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Mastering money management


Besides grades, that’s one of the things always on the minds of college students. 

This week, tax season is barely in our rearview and conversations about developing financial skills have been led by student organizations. This puts a necessary spotlight on financial literacy, as many students still don’t know where to start with money management.

Most students have debit cards by the beginning of their undergraduate career. They have interacted with their bank to some degree and probably have to manage more of their own money.

The thing about debit cards is that they are just like cash, only you don’t see what you have unless you check your balance. This comes with the risk of overdraft fees.

If you don’t have enough money, your bank will “spot you” the amount you’re missing while charging you an absurd fee. It’s important to know how to check your balance, usually on your bank’s app or through an ATM, and to check it frequently when making purchases.

Just as well, college is the time when we start to build credit by obtaining credit cards. There are some banks that will issue student debit cards, allowing you to build credit and get cashback awards.

The important thing about credit cards is to pay the balance off. The goal is to pay it off in full, basically creating a debit card with perks. Otherwise, the interest your balance accrues can really stack up, causing you to pay more for an item than if you had used cash or debit.

Lots of people work jobs alongside their studies and, depending on spending habits, can start to generate a chunk of savings. If you don’t intend on spending that money, what can you do to maximize it?

If you want some flexibility, simple high interest savings accounts will allow you to make some money while also being able to withdraw it for emergencies. Some of the best so far this year include Wealthfront, American Express and SoFi.

A lower liquidity option is a CD or certificate of deposit. You can select a set amount of months or years to keep your money with a bank for a fixed and decently high interest rate. CDs also usually require a meaningful minimum balance and won’t let you withdraw the money, so make sure you have enough leftover cash for living expenses and emergencies.

Index funds are a higher reward way to invest without the fear or management of other stock options. The money is invested into the companies of a benchmark index like the S&P 500 or the Nasdaq 100. This diversification allows for low risk and historic returns of around 10% annually.

If you’re not looking to grow your money, at least focus on keeping it.

When you shop online, make sure to look at the website’s name and address to avoid falling victim to scammers. Be especially cautious when clicking on random links, as they can send you to phony websites or fake login pages where they harvest your username and password data. And don’t be fooled by positive reviews. 

College jobs can also be a student’s first taxable income. A lot of teenagers work at local businesses back home for direct cash payments or other odd jobs.

As such, one can be left wondering if they need to file their own taxes, if their parents need to claim them or if they are just going to jail. While prison is probably not on the horizon, you could get a small return. It’s likely not a lot, but may be worth one or two drinks from the P.O.D.

Make sure to always file as a dependent if your parents claim you on their return, because otherwise the IRS will actually throw up some red flags.

Learning to manage your money in college is a crucial stepping stone to starting life as a young adult. Understanding and deciding how you want to save, build credit and avoid the wrath of the IRS is a process, so take every opportunity to learn and expand your financial literacy.

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