Developing smart financial skills and habits will give college-bound high school graduates a strong foundation. First, they must assess what college costs will be and figure out how to cover them. Learning practical money management skills and budgeting will allow them to sustain their efforts through their course of study. Understanding the scope and responsibilities of managing their finances and being able to plan for the long term will help them reach their goals in college and beyond.
To learn more, check out the infographic below created by Maryville University.
Setting Goals and Budgeting: Assessing the Costs of College and Budgeting for Them
How Will You Pay for It?
If students want financial aid to help pay for college, they must first fill out the Free Application for Federal Student Aid (FAFSA) form to apply. The aid they can get may include loans, grants, and work-study if they live on campus.
There are other ways students can pay for college as well. These include scholarships, 529 accounts, personal savings, off-campus employment, and tuition support derived from service in the armed forces. Some employers also offer tuition reimbursement benefits. Students should note that financial aid eligibility is based on family income and assets.
Chances are, students who apply for financial aid will get something in return. The percentage of first-time, full-time undergraduate students awarded financial aid was 86% in 2014-15.
Student Loans: Borrow Now, Pay Later
Plenty of students nationwide take out student loans. Currently, student loan debt in the United States is $1.48 trillion. The average student loan payment is $351 a month. These payments begin six months after the student leaves school.
The student loan interest rate in 2017 was 4.45%. This represents a substantially lower interest rate compared to other loans and 2.35% lower than it was in 2007. Even with these lower interest rates, college advisors recommend taking out no more in student loans over the course of their students’ college careers than what their expected annual income in the first year after graduation.
Tips for Creating a Budget
A budget is a powerful tool, and there are several ways to make budgeting simple and easy to update. After students find a budgeting tool that works for them, they need to learn to track income and expenses. They also need to estimate expenses and keep their budget balanced, adjusting where necessary. Since they’re in college, students should build their budget around academic periods and their expected completion date.
Working and Managing Income: Developing Good Financial Habits for Life
There are several key strategies students can cultivate to help them manage income properly. Learning how to balance bank accounts, banking online, staying on top of financial aid requirements, shrewd credit card management, and saving for the future are all crucial ways students can help themselves financially, both now and in the future.
Money management is a little different for students attending college on campus compared to those taking courses online. On-campus students may be tempted to splurge on food and snacks or go out with roommates and classmates. This can be mitigated by dedicating time to in-home meal prepping or finding free on-campus events that serve food and drink. Commuters may consider scheduling their classes for just two days a week to cut down on travel, which could save on gas, parking fees, and automotive maintenance.
For those attending college online, they should invest in a reliable laptop or digital device, or even consider using a computer reserved specifically for their schoolwork. Students should also check their internet speed and device compatibility, as some classes may use software that requires a strong internet connection or have device requirements.
Investing and Planning for the Future
What is the ROI (Return on Investment) for a College Degree?
It’s important for students to determine how much a degree will help their finances in the long term. The first step is to consider the net cost, the earning potential of their major, and the cost of post-graduate living. Research funded by the American Educational Research Association found that graduates of public colleges found jobs faster and had less student debt compared to private college graduates. The research also determined that graduates of moderately selective private colleges earned more than grads from similarly selective public colleges. Regardless of where the postgraduate studies occur, they pay dividends. Studies show college graduates earned an average of 56% more than high-school grads in 2015.
A terrific way for students to achieve their financial objectives is to invest. There are steps to do this properly, such as defining goals, deciding what their risk tolerance is, and picking a financial consultant. There are other habits that stem from these strategies, such as investment diversification and learning what products deliver what returns.
Habits for Life
Ultimately, there are several financial life habits that can serve students well after college. Budgeting, credit card management, and wise investing are crucial elements. Students should also be ready to re-evaluate their financial habits throughout their life to incorporate life events, from buying a car and getting married to having kids and retirement. Finally, students should update their post-graduate budgets to include student loan payments, new income, and living costs.