April is National Financial Literacy Month. Building strong money habits can make a huge difference in a students’ financial journey. Being smart with your money is an essential building block for students to grow in confidence to best save and spend their money. Here are some essential money habits that will help students understand how to best use their money.
1. Pay Yourself First
Save a bit of your paycheck before you spend it. Try to save about 10-20% of your income every time you get a paycheck. Put this money aside either in a savings account or a lockbox/safe. Use automatic transfers to put this money away into a savings account or into investments. Treat this as a mandatory bill that needs to be done each payday.
2. Keep Track of Your Spending
It can be easy to spend money and all-of-a-sudden not realize where it all went. To avoid this, keep track of what you’re spending and how much is left in your account. Use a budgeting app to help keep track of your money. A simple spreadsheet would also work the same way.
3. Follow a Budget
Create and follow a budget to make sure you don’t overspend and fall into debt. Use the 50/30/20 rule, where 50% of your income goes towards your needs (like rent, food and bills), 30% of your income goes towards your wants (like entertainment and hobbits), and 20% goes towards your savings and investing.
4. Build Up an Emergency Fund
Emergencies happen, and they can’t always be planned for. It’s important to have an emergency fund to address these unexpected expenses. Try to have about 3 to 6 months of living expenses saved for emergencies. Keeping this money in a high-interest savings account helps keep it safe but still accessible.
5. Stay Away from High-Interest Debt
Debt, like credit cards, can grow quickly. Aim to pay all credit card bills in full each month. Avoid carrying your credit card balance over to the next month, as you will have interest added to that bill. To avoid a big credit card bill at the end of the month, stay away from impulse purchases. These are things you don’t really need. The total amount can grow quickly without you noticing until you get that bill at the end of the month.
6. Invest as Much as Possible
Investments is a great way to grow your money. It’s a place to put your savings and let them grow over time. Doing this early gives you more time to grow your savings. Consistently adding more money into these investments will help it grow more.
7. Avoid Inflation in Your Lifestyle
Your income may grow over time. Minimum wage will go up, taxes may fluctuate, you may even get a raise. The amount of money you earn at your job may grow over time. When this happens, it can be easy to also raise your spending. Try to avoid this. The more you earn, the less you spend, and the more you can save and invest.
8. Set Financial Goals
Create clear goals for yourself and your money. Do you want to buy a house one day? Do you want to maintain a great car? Do you want to retire early? Do you want to travel? Setting these goals and then making a plan to reach them is important.
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