Understanding your personal finances, especially while in school, can set you up for success in the future. Being able to predict spending habits, build a safety net, and understand what’s available to you to help save and spend responsibly means having the tools for when you exit college with loans to pay or having new expenses from moving for a job. In this article, we will discuss areas to improve your financial education.

 

Banking basics
The first step to making sure you can plan for emergencies or begin to budget is understanding how your banking works. Many of our banking needs are right at our fingertips – be sure you have your bank’s app downloaded to access your accounts with ease. Many bank apps have a way to set up near-instant notifications, allowing you to see when your accounts might hit below a threshold you’ve set or if unusual transactions occur.

Here are some basic banking terminologies to know:

• Checking account: An account where you can receive or deposit money, usually by cash, check, or electronic deposits. A checking account allows you to have access to a debit card, where you can pay bills, make purchases, or withdraw cash.
• Savings account: This account does not have any access to a debit card, but you can link it to your checking account to move money around and save money by earning interest while it sits in savings. These are good accounts for emergency expenses.
• Direct Deposit: Employers and government benefits can send money straight to your account within one business day. This is generally the preferred way for funds to be sent.
• Electronic transfers: Payment apps such as PayPal, Venmo, or Zelle can be used to move money into or between bank accounts.
• Routing number: This is a 9-digit code associated with your bank or credit union. It can be found by searching the bank online or reviewing your bank statements.
• Account number: Usually asked for alongside your routing number when setting up a direct deposit or for refund methods, this is a unique code identifying your specific, personal account. You can find this also on a bank statement, by calling your bank and verifying your identity, or by viewing your mobile bank app.
• Interest: This can be either the cost of borrowing money or a reward for saving or investing in something like a high-yield savings account or a Certificate of Deposit (an account that holds your money for a fixed time with a guaranteed rate).

Consider the type of accounts you have – most likely one savings and one checking. If you work, do you let your check or direct deposit go to your checking and sit there until you have spent it all? Consider setting up an auto transfer every month, if you’re able to move money into your savings account. Alternatively, there may be an incentive to open a high-yield savings account, where you earn interest on the money saved over time. These are typically free-to-you services banks offer that allow you to accrue even more savings on what you already have.

As always, be sure to do what is right for you and your current financial situation. If you have more questions, direct them to a financial educator or contact your bank directly.

 

Monthly budgeting
One of the key ways to manage expenses while you’re in college is assessing your budget. Budgeting can help plan for an emergency expense, keep up with a payment plan, and understand what your monthly expenses might look like or how they fluctuate. Start by listing all your transactions for the previous month, including paychecks. This includes listing expenses like entertainment, food, and clothing. List the dates to know when to set up calendar reminders for bills, especially those not on autopayments. This can save you money in the long run by avoiding late fees.

After you list your expenses, list your pay stubs. Include any other income, like a side job or child support, that you might get throughout a month, even if it isn’t consistent. Once both of these sets of expenses are listed, you can subtract your monthly bills from how much money you make in a month to get an average of what you have leftover every month.

This allows you to accurately put money aside for a savings account, know where you can spend a little more in a month for groceries, or know when to cut back on extraneous expenses like take-out. Or perhaps your number from that calculation is less than zero. Consider where you can cut back, or find where you might be paying too much.

Budgeting eases the stress of not knowing whether you will make it week to week with your money, or knowing when to plan ahead for a month where you might need to pay more due to tuition, medical expenses, and more. Perhaps knowing you have excess leftover means you can plan for a trip or something you’ve wanted to buy for a while. But what it could really mean is knowing now that you have the means to plan for an emergency savings account.

 

Emergency expenses
The Federal Reserve reports that nearly 40% of adults can’t support a $500 emergency. These emergencies include a major car repair, income loss, or a broken appliance that can’t wait. For many people, having a designated account for emergency expenses can ease the stress of wondering whether you can make it paycheck to paycheck, or can take care of that repair or medical bill. Sometimes this is as simple as using your savings account and making sure it stays above a threshold of $250, or creating a high-yield account that allows you to add funds but watch it grow every month with interest accrued.

This saves the headache of putting a major expense on a credit card that you will eventually pay off (and might even pay more on in the long run) or having to take out emergency loans that create more debt. Consider saving $10-$50 per paycheck for your emergency savings when you can. Maybe your electricity bill was lower this month – that extra money could go right to savings, for when that bill is higher another month.

If emergency savings aren’t enough to cover expenses when the time comes, ask about payment plans. Pay what you can out of your emergency savings, and set up a reasonable idea for what you can afford to pay for the rest over a number of months.

Emergencies happen fast, but a quick decision can sometimes cost you. Make sure you really think about what you can afford based off your budget, and decide from there.

 

You can build further financial understanding and set your self up for success. Interested in gaining more practical skills to better your financial future? LCC has partnered with resources like CashCourse and CASE Credit Union to provide more ways to educate yourself on finances.

CashCourse is a free, online financial education resource for the busy college student, offering courses, quizzes, videos, and other resources to help build financial skills and prepare for the future. After registration, return to www.cashcourse.org at any time to access modules.

CASE Credit Union is conveniently located in the Gannon Building on LCC's Downtown Campus. At this branch, you can open an account, conduct daily transactions, and apply for credit cards and loans. Financial counseling is included for members at no charge! Whether it is through a job loss, credit card debt or medical expenses, let CASE help you get back on track.