College is a time for exploring your independence — you can eat, sleep and go out whenever you want without having to check with someone like your mom or dad. The awesomeness of that cannot be understated. But it’s also a time when some real-life money issues come at you fast — and many college students aren’t prepared.
“It’s not surprising that many students aren’t completely prepared for all the big money decisions that are thrown at them in college like student loans, budgeting, paying the bills, handling credit cards, etc., because let’s face it, most of us don’t talk money at home and didn’t learn it in school,” said Winnie Sun, managing director of Sun Group Wealth Partners in Irvine, California.
Jonathan Drake | Reuters
Students walk past Wilson Library on the campus of the University of North Carolina at Chapel Hill.
Even if no one ever talked to you about money or finance “isn’t your thing,” everyone needs to know about money. You need to know how much you earn. How much you need to pay your bills. How much you have left over to spend. And how much you are saving. Saving may seem like a ridiculous concept when most college students would describe themselves as “broke,” but emergency expenses like a busted laptop or a flat tire can happen to anyone at any time so you need emergency savings to be ready.
You can’t just throw your hands up in the air dramatically and say, “Why does this stuff always happen to me?!” It happens to all of us. You just weren’t ready. You need to be ready. And if no one taught you, it’s up to you to figure it out. But don’t worry, you don’t have to go it alone!
That’s why we decided to create “College Money 101: The ultimate money guide for college students.” We want to give students a foundation to learn the basics about money, be smart about their money, have enough money to do what they want in life and be prepared for the unexpected expenses life throws at us.
“It’s important for students to know about their money, because it sets the financial foundation for the rest of their adult life,” Sun said. “Those who make better financial decisions early give themselves a better chance at achieving bigger financial goals down the road.”
Here are some of the topics we’ll cover in the College Money 101 guide:
- Student loans
- Setting up a budget
- Saving while you’re in college
- How to launch a start-up while you’re still in college
- Getting your first apartment
- How to get your first job — and nail the interview
- Negotiating your salary for your first job
- Understanding your paycheck, 401(k) and other new job money issues
- How to choose a health-care plan
- How to ask for a raise
We’ll roll out these stories in the next month and then we’ll package them in a neat guide you can read, go back and reference or share it.
And, here’s the cool part: All of these stories are written by interns at NBCUniversal as part of CNBC’s “College Voices” program. College Voices started as a way for students to share stories about what financial and career issues they were facing during college, learn from them and share them with other students, so they could learn from them. So, we’ve asked the students to tackle some big money issues and contact financial advisors and other experts to get tips for how to deal with them. These young journalists are actually living these issues right now, so they’re going to ask the questions they want to know. Then, they’re going to share what they’ve learned with you!
Student loans: Do you know how much you owe?
One of the first big money issues that comes at students fast is student loans.
If, like most students, you don’t have thousands of dollars to pay for your college education, you have to apply for scholarships and take out student loans. There are terms that come with those scholarships and if you miss a deadline, you could be on the hook for that money. The average amount of student loan debt is more than $30,000 and it will take the average borrower about 20 years to pay it back, according to the Education Data Initiative.
You might think of contracts as something older people like your parents get into but if you have scholarships or student loans, you have signed a contract. There are terms and, in the case of student loans, one of those is a requirement at a certain date to pay them back. (Assuming student loans will be forgiven is NOT a viable plan.) You’ve got to know how much you owe, when you need to pay it back and HOW you will pay it back. You have to be making enough money to pay your rent and bills AND your student loans.
Mikaela Cohen, a graduate student at the University of Georgia, tackled the student loan story and said she learned a lot along the way.
“Before writing this article, I knew that the student loan debt crisis in the United States was crippling, but I didn’t realize just how bad it has gotten throughout the last 10 years. It was shocking to learn that the country’s total student loan debt has increased by more than 80% in the last decade,” Cohen said.
It is a crushing amount of debt to have to carry as you start out your adult life, which — as you’ll learn from Josh Meyers, a junior at Syracuse University who wrote about getting your first apartment — is crazy expensive in and of itself.
Cohen said if she had one piece of advice to pass on to other students after working on this story, it would be this: “Only take out the exact amount that you need to pay for tuition, fees and major living expenses in college like rent. I regret taking out more student loans than I needed during my time in undergrad. I used some of student loans to pay for personal trips and eating out when I shouldn’t have.”
