Starting a new chapter of their lives, soon-to-be independent high-schoolers may be caught up in all the excitement of going to college. However, while the
transition from high school to college is an academic and social shift, it is also a financial shift.
When high school seniors and college freshmen become adults, they take on various responsibilities including budgeting on their own, taking on loans and credit, saving and investing for their future, filing their own taxes, and insuring themselves and their assets.
Especially when going into college as an independent entity with little income, it is essential that students learn how to
manage money wisely.
Becoming Financially Independent
Most students tend to incur large student loans, and the impulsive
spending often associated with college life does not necessarily help students’ financial situations. Therefore, it is important that students learn how to balance their income, fixed expenses, and variable expenses, which will not only help students manage their money in the short term but also will prepare students for long-term financial success.
Student Loan and Credit Card Debt
Learning to prioritize spending and allocate funds appropriately ensures that students can financially fend for themselves in the real-world, even after college.
As students become financially independent and take on debt of various forms, including student debt and
credit card debt, it becomes essential for students to understand how borrowing money works. In order to avoid paying off large debts and incurring high interest rates, students who understand the system of credit can utilize their knowledge to find loans with low interest rates, pay off their debts on time, and ensure that they remain responsible with their finances.
A large portion of college students end up with excessive debt as a result of not setting up automatic payments to pay off their credit card spending each month, which could easily be avoided if students learn the pitfalls of being indebted before they enter college.
Saving Money in College
Savings can be of utmost importance in times of need. Whether it be unexpected medical bills, paying off long-term debt, or retiring with an adequate amount of money, it is important that students start
saving money in college.
Because college students often have little to no income, while their total savings may not be large, learning to save prepares students to save money in the future. In addition, learning about compound interest and student benefits enables students to have an emergency fund that they can tap into.
Regardless of whether one decides to save money for short-term expenditures or long-term goals, adopting a savings mindset allows
students to control their financial future.
Investing as a College Student
In addition, students should learn the essentials of investing before entering college so that they can explore alternative assets and learn about how to grow their money through real estate, stocks, bonds, or even investment accounts such as Roth IRAs. In a world where there are hundreds of reliable ways to earn passive income, students should take advantage of these opportunities while they are still young.
When students learn to responsibly invest money, they can ensure that they still have a source of passive income in the case that they ever lose their primary income stream.
Filing Taxes
Furthermore, as students progress into a state of financial independence, it is vital that they learn to
file their own taxes. The majority of students partake in some form of job during their college years, whether that be an internship or a part-time job after school, so students must learn how to file taxes each spring and become aware of potential tax exemptions and deductions they may be eligible for.
Every year, millions of Americans miss out on
tax benefits that they are eligible for simply because they are unaware that these programs exist. Therefore, now may be the time for students to finally avail themselves of the opportunities that previous generations have not by understanding the variety of variables that go into filing taxes.
In conclusion, there are several financial concepts that students can learn as well as tools that they can utilize in order to build financial independence. For example, students can use tools such as Excel in order to create weekly budgets that track income and spending. By creating a budget, students can make sure that they save money as well in order to build an emergency fund.
Furthermore, if guardians teach students how to use tools such as Intuit TurboTax or H&R Block, students would be able to file their own taxes with the assistance of these easy-to-use tools. With a wide variety of student credit cards offered, students can responsibly use credit cards to increase their credit scores, which will allow them to make large purchases and financial decisions in the future, such as buying a house or investing in a business.
When students learn the risks of
taking on loans and understand how they can build a good credit score by paying back loans and debts on time, they become prepared for financial success.
