How Smart Are YOU About Money?

How Smart Are YOU About Money?

If your family is like most, money is a private – perhaps touchy – issue. Financial professionals sometimes say that people are more willing to talk openly about their sex lives than they are to discuss their financial situations. A strange thing, really, for people living in one of the most prosperous countries on Earth.

The thing is, because we’re so secretive about our money, parents often don’t teach their children how to handle it – maybe because they don’t know themselves, or perhaps because it’s just awkward and embarrassing to talk about. Either way, many parents are doing their children a disservice by not explaining basic money skills, like budgeting, saving, and how to use a checking account.

Think about this: babies being born today most likely won’t even know what a check is! Even though we may never write checks, we still have “checking accounts,” which work differently from savings accounts, in that we deposit money into them with the intention of spending that money. For example, we have debit cards attached to our checking accounts which we use for many purchases. Savings accounts, on the other hand, are designed to put money into and keep it there to earn interest, if only a miniscule amount. Banks and credit unions often penalize their customers for making too many withdrawals from their savings accounts, because they are not designed for that.

This may seem like basic stuff, but trust me – there are some folks out there who never really understood the difference between these two types of accounts. Never mind things like money market accounts, cashier’s checks, and wire transfers.

While it’s never too soon to start getting a basic grasp of how money works, it becomes urgent as students prepare to graduate high school and get out in the “real world.” Mom and Dad may still help with your expenses, but if you’re working or going to school – especially if you’re moving out of your parents’ house – you will need to start understanding basic money concepts.

I don’t mean to get all preachy on you, but this stuff is important, so bear with me, please. Here are some basic money tips for students heading off to college – or just moving out of their parents’ homes.

Track Your Spending 

While the word “budget” seems to make many people cringe, it’s a simple, necessary concept if you intend to have money left over at the end of the month, rather than the other way around. All budget means is “to get an estimate of your income and expenditures for a specific period of time.” This means you know how much your car will cost, your cell phone, rent/utilities (if you’re paying for them), food, personal necessities, and FUN. Yes – you need to budget for fun because if you don’t, you won’t have much of it.

Use Credit Wisely

Credit card companies LOVE new college students – because they usually have no credit history yet, so they can start fresh. Please, please, please … no matter how tempting the offers, make sure you don’t get in over your head by signing up for too many credit cards. It’s tempting, to be sure, because it FEELS like free money. But it’s not free at all.

The way a credit card works is that you sign your name when you make a purchase, promising to repay what is essentially a loan. However, if you don’t pay ALL of that loan back immediately (and credit card companies don’t want you to do this), you will be charged interest, which is a fee you pay to the bank for “loaning” you the money. And these fees can be steep. Get two or three cards going with high interest rates, and before you know it, you’re in debt up to your eyeballs. 

Credit cards are not all bad, though. They can come in very handy in emergencies. If you’re going to use credit cards regularly, you should try to pay off the balance each month to avoid those huge finance charges.

Work Out Roommate Arrangements Ahead of Time

If you’re moving out on your own or into a college dorm, it’s important to work out payment arrangements with your roommate before you move in. Decide ahead of time who will be paying for which expenses. If you’re living off campus, determine each roommate’s share of the rent and utilities before you start paying them. If you’re living on campus, talk to each other before moving in to figure out who already owns which accessories and supplies so you won’t buy duplicates or have to budget for new items after school starts.

What You Do Now Will Impact You in the Future

I know how exciting it is to think about moving out on your own. It’s a rite of passage we all go through. The thing I really want you to keep in mind, though, is that the things you do now – particularly with your money decisions – will impact you down the road. Did you know that many companies do a credit background check on the people they consider hiring? I know you’re on the verge of adulthood – and you want to be treated like a grown up. But you have to act like it. If you’re like most people heading off to college, every penny counts. Make it an awesome experience by spending within your means, sticking to a budget, and not abusing credit cards.
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ALBERT MENSAH is a champion of opportunity and achieving one’s dreams. Rising from humble beginnings in Ghana, Africa, Albert has become one of the world’s leading student motivational speakers, regularly presenting to groups such as FCCLA, FFA, FBLA, DECA, 4-H, and numerous school assemblies and student council groups. Visit his website to book him to speak at your student assembly, career day, or state or national teachers’ conference.