Financial responsibility is something college students sometimes struggle with. This may be the first time many individuals experience the freedom and responsibility of managing their own finances. Some college students rely on their parents for a steady source of income, others rely on savings and many students have part-time or full-time jobs while enrolled. Whether you are paying for your education, room and board and other living expenses or simply your entertainment, there are several keys to being successful financially while attending college.
The first key to financial stability and success – now and throughout life – is developing and maintaining a monthly budget. Just like anything else that is important to you in life, you need a plan. A budget your plan for your money that month. Use this form or phone/web apps like EveryDollar or Mint to make your budget and track your spending.
Credit Cards and Debt
Recent studies estimate that more than half of all college graduates will graduate with student loan debt. The estimated average student debt for these graduates is $37,172. In addition, it is estimated that graduates are also carrying an average of $2,500 or more in credit card debt. If you are able to develop and adhere to a monthly budget, you can graduate debt free or limit the amount of debt you incur.
Retirement Terms to Know
As you enter the workforce after graduation, you should consider investing for retirement. The earlier you start, the more it will grow! Many companies offer plans to facilitate your retirement savings; Some will even give you money! Here are a few terms to know.
- 401(k): a retirement savings plan sponsored by an employer, named after the subsection of the IRS code. If you
- IRA: an Individual Retirement Arrangement (IRA), sometimes called Individual Retirement Account, is a type of retirement account you can open outside of work with an investment firm (Betterment, Charles Schwab, Fidelity, etc.).
- Roth: is a term that is used to describe how the taxes on an account are calculated and paid (i.e. Roth 401(k) or Roth IRA). With Roth accounts, you’ll pay taxes on the money before you put it into the account. The money grows tax-free, and you don’t pay any taxes on it when you take it out in retirement.
- Employer Contributions: This is money that your employer puts into your retirement account, generally a set amount or percentage of your income. Matching your retirement contributions, up to a certain percentage of your income, is common.