I know that students get so much advice about finance thrown at them from all sorts of sources, but I thought I would share with you the things students should know about money based on my personal knowledge, common sense and having been an accountant for 25 years before I made writing my career. Students have a tough time and college is a lean time finance wis, but there are ways to manage your budget successfully – especially if you’re educated with the essential things students should know about money.
1. Rich People Are Rich Because They Saved Instead of Spent
This is one of the things that everybody should know and is certainly one of the things students should know about money. In order to have $20,000, you need to save it up. People with money in the bank have it there because they did not spend it. It is easy to spend money, but if you want to boast amounts in your bank account, then you have to save your money. Yes you have to earn it in the first place, but that’s a different issue.
2. Paying Less is Not Saving Money
You can buy a Chinese made plastic potato peeler and it can last you six weeks before it snaps. Or, you can buy one made in Europe and spend more money but it lasts you two years. Which is the better value and which is going to save you the most money? Cheap goods are often shoddy goods and will rarely last you long enough to justify their purchase. It is much easier and more sensible to buy a decent item once than buy a crappy item 4-5 times.
3. Grocery Store Discounts Are Designed to Make You Spend More
This is like point number one, where it is one of those things students should know about money in the same way that the rest of the world should know. It is easy to spot when they put up the price of Pringles so that they can have an offer with two for one, but there are far more insidious deals in the store. For example, yogurts are sold in big packs at a discount. This is because they know the yogurts won’t last long, and that ideally you only need two or three per shopping trip. That is why they bulk them together and sell them at a discount. It makes you think you are getting a good deal, when actually you are buying more than you need.
4. Borrow and Lend so That You Have More Money to Spend
Other students need your stuff, and you need the stuff that other students have. Instead of buying stuff all the time, just borrow it from other people, and lend them your stuff when the time arrives.
5. Having Money Means Being Very Disciplined
It means creating and following a budget, and it means resisting your pre-programmed urge to spend, spend, spend. It takes a lot of discipline.
6. Hunting for a Better Price is Okay to a Certain Point
Don’t buy stuff at any old price. Do try to get a better price for things, but remember that lower prices are not always the best (see point number 2). Instead, be conscientious but not too silly when you are buying. There is something in accounting called opportunity costs which is basically the cost of doing something at the expense of something else, and the value of what that something else would be. Ask yourself, is it the most valuable use of your time (which is the cost) to spend 3 hours searching to finally find a discount of $3? Those 3 hours could have been spent finishing your paper, or sexying it up to get a better grade (the opportunity).
7. Buying Something New as a Student is Foolish
Second hand goods are worth the money, but new goods are not. The only exception is with certain items of clothing such as underwear and trainers, and certain goods such as PCs and laptops.
8. Impulse Shopping is Programmed into You
You did not buy something just to get rid of your change, nor because the shopkeeper sneakily put something besides the checkout. You impulse buy because you are programmed to do it by modern marketing. You are programmed to believe that this sort of impulse buying gives you pleasure. This is another of the key things students should know about money and once you realize this, you will start to notice your silly purchases and will hopefully stop making them.
9. A Budget Helps You See How Little You Have
This is one of the best things about a budget, because it makes your large bank balance look as small as it actually is. The worst time for a student is when they start a term and have lots of money in their account. They do not see how little they have to spend because all they see is their balance. Use a budget and you will see how little liquid cash you actually have, which will make you spend more conservatively.
I am of the opinion that students and money management is as much about attitude as knowledge. If you start off with the right attitude to money (and credit) you will be in a better position when you move into the world of full time paychecks. What do you think are the things every student should know about money?