Having a healthy financial life while in college/school is a challenge. The most frequent interaction we have with money is when we spend it. And we don’t often think about ways to manage it, and other concepts like saving, investing etc. Students should spend their years working on their finances. They should educate themselves in money management and turn that knowledge into concrete moves.
7 Money Concepts Students should know
1. Money Personality
This refers to your money attitudes and money habits. Are you a saver or a spender? Do you worry about money or do you refuse to think about it? A person’s life experiences affect the way they handle money, the attitudes they have towards it, the financial decisions they make, their money values, and their willingness to take risks in money matters.
2. Plan your Purchases
Has the Rs 1,000 spent on a dress for freshers’ night left you broke? Simple mathematics and a bit of planning could have helped you avoid the situation. Cutting down your expenses by Rs 250 every month would have saved you Rs 1,000 in just four months and made the dress affordable. Planning ahead is an easy way to prevent bankruptcy.
3. Select a Good Savings Account
Rather than going for a regular bank deposit, look at products specifically designed for students. Apart from the zero-balance facility and regular freebies, students’ savings accounts have other benefits which make them better than a no-frills account. For instance, free demand drafts for paying examination fee or buying application forms are offered to student account holders of Punjab National Bank, Corporation Bank and State Bank of India. Punjab National Bank also provides an overdraft facility, Maharashtra Bank offers free assistance in sending applications to universities abroad and you can get concessional educational loans if your account is with Vijaya Bank.
4. Building Good Credit
Having good credit will help you make larger purchases such as buying a car or a house. It’s good practice to work on it earlier and the most convenient way to start is with a credit card. Just be sure you know how to use it. This means:
- Pay your bills on time. Payment history makes up a third of your credit score.
- Aim to keep your debt low. Divide your debt on a credit card by the amount of credit available. Try to keep this ratio below 30%. This makes up another third of your credit score.
- Start early, as 15% of your credit score is based on length of credit history. Parents with good credit can help their children build a credit history by adding their name on their credit cards.
- Consider increasing your credit line every now and then. Credit reporting companies like to see how you handle new credit. This makes up 10% of your score. But beware too many inquiries for credit, especially in a short period of time, can hurt your score.
- Having credit cards and installment loans with good credit history will raise your score. This is the final 10% of building a good credit score.
5. Fund for Emergencies
Since students don’t have a steady source of income, it is a must to have a fund for situations that might require some quick cash. Rather than borrowing from friends, making small adjustments, such as skipping a movie at the multiplex or ordering pizzas less often, can help you prepare for both opportunities and crises.
6. Search for Online Offers
Before you go for a movie or lunch with friends the next time, do not forget to surf the Internet. Discount sites are mushrooming by the day, with some offering as much as 95% off on a variety of products and services. You can get huge bargains at restaurants, on multiplex movie tickets, apparel, gyms, spas and a lot more.
7. Contribute to Save
Buying books often burns a hole in your pocket. Instead, ask your friends to chip in and buy them together. The unit cost will reduce and you can take turns to make notes. Once you get the degree, they can be sold and the money can be divided equally among the group members. This can be done for other things, such DVDs and computer games, as well.
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