Common money management mistakes college students make

FOR many young people, college is their first money management experience. However, many students are not adequately prepared to handle their own finances. One of the main reasons for students dropping out of college is because of finances — often due to poor personal money management. Parents recognise the need for their children to have […]

May 19, 2024 - 09:43
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Common money management  mistakes college students make

FOR many young people, college is their first money management experience.

However, many students are not adequately prepared to handle their own finances.

One of the main reasons for students dropping out of college is because of finances — often due to poor personal money management.

Parents recognise the need for their children to have basic personal finance knowledge, but many do not know how to teach their children good money management skills.

By practising basic money management techniques, college students can feel confident about their ability to run their finances.

The following are the most common money management mistakes that students make.

Not knowing where their money is going

Want to know a millionaire’s secret? Live within your means. Overspending is a problem everyone faces at one time or another — especially college freshmen.

The first thing every college student should do to gain control over their financial lives is create a spending plan.

Having a spending plan will allow them to see where their money is going and where they can cut back.

Basically, when creating a spending plan, you compare your income to your expenses.

Making your income and expenses match or having more income than your expenses is the goal.

This means your financial life is in balance and you are living within your means.

A negative number means you are spending more than you are earning and need to adjust your spending habits.

Not having a plan for their money

Students often have no plan for how to use their money.

In this case, they would benefit from setting financial goals.

There are things each of us wants to get out of life, and we have to plan for how we will pay for them.

For example, a common financial goal for college students is to go on a study-abroad trip.

They need to write down this goal, as opposed to just thinking about what they want to do with their money in the future.

Writing goals down has been proven to lead to greater success in actually achieving them. Writing down a goal makes it more permanent and you are more apt to remember and reach it.

Not determining wants vs needs

It sounds pretty basic, but many college students try to live outside their means because they have not thought about categorising their expenses — determining what they really need versus what they want.

Determining wants versus needs will help college students avoid impulse purchases and overspending.

Succumbing to peer pressure

Peer pressure is a very powerful phenomenon on a college campus.

Students need to understand that it is okay to say “no”.

If their friends want to go out to eat, see a movie or go on a trip, but know they do not have enough money in their entertainment budget, they should bear in mind that they do not need to give in to peer pressure.

This is where financial goals are important — students need to concentrate on what they really want out of life in order to help them avoid overspending.

Plus, if they make good financial choices, they could help their friends make better financial decisions.

Abusing student loans

Many students are at a loss when they try to figure out how they will pay back their student loans.

The most important thing they should know about student loans is they should only borrow enough to pay for necessities.

They should strive to graduate with as little debt as possible.

One of the greatest satisfactions in life is having a sense of control over your personal finances.

When it comes to money, students should always remain positive.

Practising good money management habits can be challenging, but with a little practice and patience, it is possible.

Practising good personal finance habits is an empowering experience, and helps students gain confidence in themselves and their ability to be financially successful. — University of Nebraska-Lincoln

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David Lee Munemo David Lee Munemo is a rising Zimbabwean journalist with a passion for making complex news discoveries accessible to the public. Driven by a belief in the importance of information communication, David's work tackles a variety of news fields, from groundbreaking entertainment research to the latest political news.