More than ever, students in the United States should be concerned about their finances. Student debt is abundant, and money is tight for many; millennials should be more concerned than ever about the money they make, owe and save.
Unfortunately, this isn’t the case. Millennials score lower than other generations on financial literacy tests. According to a George Washington University study, only 24 percent of millennials have a basic knowledge of finances.
Thinking about finances means thinking about thousands of dollars in loans to the average American student. Even though thinking about your financial future may seem hopeless, ignoring it will only make it worse. The feeling of hopelessness is a red flag that it’s time to make a financial plan for your future.
Here are three basic tips to start your plan:
- Eliminate unnecessary debt. The thing on most students’ minds is the very thing you should be concerned about. Thinking of sacrifices you can make to pay off debt may not seem fun now, but it will mean more money in your pocket in the future. You will have to pay for it eventually, so why not start now and save some interest payments while you’re at it? When it comes to new debt, you should only take on what you absolutely have to. In the past five years, 42 percent of millennials used an alternative financial service like payday loans, pawn shops and title loans. These types of debt are extremely dangerous to your financial well-being and should be avoided at all costs. Even the misuse of credit cards can lead to serious debt over time. Paying off your card in full and on time can make the difference between paying for normal expenses and normal expenses with ridiculous interest rates.
- Save for an emergency fund. One of the most financially responsible things you can do is save money for emergencies. Knowing that you will be prepared for a financial emergency will give you security in budgeting and peace of mind. Think of this sum as an extra insurance policy that will cover any emergency. Even if you feel like you don’t need it now, you will eventually. Saving early and often can make this goal achievable.
- Save for the future. It sounds silly to think about saving for retirement while in college, but the truth is that there isn’t a better time than now. Investing some money into a retirement account will allow it to be worth far more than it currently is. You will have to start setting money aside for retirement, so doing so sooner will mean more money in your pocket later.
Millennials have more resources than any other generation to be financially responsible. Financial apps, information and advice are never far from anyone with an internet connection. The 34 percent of millennials who are unsatisfied with their current financial situation have hope if they put their mind to making and sticking to a plan for success.
Daniel Payne is a sophomore integrated marketing communications major from Collierville, Tennessee.