Campus Life 101: Managing Your Finances
What students need to know about budgeting, credit cards, building a credit history
As the Class of 2023 settles in on campus, BU Today offers a series called “Campus Life 101.” You’ll find tips about how to shop for groceries, what to look for when buying backpacks, how best to manage your personal finances, how to stay safe on—and off—campus, and how to reduce stress and anxiety.
Starting college can be both exhilarating and overwhelming. You’re now making the decisions about what to eat, when to go to sleep, what courses to take. For many, it’s the first time you’ve had your own credit card. Knowing how to create a budget and how to avoid racking up debt from high-interest credit cards is crucial. Bad financial decisions now can have lasting ramifications.
But when it comes to financial literacy, recent studies show that college students are woefully ignorant about topics like investing, credit card debt, and credit history—never mind about longer-term financial goals like saving for retirement. A 2018 EverFi survey found that only 40 percent of students attending a four-year college had taken a personal finance course in high school and only 43 percent of all college students polled had used a budget to help manage their finances.
BU Today reached out for guidance to Zvi Bodie, a Questrom School of Business professor emeritus of finance, the author or coauthor of several books on personal finance and investing, including The Future of Life Cycle Saving and Investing (Research Foundation Publications, 2007) and Risk Less and Prosper: Your Guide to Safer Investing (Wiley, 2011).
With Zvi Bodie
BU Today: Surveys have found that most students have little grasp of financial literacy. Why is that?
Bodie: Financial literacy is knowledge about how to earn money, save it, invest it, borrow it, and manage financial risk. Many students have little experience with these financial activities before starting college. Their parents support them and make financial decisions for them. Most high schools do not provide courses in personal finance and do not cover financial topics in other courses like mathematics.
What’s the most important step for college students to help them manage their finances?
The most important steps would be to get part-time employment to earn money and to create a budget to manage expenses. And find unbiased online sources of financial information and advice. For advice about investing and other important financial decisions, see this series of videos produced by BU’s Human Resources office. While originally intended for faculty and staff, much of the material contained will be of use to any student who is seeking guidance in saving and investing.
How critical is it to create a budget and what’s the best way to stick to it?
Creating a budget is essential. The best way to stick to it is to be accountable to a parent or other close relative. Establish penalties for violating budget targets.
It’s important for college students to begin building a credit history. Why is that so necessary at this juncture in their lives?
A good credit history enhances one’s ability to borrow money. It can be essential in finishing one’s higher education to pursue a career, securing a place to live, or starting a business.
Is getting a credit card a good way to do that? (An estimated 56 percent of students report having one.)
This is probably the easiest way to get credit. But credit card debt is very expensive. You should always pay it off in time to avoid monthly interest charges and late fees.
Students are barraged with offers for credit cards when they first arrive on campus. What should they look for in a credit card company, and what should they avoid?
Security is a major consideration. Make sure you understand how the company handles your information and protects you against fraud. The interest rate and late fees charged are another major consideration. Students may want to check out the Creditkarma website. It provides a list of low-interest-rate credit cards and pros and cons for each card. It’s important that you read the fine print to know what the interest rates are, how and when those rates can change, and whether an annual fee is charged.
Should students open a savings and a checking account? If so, what should they look for and what should they stay clear of when opening them?
Students should certainly open savings and checking accounts. Look for the best interest rate and lowest fees available. Make sure that good deals are permanent and not just for the first month or two. Security is a major consideration. Make sure you understand how the bank handles your information and protects you against fraud.
When signing a lease for an off-campus apartment, what should students consider, especially if they’ll have roommates, but they’re the ones signing the lease?
Pay careful attention to the restrictions on occupancy and who is responsible for repairs. A good resource for information about tenant rights and responsibilities is the Massachusetts Consumer Guide to Tenant Rights and Responsibilities; it offers tips for what to do before signing a lease as well as information about late payment penalties and rent increases.
If you find yourself in debt, what’s the most important thing to do?
Verify what interest rate you are being charged and what penalties you are subject to if you cannot pay off the debt.
Can you recommend certain apps that can help a student maintain a budget?
I like mint.com.
If you need to take out loans to pay for college, what should you consider?
You need to consider how much you will have to repay after college and your ability to earn enough to cover it.
What other financial advice do you have for college students?
Take free courses in personal finance from unbiased sources—for example, the nonprofit SAM (Smart About Money).
Students can save with student discounts, too. Can you talk about that?
Whenever you purchase tickets to events like movies, concerts, sports, remember to ask if a student discount is available. Bookstores often offer student discounts too.
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