problem for many of us. Life happens, after all! But being able to create a budget—and actually being able to stick to it—is an important life skill that’ll help keep you on track with other financial goals.
College is a great time to start learning about budgeting, simply because college is typically a time when our expenses are pretty straightforward and uncomplicated. You might have a few monthly bills, but nowhere near the number of bills that you’ll have after you graduate; building solid budgeting skills now will only set you up for success in the future.
It’s important to note that budgeting success doesn’t need to come from big changes in your spending. It all starts by understanding your wants vs your needs, and prioritizing your needs first. After that, small steps—like clipping coupons, negotiating a bill, or choosing the right bank—can all make a big difference. One example of a bank that could actually help you save money and budget smarter is Chime, who contributed information for this article.
If you need help creating your first budget, we’ve pulled together five free budgeting worksheets that you can use to find the perfect budget that works for your lifestyle.
4. Understand Your Student Loans
Student loans can be complicated. Before graduating, you should be able to answer the following questions about your student loans:
- How much do you owe?
- What’s your interest rate?
- What’s your monthly payment?
- Who are your lenders or servicers?
- What kind of student loans do you have? Are they federal or private? Are the subsidized or unsubsidized?
- Do you have a grace period? If so, how long do you have before you need to start paying them back?
- What’s your plan for paying them off?
By being able to answer these questions now, before you graduate, you’ll increase your chances for successfully paying back your loans.
Ultimately, your best bet is to make sure that you’re keeping track of all of your student loans throughout college and as you’re making payments. A free student loan spreadsheet (like this one) is a great place to start.
5. Protect Your Information
In today’s day and age, it seems that we don’t go more than a week between hearing about data breaches or security issues. From brick and mortar stores and online retailers to giants like Facebook, LinkedIn, and Google, it seems like none of us are truly safe.
It’s essential you keep your financial information protected, because one cyber attack or unsolicited transaction can throw your financial stability into jeopardy. Especially as a person just beginning to get their feet wet with their finances, a mishap with your accounts can be devastating.
Some tips that you can use to keep your personal and financial data secure include:
- Never giving your Social Security Number or bank account number to anyone you do not personally know and trust, especially if they are asking you for it over the phone or by email.
- Not writing down your SSN, bank account number, or login information (for any account) unless you absolutely have to. If you do, it should be in hard copy and stored somewhere secure, like your home—not in your wallet or a notebook in your bag, and never in your phone. Also remember to never carry your Social Security Card in your wallet.
- Being careful of public computers and wifi, which are prime targets for hackers. However convenient it might be to use the wifi at Starbucks, it can also be dangerous. Try not to log into any account unless you’re on a safe, secure system.
The Bottom Line
The key to a successful financial life after college is making sure you know your stuff before you graduate. While there’s plenty more to learn, the concepts above are a great place to start.
Remember, you don’t have to start out as a money pro. You just need to commit to getting there!