Students all over the world are confronted with major financial decisions as they enter college, and yet they have little experience with personal finance (Knox, 2016). According to Gobal (2013) students’ ability to deal and manage their finances will enable them to live better lives in the future when they start earning higher wages and remuneration. If they cannot manage their finances as students, then it adversely impacts negatively in their lives forever because “little drops of water make the mighty ocean”.
Financial management has and continues to be a tricky issue for students all over the world. Nevertheless, financial education is key because it provides a pathway to increase one’s sense of responsibility in relation to managing finances and avoiding possible mistakes that can take significant amount of time to recover from (Knox, 2016). It is important to manage one’s finances at an early stage of independence by becoming financially educated to help attain a healthy financial future. The article evaluates methods and ways to effectively manage one’s finances.
Managing Student Funds Effectively: Building Financial Independence
As students begin to live on their own in hostels and shared accommodations, it becomes vital to manage their finances and this commences with owning a bank account. As an initial step, not having one indicates a tough time managing one’s finances. A student must endeavour to have a savings account which usually have little to no amount charged on account fees (Randolph, 2013). Also it is important for a student to set financial goals for a week, month, semester, term etc. Setting financial goals is a smart choice and can be very rewarding because it will enable you to check whether you are on course and in control of your spending (Peterson, 2012).
Instead of wandering aimlessly without having a financial spending plan, one has something to strive for if they make a budget and have a clear path for ensuring that they live within their budget (Gamm, 2013). To set financial goals in your budget, first define what the goals you want to achieve (Carey and King, 2017). Write them down and set milestones along the way to help achieve them. Prioritize the goals and put together a plan of action. Just remember to be realistic when setting financial goals. You want to set a goal that is reasonably attainable (Lowry, 2017).
It is also important for you as a student to create a realistic budget which is achievable (Knox, 2016). Creating and following a realistic budget helps you avoid making purchasing or procuring things you can’t afford, missing payments or defaulting on your student loans from the bank (Peterson, 2012). These mistakes can hurt your credit history and therefore your ability to: rent an apartment, borrow to purchase a home or car, or most importantly, get a job in some instances (Lowry, 2017).
Making money – and spending it – can feel very rewarding. However, saving can help every student reach many of his or her financial goals and prepare them for a brighter future. According to Knox (2016) from every wages or income you receive, do well and ensure that automatically you designate and deposit a certain amount of money into an account you can label as “emergency bank or fund account”. This should be done on a regular basis to ensure that you always have some amount of money as your savings for emergency purposes.
This can be increased gradually and if it becomes a habit then you can be well prepared for the future (Carey and King, 2017). Consistency is the key to developing a successful saving habit and it is very wise to be disciplined and not give up in saving something for the future no matter how modest (Lowry, 2017). After paying your monthly bills, consider putting any extra money in the savings account immediately rather than waiting until the end of the month to see what is left over. This will prevent the student from spending your extra cash on unnecessary purchases that can interfere with meeting your financial goals. When money is saved, remember to do so in an interest-earning account. Compound interest helps you reach your goals faster (Gobel, 2013).
Tips for Students on Making Smart Financial Moves
It is also important that as a student, one must learn to spend responsibly. One must learn to eat healthier and spend wiser. As such, some items like coffee, takeout and pizza as well as vending machine snacks must be reduced to the barest minimal (Peterson, 2012). Also, students must learn not to over borrow, be it for a car loan or a student loan. One must have a loan repayment plan in mind to help pay such loans. Other ways of spending responsibly include the following:
- Spend your Funds on the Right Things
College students must endeavour not to use financial aid to fund pizza night or drink up parties in their hostels and dorm rooms. In addition, do not be tempted to use your student loan to buy an expensive item you can’t afford to maintain. For e.g. procuring a BMW X6 whilst you are living on your part-time job or depending on a student loan is a non-starter.
- Borrow Only What’s Required from the Bank
In your decision to get financial support from the bank or the required institution, do well to ensure that the loan is what is needed to support you in college. Do not over borrow because you may end up spending it unwisely. In addition, endeavour to live within your means and the budget you have prepared.
- Work for a Charity Organisation
There are lots of charity organisations in the UK. Endeavour to join and apply to work for one of them and through that you will get some little income and help support a good cause. Make sure that your ultimate aim is not about
- Fund Extras with a Part-Time Job
You need to ensure that you get a part-time job rather than a loan if possible. Getting a part-time job ensures that you get both work experience and some cash to support you rather than depend on student loan / finance which you may need to pay later.
College students are not likely to sit down and go over finances in an Excel spreadsheet, especially when there are better options available. Instead, set your student up with an online service or smartphone app that makes money management easy and convenient (Peterson, 2012). After all the fact is that the smartphone is practically with you every day and it will be more prudent to set reminders on what to buy, on what to do and what lifestyle habits you want to stop to help you save money (Knox, 2016).
Students are also encouraged to use apps such as Student Budget Tracker; Monefy; Money Manager and Spendee etc. to help them manage their finances better.
Financial management on a personal level for students is a big step towards financial freedom and discipline now and in the future. It must be noted that there is no perfect financial decision but one learns along the way (Randolph, 2013).
At London School of Management Education (LSME) we aim to support our cherished students to have an adequate idea and discipline towards achieving effective management of finance that can be effective in ensuring that they manage their limited financial resources efficiently for now as they prepare for their future career aspirations.
If you are a student and have difficulties in managing your finances, please then kindly speak to any of our officers for counselling towards better ways of managing your limited financial resources.
- Gobel, R. (2013) Graduation Debt: How to Manage Student Loans and Live Your Life. Wiley-New Jersey.
- Knox, S. (2016) Financial Basics: A money-management Guide for Students. 2nd OSUP – Ohio.
- Lowry, E. (2017) Broke Millenial – Stop scrapping by and get your financial life together. Penguin – New York.
- Gamm, S. (2013) More Money Please: The Financial Secrets You Never Learned in School. Penguin – New York.
- Peterson, S. (2012) Don’t Break the Bank: A Student’s Guide to Managing Money. Peterson’s Publishing: California.
- Randolph, R. (2013) How to Make a Budget. Rosen Publishing. New York.
- Carey, M. and King, J. (2017) Personal Finance. OUP – Oxford.