The (Other) Most Important Thing You’ll Learn in School
High school and college are full of important lessons, including many that happen outside the classroom. As students head back to school, some of their most valuable learning opportunities will be about money. Here are a few top tips to begin a lifetime of smart decisions.
Set short-term and long-term goals
Setting goals is important in all areas of life, especially your finances. Think of short-term goals as anything you want to achieve in the next year and long-term as anything beyond that. For students, short-term goals might include things like:
- Buying books for next semester
- Being able to buy a used car
- Having enough savings to study abroad
Common long-term goals are:
- Taking time off to travel after graduation
- Moving to a new city to start your career
There are two keys to effective goal setting. Begin with the end in mind, then figure out your first step to get started. To set goals with money, start by figuring out how much money you need, and how long you have to get there.
Suppose your goal is to build up $500 in emergency savings by the end of the year. If there are six months left in the year, divide $500 by 6 and you will learn that you need to save $83.33 (that’s $19.16 every week) to reach your goal. You can start right now by setting aside money each day so that you have $19.16 by the end of the week. You’ll soon see those small steps, taken every day or week, can add up quickly over time.
(Moms and dads, maybe your long-term goal is sending your kids to college. To get started, read our complete guide to saving for a college education)
Create a budget
Just as you can’t reach your financial goals until you define what those goals are, you can’t manage your money until you create a budget to follow. Start this powerful habit early and you can reap the benefits for a lifetime.
The good news is that you don’t have to start from scratch. There are plenty of good budget models to follow. Here are a few:
Don’t worry that you don’t have enough income to follow a budget or set aside savings, and don’t worry that you’ll make a mistake. Budgeting takes practice. The important thing is to find what works best for you now, choose a strategy to stick to it.
One solid strategy is paying your bills as soon as you get paid, even if they aren’t due for a few more weeks. This works for car payments, credit card payments, groceries, gas, and the other expenses that you can’t live without. If you tend to forget about recurring bills, you can schedule automatic payments or use Bill Pay so you’re always covered.
After your living expenses are paid, then you can work on setting aside some money for savings and fun. Even if you only save $25 a paycheck, that can add up over time.
When creating your budget, the biggest thing is to make sure you allocate enough money to cover your bills and then divide the rest between savings and fun. Happy budgeting!
Check your accounts often
Young people who are just starting out often carry low balances in their accounts. This can lead to accidental overdrafts and costly fees. To keep this from happening to you, check your bank accounts daily! If you know your current balance, you’re less likely to exceed it. Luckily, you can check accounts from anywhere with mobile banking and setting up alerts to show your available balance.
This is also a good habit to prevent fraud. Inactive accounts are more often targeted by criminals, and checking often makes it easier to spot any suspicious activity that wasn’t made by you. If you see anything that doesn’t look familiar, please reach out to the Fraud Squad for help navigating your next steps. Time is of the essence in fraud cases, so don’t wait!
Watch what you sign up for!
Starting at a new school or new job often comes with lots of offers for student loans, credit cards, and more debt. Remember – just because you qualify doesn’t mean it’s a good idea! Always read the fine print, and when you’re ready to open a credit card, look for one with a lower interest rate (ideally under 20%). At Farmers & Merchants Bank, we offer a couple options for credit cards that are perfect for student needs. If you’d like to talk about it, call or stop by.
Most students need student loans to pay for college, but don’t borrow more than you need to cover tuition, room and board, meal plan, and your books. Instead, look for grants and other scholarships to cover these costs. You’ll be glad later on!
Finally, do an audit of your subscriptions to things like streaming services, Amazon Prime, Chewy, and Dollar Shave Club. Review them every couple of months and cancel the ones you don’t use. You may only save a few dollars, but that adds up over time!
As you venture out into the world, you’re going to face more new financial decisions. So if you’d like some help, don’t forget – we’re always just a phone call away.
Done the right way, this is an excellent opportunity to show your kids that you have confidence in their abilities, and to instill the sense of pride that comes from becoming more independent. It also reminds them that you’ve learned a few things over the years, and you will be there to offer guidance and advice as they face new challenges. Not everyone will be able to leave an inheritance for their children, but we can all give them the gift of being smart about money.
If you’d like to talk more about these ideas or have other questions, just call 800-695-2045 and talk to one of our experts. After all, keeping you smart is what we’re about!