Young adults are reaching financial independence much later than in previous generations,and financial advice for college students and grads can be confusing. This month, Charles Schwab launched Money Mondays, offering easy-to-understand and actionable financial advice for college students and other 20-somethings to improve their financial health.
Q: It seems there’s a stigma that college students are notoriously BAD at personal finance. Why is that and what is Schwab’s Money Mondays doing to help?
A: I’m not sure what drives that stigma – and in fact people of all ages can be bad with money. But the reality is that today’s students are dealing with enormous financial pressures—probably more than previous generations. The cost of college has been soaring over the past decade, and it continues to climb, so the reality is that many young people start out with a tremendous debt load.
The good news is that young people are very eager to learn how to manage their money better. They’re just not sure where to start – and that’s where Money Mondays comes in.
Money Mondays offers weekly, easy-to-follow tips that aren’t overwhelming or time-consuming. Our goal is to motivate people to take small simple steps that over time will have a huge impact on their financial lives. In addition, we have online calculators and budgeting tools to get people started. And we’re leveraging contests and social media – including Twitter and soon Facebook — to help spark a conversation, listen and really understand what people need.
Q: What are some realistic money management suggestions for college students as they move through college and graduate into the working world?
A: First of all, be proactive. Managing your money doesn’t have to be overwhelming or time-consuming if you set things up properly. You can start by automating your finances as much as possible. For example, use direct deposit and set up automatic bill-pay to avoid being late on payments.
Second, take advantage of your company’s 401(k) or other retirement savings plan – especially if there’s a match. This might not seem like a critical priority for people in their early 20’s. But if you start putting away just 10% of your income now, you’ll be in great shape. And I can’t emphasize enough: Don’t walk away from a company match! It’s like walking away from free money.
Third, live within your means. If you can’t afford an HDTV or a new smart phone on your monthly salary, set a savings goal and put away a little each month till you’ve reached it. If you’re methodical and committed, you can be successful.
The point is that it doesn’t have to be overwhelming; there are little ways to make a big difference in your financial life.
Q: Why should students care about their credit score?
A: Your credit score can have an impact on so many things. Bad credit can keep you from getting an apartment, a car loan, a home mortgage, or even a job. Knowing what’s on your credit report is the first step to fixing any problems. So we always advise that people get a free copy of their credit report each year at annualcreditreport.com.
Q: What is your advice for college students that have already racked up significant debt (via credit cards, student loans, or both)?
A: One of the simplest things you can do is pay your bills on time. You’d be amazed how quickly debt can compound when you’re racking up late fees and penalties.
Second, always pay off your expensive debt first. Generally credit-card debt costs more than student loans. So pay an extra $10 or $20 toward your expensive debt each month — or even more if you can afford it. We have a great Cost-of-Debt Calculator that tells you exactly which debts are costing you the most.
And finally, put a lid on your use of credit. Don’t charge anything new unless you can absolutely afford to pay it off at the end of the month.
Q: What is one of the most unique or funny solutions you’ve uncovered by a 20-something to manage their money/debt/income, etc.?
A: We host a Money Mondays Contest every other week where we ask people to answer a simple question for a chance to win $100. You’d be amazed at the things people will do to save money. One of the more dramatic stories was from a guy who sold his bed to help cover tuition costs. It seemed like a good idea until he found himself sleeping on a hardwood floor. Then there was the student artist who tried to pay rent with his artwork. Not a bad idea, but the landlord didn’t go for it.
Generally though, we hear a lot of practical ideas for being thrifty, like getting roommates rather than living in your own apartment, throwing potlucks in lieu of going to a restaurant, or having movie night at home versus going out to the movies. And for a lot of people, being thrifty has become chic. It’s the new black.
Want a chance to win $100? Money Mondays features bi-weekly contests with $100 cash prizes. This week’s contest, launching today: What’s the worst financial mistake you’ve made while surviving on entry-level pay? Answer the question for a chance to win!
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