These 3 Personal Finance Tips Are a Must-Know for Every College Student
With financial wisdom coming at you from all sides, it can be hard to discern what steps we, specifically college-aged students, should be taking to set our future selves up for success, i.e., not being forced to live on ramen for the next four years.
Fortunately, I have three go-to tips for beginners looking to get off to the right foot financially and mentally- as understanding the intricacies of our financial future often brings its own stress. These are easy steps and vital in setting a strong foundation for future financial goals or building a safety net.
#1 Set Up a Savings & Retirement Account
While most students know to set up a savings account and at least maintain a $300 minimum many don’t realize that there are other, sometimes better options for saving. A Roth IRA (Independent Retirement Account) is a wonderful opportunity to build interest on your money and you have the power to choose where it is invested. It helps diversify where your money is, while also allowing you to save for the future. It allows for contributions up to $6,000 (as of 2019!) and once you hit the maximum (likely, once you have a full time job), you can transition to other savings options. Your money builds interest tax-free.
To withdraw your funds you must be 59 1/2 if your account has been open for at least 5 tax years or if you are under 59 1/2, there are enumerated exemptions such as a first house or college expenses.
This is the type of account I personally use and suggest setting up automatic weekly or bi-weekly payments so it becomes a mindless, yet unbelievably useful habit.
#2 Start Building Credit
This is a tricky one. It is so so easy to spend too much when you think of credit as ‘free money’ but credit can be a good thing when used responsibly. I suggest Discover Student Card for your first card as it processes your application within minutes, gives rewards for good grades and earns cash back. Once you’ve been building credit for a little while, you can then apply to different cards with other added perks that may better suit you- whether a cash bonus, rewards or airline miles. You can use Credit Karma to stay on top of your score and this will help when you apply for future loans, buy a car or even a future home.
#3 Open a RobinHood Account & Get a Budget App
Okay, so this is really two-in-one, but both apps are important.
Robinhood is exciting because it allows you to gain exposure to the stock market without risking thousands right off the bat or paying fees for every transaction. The only catch is if your account is under 25,000, you cannot buy and sell more than three times in one week as your account will freeze for 90 days. But hey, $25,000 could be a lofty and motivating goal to shoot for. This is a loaded tip because you will need other resources and I will go into detail in coming posts, but you can always play with penny stocks to understand trends and the basics.
Lastly, get a budget app! They will save your life and with so many out there- you can’t really go wrong. I personally use NerdWallet to stay on top of my expenses and always do my best to keep purchases up to date. While budget apps are not the most useful in creating a budget (see China Alexander’s video for great budget tips) they are great in making you accountable to yourself by tracking purchases.
If you have any questions or comments, I would love to hear from you! Keep an eye out for my next post, where I will be writing on how to create a budget (and what mine looks like)!
Ready to delve into personal finance RIGHT NOW? Here are a few resources I recommend you start with: