Managing money is one of the most important aspects of adulthood. Without it, we of course could not survive, needing to pay bills, food and so on. The issue is no one wants to live hand-to-mouth, where the money we earn immediately disappears. We all attempt to save, of course, but that is not enough. There will be times when we can’t earn money, earn less or require a very expensive item – such as a car or home.
This should be of particular interest to students. They have the advantage of time, which many, who start focusing on finances late in life, do not. The question is where precisely students’ money should go.
Savings Account
One of the first things we should do is figure out our budget. This means looking at how much we earn, how much we must spend and then figuring out how much excess is left over. Budgeting is essential for every financial transaction.
Forbes’ Laura Shin has an easy budgeting outline, which makes an ideal starting point when tackling personal finance issues.
“I have come to prefer a simplified method of budgeting that uses the 50/20/30 guideline of budgeting (or numbers tailored to your situation) in which a certain percentage of your budget is allocated to certain large categories, and weekly allowances to keep you on track.”
One area where your excess can go is into a savings account. What makes this kind of account beneficial is knowing your money will always be there. There is little risk – but in the same sense, there is also little reward (of course, collecting your accumulated wealth is its own reward, but that is long-term). Consider what options are available. It might be wise to set up policies where your bank automatically takes a set amount each month, leaving it out of your hands.
Investments
Savings are beneficial because students have time to watch their money grow. Another advantage students have is the ability to take risks. While younger people are renowned for this, it is also highly beneficial to finance. Given that students won’t be putting all the money into investments, they can afford to take chances, perhaps lose some here and gain over there. Whether they focus on short term investments or more riskier options, students should consider the benefits of investing.
Unlike saving, investment in the right area could mean dramatic increase in returns. For example, the price a student might pay for stocks today could result in enormous returns later. It might not, of course, but students can afford to change and adopt other items.