Basic Financial Skills Every Student Should Learn Before College
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College gives students a new sense of independence, teaches them numerous life lessons, and aids in making them more responsible. One of the crucial responsibilities among those is the skill of money management for College students. Financial skills for students / financial literacy is a fundamental life skill that everyone should inculcate early in life. Hence, students should learn the basics of money management before joining College that will certainly help them in building a strong financial foundation & making informed decisions in the long run.
This blog not only explores the basic financial skills for students that they need to develop, it also comprises budgeting tips for students. Read along to find out more!
Contents
Basic Financial Skills Every Student Should Learn Before College
A student should possess various life skills before they begin their College life. Being financially literate is one key skill to survive this growing economy.
Below-discussed are some of the basic financial skills for students that should be learnt before stepping in the outer world:
1. Importance of Budgeting
Budgeting is one of the initial steps of gaining proficiency in maintaining financial security. This technique teaches the students how to manage expenses in low to no income conditions and can be a very impactful financial skill for students. Budgeting helps an individual in avoiding engaging in unnecessary debt and seeds financial stability for short or long-term goals during a student’s College life.Â
Maintaining a budget plan will help the students in distributing the income into essential categories like tuition, rent, food, transport, miscellaneous, etc. This habit can help students picture a clear budget and save more for other purposes.
2. Saving and Investing
Many students work part time whilst managing their higher education since they understand that having financial skill for students is necessary and saving money comes in handy for the future. Students should know that the root cause of the majority of financial problems is overspending. Cutting down unnecessary expenses can contribute to less money related issues. The 50 / 30 / 20 method of saving, where 50% expenses should be segregated for daily needs, 30% for wants and 20% of the income must be kept for saving. This can prove to be helpful for the student when they start to earn.
Alongside this, learning how and where to invest can be a game changer for effectively making use of personal finance for students. However, without proper research and knowledge of investing, students should avoid doing so as it opens doors to sinking in heavy debts.
3. Understanding Credit and Debit
Understanding the concept of credit and debit beyond classrooms will help a student immensely in understanding the flow of money and how it affects the overall financial wellbeing of an individual. Maintaining credit scores, knowledge on loans, interests and practicing responsible habits of borrowing money is something that is very important for an individual to be aware of.
Good knowledge of credit and debit can impact multiple areas of life like taking loans, keeping control over expenditure etc. making it an essential financial skill for students.
4. Maintaining a Balance Sheet
A personal balance sheet is a document that indicates an individual’s liabilities and assets at a given point of time. Maintaining a personal balance sheet will assist the students in clarifying their account of personal expenses, their financial soundness, and in learning how to read and maintain a strong balance sheet.Â
A balance sheet will thus help students in making more informed decisions about their spendings, savings and earning habits. Learning this at an early stage of life aid in polishing the financial skills for students.
5. Basic Tax Knowledge
While some students might not earn during their College, yet it is essential for them to have a basic knowledge about tax. How taxes work, what is tax deduction, tax savings investment techniques, why filing Income Tax Return (ITR) is important, and how income tax affects the earning capacity of an individual are some of the basic fundamentals students should be well informed about. Knowing answers to these questions will add great value in the overall understanding of the financial skills for students ultimately.
Also Check: Top Soft Skills Every Student Needs for Career Growth
Money Management Tips For Students Going To College
As an individual embarks on the new journey of College, financial skills for students and expertise in budgeting become more important. Let us take a look at some of the tips to manage personal finances that are mentioned below:
1. Building an Emergency Fund
An emergency fund can save a student from a lot of stress caused by unexpected life situations. Having a reserve fund can give a sense of security to the students and help them cover unexpected expenses without having to take out a loan under high interests and without engaging in debt cycle.
2. Setting Financial Goals
Learning to manage finances is a pivotal financial skill for students to master. Creating a personal budget can help them save a lot. Setting a financial goal goes hand in hand with budgeting. This indicates setting measurable targets to achieve financial freedom and stability without having to face any pressure.
3. Tracking Expenses
Prioritizing needs over wants and cutting unnecessary expenditure is one way of saving money and a great tip of enhancing financial skills for students. This can be achieved by keeping a record of monthly expenses. Correct usage of technology and applications can not only give a clear illustration of a student’s expenses, but also help them track their financial achievements and low points.
4. Safe Investing
Learning about various funds, stocks, bonds, deposits and savings from an authentic platform / certified person can prepare the students for facing real life challenges and help them practice safe investments, dodging any debt traps thus making it an important technique for improving the financial skills for students.
Also Check: Common Myths About College and Career Choices After 12th
Wrap-up!
The need of hour, in the growing economy demands a student to be independent and responsible from a young age. The best way to inculcate these habits in them is to help them be financially responsible and independent. The skills and tips mentioned in this blog can help refining the financial skills for students in an earlier stage of life.Â
Gaining knowledge and efficiency in managing financial skills is not just about knowing about income in numbers, it is about making informed choices that ensure financial skills for students, their well being, and lead a secure and independent life ahead.
