Financial Literacy

Setting Financial and Savings Goals

It helps to have a plan for your money. As a student, these topics may not yet be on your radar, but saving is a key concept for financial well-being. If you make saving a regular habit, even a small amount, you are building a foundation for financial success.

Setting financial goals is important and while you may have only a few financial goals as a student, this is the perfect opportunity to hone your skills. Do you want to work toward a short-term goal, like a down payment for a car? What about a long-term goal, like investing for retirement or paying off your student loans early? Don’t forget to pay yourself first, and commit to putting an amount of your income toward savings, investments, or debt payoff. 

How Can Students Save Money?

• Create a budget and plan your expenses
  • By tracking your money, you can keep spending under control, stay out of debt, and plan ahead for the future.
• Avoid Paying Full Price for Textbooks 
  • Textbooks and course materials can be expensive but there are plenty of ways to save on textbooks. Instead of buying them new, consider buying them from other students, buying used copies, renting them, or using digital copies.
• Find a part-time job
  • Part-time employment a fantastic way for students to earn cash and possibly relevant work experience. Whether you choose and on-campus job, an off-campus job, or an internship, having a job will teach you skills like accountability, time management and collaboration. Plus, they can provide you with a means to pay for school expenses, purchase textbooks or have as spending money
• Use on-campus resources rather than going off-campus
  • Check out activities that are available on campus, free of charge to students.
• Monitor your spending
  • Apps can be super useful tools for college students. They connect to your bank account and credit cards so you can track all spending, set savings goals, and even get alerts when you've spent too much.

There’s no one-size-fits-all approach to how to save money in college. Saving money at any stage of your life, but especially while you’re in college, takes a little common sense and discipline. Remember that you’re in college to learn and earn your degree. Meeting your academic and budgetary goals will not only help you make the most of your college experience – it will help you start your financial future off right.

A budget is a plan on how you will spend your money. A budget can help you manage your money, make smart decisions, and avoid problems like overspending, debt, or running out of money.  

How to Get Started

• Calculate your monthly income, after taxes. This should include all sources of income such as full-and part-time jobs.
• Calculate your monthly expenses, separated into categories like books, groceries, rent, phone, utilities, transportation, credit card statements, and entertainment.
• Designate which expenses are the most important. Be honest about "needs" vs. "wants". Enjoying a store-bought coffee every single day is nice, but you could save up to $80/month by reducing this purchase from daily to weekly.
• Once you have tracked your expenses, compare these to your income to determine your discretionary income. If you are spending more than you are earning, you need to make changes.
• Review your monthly budget for any necessary changes. Remember: a budget is fluid, meaning that it will (and should) adjust as your income and goals adjust.

Credit Report vs. Credit Score

A credit report is a detailed report of your credit history. It has personal information, employment history, and a list of open and closed credit accounts. You can get a free copy of your credit report once per year from each of the three credit reporting bureaus: Equifax, Experian, and Transunion. The website to check is www.annualcreditreport.com. It’s a good idea to review your report at least once per year to ensure accuracy and check for fraud.

A credit (FICO) score is a three-digit number designed to represent your credit risk, using information from your credit report. It predicts how likely someone is to pay their bills on time. Lenders often charge higher interest rates when your have a low credit score. With solid credit history you can pay less for many credit products like private loans, credit cards, insurance, auto loans, and mortgages.

Factors that do impact your FICO Score fall into one of the following five categories.

• Payment History (35%) This is the largest factor and thus the best way to improve your score: make consistent, on-time payments. If you are more than 30 days late even once, it can do significant harm to your score.
• Amount of Debt (30%) The total amount you've borrowed affects your credit score, as does the portion of your available credit tied up in outstanding balances.  A good rule of thumb is to keep your credit utilization ratio (amounts owed/total credit limit) below 30%. For example, if you have a credit card with a limit of $1,000, to stay under 30%, your should spend no more than $300.  Keep in mind, however, that 30% is not a magic number, and lower utilization ratios can improve your credit score and help build it. 
• Length of Credit History (15%) While your age is not a factor in your credit score, the age of your accounts will be considered.   Older accounts and an older average age of accounts may help you to earn more points for your overall credit score. Note that closing accounts and paying off loans in full caps the payment history for those accounts, but it doesn't immediately cancel out their ages for purposes of calculating length of credit history. Accounts you choose to close in good standing (meaning with no late payments) remain on your credit report for as long as 10 years. 
• Credit Mix (10%) Lenders like to see a variety of credit accounts in good standing because it signals that you are a responsible borrower. A person who is making on-time monthly payments on a credit card, auto loan, and a student loan is considered less risky. Your access to different types of credit may be limited as a student, and most lenders realize this.
• New Credit (10%) Anytime you apply for a line of credit and a lender does what is called a "hard inquiry" on your credit score, your score can drop by a few points. Hard inquiries are not all treated the same, however. Credit scoring models see rate shopping for the best rates and terms on installment loans such as mortgages, car loans and student loans as positive behavior. In these cases, they lump together hard inquiries on the same type of loan made within a short period of time and consider them as one inquiry. Note that hard inquiries made in relation to credit card applications don't get this same treatment: Each inquiry is considered separately, and can have a bigger impact if you apply for several cards in a short time span.

For more information on effective credit building as a student, the following articles may be useful:

How to Build Credit as a College Student

Sites

• Federal Student Aid: This website features helpful tips and suggestions on budgeting, tailored to college students.
• InCharge: This page, created by a debt solutions company, features a collection of financial literacy lessons and resources for college students.
• Big Future: This site features resources to help you figure out how much college will cost and ways to get help paying for it.

Free Budgeting Resources

• Mint: This popular app from Intuit tracks expenses and income. You can sync to your bank account and see your spending data. The basic tool is free, but there is also a premium version.
• EveryDollar: This app offers an easy way to budget. As you track expenses throughout the month, EveryDollar will do the math for you. There is a free version as well as a paid upgrade.