It’s important to study well, party hard, fall in love, and enjoy your college years – and to be young and a little reckless sometimes. However, it’s also important to start thinking about some “grown-up” things, too. In this blog post we talk about finance, savings, and investing.
Looking back at our college times, there are a few things we would have loved to know already then, but didn’t. That is why we would like to pass the “knowledge crown” on to you, who are still in college.
Be a best friend to your financial self, too.
Build a healthy relationship with money
A lot of Instagram, FB, and other channels promote blogs and posts that we need to take good care of ourselves – psychologically, physically, and emotionally. And, we totally agree on that! However, we should not forget about a healthy relationship with our money, too. There is some old wisdom that we strongly suggest you follow:
Spend only what you earn or have.
Not that debt is evil; we all need a loan for something bigger sometimes, or there are inevitable circumstances that can cross our path. It is just that debt should not be the only and constant way of how you build your life – it should be a rarity.
Credit cards - know the real cost. We know that interest rates on credit cards are among the highest. And too often we find ourselves using them too much – we see that when we receive our card’s financial statement. So, we should reverse the logic – picture the cost of such financing and then decide whether we go for it or not. Another rule of thumb is that if we can not manage to settle credit card debt to zero in one or two months, then we are already looking at too much debt. In short, debt is not healthy.
Become a Master of Budgeting
When somebody says you should live on a budget, our mind instantly goes to thinking, “Oh no, but I want those pair of shoes, I need to see that movie . . . .” The good news is that living on a budget actually means a very positive thing:
Take control of your money in order to meet your financial goals.
If you start thinking and acting upon it already in college, you are set up for a life of financial happiness and success, because it will become your good habit.
Use Apps to Reinforce Good Financial Habits
We love that so many funky, awesome, and useful web and mobile apps exist already. They will help you with creating your budget, saving money (and you will not even know about it), or investing in stocks or cryptocurrencies. Check some of them out:
If you by any chance still love the old analog ways, you can set up some visual reminders for you to save money, like leave photos of your dream holidays or car next to the computer where you do the online banking – it will remind you that you want to save that money, instead of spending it. 😉
Have That Emergency Fund
Why do you need one? It gives you the peace of mind to know that, if you, for example, lose your job, you can worry about how to deal with the emergency itself and not worry about how you’re going to survive financially.
Let’s first take a look at what an Emergency Fund isn’t:
- It’s not used for planned purchases like a house, a new car, and so on.
- It does not have to be large, it can start small.
- The amount of it varies based on your lifestyle.
Out of sight, out of mind.
The best way to store your emergency money is by putting it into a separate account, you’ll know exactly how much you have – and how much you may still need to save.
How much should you have in your emergency fund?
Financial experts recommend that you should typically have three to six months’ worth of expenses. You can start small, here are some examples of how much can you save up in two years:
For instance, let’s say you set aside €25 a month in an emergency fund. At the end of two years, you could have €600 saved. Increase that amount to €50 a month and your savings could grow to €1,200. Make it €100 a week and you’ll see an even larger amount saved – €2,400.
Should you save or invest your money?
We would say that you should save AND invest your money, but how? Read the following lines, and get to know the basics.
The real question in our college years is where the savings happen.
There are two sides to the equation: earnings and spending. We can think of extra earning – babysit, work in a bar, or help the elderly with groceries for some extra bucks. Or, we can think of smart spending (buy things on sale, ask a friend if he or she has something we need, etc.). Both result in additional $$ that can be saved, and at the end invested.
Useful Insight: Time your spending (if you don’t need one thing urgent, can you buy it on sale?) and monetize your knowledge (either build a photo portfolio or start sharing crypto knowledge with old wealthy neighbors). There are always options.
Let your money work for you
You do not have to overexpose yourself. Start with small amounts (if you have it for a coffee then you have it also for investment). Choose from stocks, bonds, or dive into cryptocurrencies – If you do not own a Bitcoin, now is the time to try this digital novelty. Find out more in an in-depth blog on “Investing is a Marathon, Not a Sprint.”
And in the end, we know that the best teacher is life itself.
To explore more options, you have to start increasing your financial literacy. Some financial products or services might seem complex, but our advice would be: jump into the water and start exploring, ask questions that will unlock a new level of financial knowledge, and compare your experience with parent’s experience of buying their first stock or bond.
Intrigued, and eager to learn more?
We’ve written a number of “Investing 101” blogs that will help you with the first steps of increasing your financial literacy. We invite you to check them out: