The average student is in a very difficult financial situation. For one thing, they most likely just took out a big enough loan to buy a first home, and they will do that every year for the next three years.
On the other hand, they earn little or no money and are independent for the first time in their lives without any real knowledge of how adult finances work. Without a little thought, this can be a disastrous equation, with ramifications that can follow a student into their twenties and beyond.
Good financial advice can make all the difference.
For the prospective student, a lot of good can be done by considering which loans are right for you. Too often, future students make decisions during their senior year of high school that follow them into adulthood.
Rarely is there anything that can stop the average 17-year-old from taking out hundreds of thousands of dollars in loans without really understanding what it will mean for their future. By educating high school students about the real impact of large loans, a lot of financial stress can be avoided up front.
Looking for a job
It’s not easy to keep a job as a student. And yet, it can be a necessary part of the equation. Although loans are usually not due until after the student graduates, other pesky expenses (like the need for food) are more immediate.
Keeping a job can reduce the amount of money students need to borrow for room and board. Positions within the university are particularly reliable in meeting the busy schedules of students.
Learn to invest
Learning to invest in college is a good habit that can yield fruitful results later in life. Although most students probably don’t have a stock portfolio, investment literacy is an important skill to have.
Not only does this prepare students for the adult world, but with luck, it can also lay the groundwork for eventual loan repayment.
College students should also receive extensive training on how common things like credit cards work. Like student loans, credit cards are widely available, but not so widely understood by the average student.
Students are well advised to understand credit cards, interest rates, and overall financial planning to know how they spend their money. Although some credit card use may be necessary, most students will probably find it best to pay in cash.
Learning to budget is another essential skill for students. Since student loans are not usually due until six months after graduation, the immediate need for a comprehensive budget may not seem obvious to all students.
However, budgeting can help develop good financial habits that will carry over into post-college life. It can also help students be in a better position to start repaying their loans after graduation.
Finally, the student will be well advised to develop a clear idea of what he spends and how he spends it. There are, of course, stereotypes about high bills and overspending in fast food. Although these expenses may be common in universities, they are not the total expenses of a student.
For example, students can be smart to monitor and track how much they spend on books. Although it is a necessary expense, tracking expenses can encourage students to prioritize smart purchases (i.e. renting or used books).
Tracking expenses is an essential part of sticking to a budget. It is also a habit that can help students survive their college tenure and emerge on the other end in a good financial position for the future.
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