Setting up a budget
One of the most important things students need to do right away is create a budget.
“Setting up a budget early on is important, because just like exercising and eating right, we need to train ourselves to save — really know how to handle our personal finances — so we can pick ourselves up when something goes wrong,” Sun said. “That emergency savings mindset.”
Darreonna Davis, a third-year journalism student at Howard University, said she had always aspired to set up a budget but didn’t really know where to start. She was assigned the story on how to establish a budget and said she now feels like she has a plan.
“After going on this journey of interviewing both experts and my peers about budgeting, I see it as more of a possibility than just an aspiration,” Davis said. “I have an actual savings goal — to save up enough to afford an apartment in my desired living area post-grad — and I’ve decided to use the 50-30-20 rule.”
The 50-30-20 rule is an approach to budgeting where 50% of your income goes to needs (like rent and food), 30% to wants (like going out to dinner, shopping or going to a concert) and 20% to savings. It’s not the only way, of course, but it’s a great place to start because it’s easy to understand. It’s just three numbers!
Davis also learned that there isn’t just one way to budget or keep track of your numbers. You need to find what works for you. Some people like to create spreadsheets. Some prefer to just write it down or type it in a document. Some like to automate things like bill-paying and savings and track it in an app, while others like to do it manually so you are a part of each transaction.
“Writing/typing and taking notes better helps me retain information and ensures I practice it regularly,” Davis said.
Since writing the story, Davis has vowed to set up a budget and check in with herself regularly to make sure she’s on track.
Getting your first apartment
Graduation is a huge milestone in your life and cause for celebration. Woo hoo! You did it. You got that degree. The world is your oyster! You’ve got plans and dreams.
No doubt your plans and dreams are AMAZING. But! You need money to do that.
You might want to move to a big city like New York. But the question is: Can you afford it?
When you move into your first apartment, you will probably be asked to pay first and last month’s rent as well as a security deposit. You’re going to need to crunch your numbers to figure out how much you make and realistically how much apartment you can afford — what neighborhood, if you need roommates, etc. And, if you are moving to a new — and expensive — city like New York, you really need to do your homework to know exactly how much that is going to cost and if/how you can afford it.
Do you know how much the average rent in New York is right now? $3,630 if you want to live right in Manhattan or $2,850 if you live in the outer borough of Brooklyn, according to a recent report from real estate appraiser Miller Samuel. Of course, there is definitely a way to be able to afford moving to New York, but assuming it will all work out is not the way. Those are definitely some big numbers!
Meyers, who wrote the story in this guide about how to get your first apartment, said it’s important to recognize that some cities are more expensive than others.
“I had a pretty good idea of how expensive NYC was when I moved in. But I was still surprised by how expensive everything was compared to when I lived in Syracuse,” Meyers said. “I buy the same number of groceries in NYC as I did in Syracuse but pay over double the price here just because it’s a bigger city. That was definitely a big adjustment for me.”
Josh’s best advice for college grads getting their first apartment is 1) Know your budget and make sure you have enough money left after you pay your bills for food, activities and your social life and 2) Network as much as possible!
“You’d be surprised how many people are in the same situation you are,” Meyers said. “Reach out to people who have already lived in the city you are moving to and ask where the best place to live would be under your budget.”
Your first job — and your 401(k)
Getting your first job is crazy exciting. You tell everyone you know, they congratulate you and you know that your success train has officially left the station! But, during your orientation, in addition to explaining to you where the cafeteria and bathrooms are, you will also have a million real-life money issues coming at you fast, like choosing a health-care plan, signing up for the company’s 401(k) program, and deciding how much you want to invest and what funds you want to invest it in. So, even if you’re not a finance bro, you’re going to need to know something about investing. And, of course, if you are freelancing or don’t have health care or a 401(k) from your employer, you’re going to need to get that on your own.
When your first paycheck arrives, you’ll find a lot more money than you expected is taken out for taxes. Hopefully it’s still enough to pay the rent and all your bills because you already signed a lease for an apartment, right?
Oh, and now that you are no longer a dependent, you are — woo hoo! — independent, you will also need to start filing your taxes.
It’s a lot, I know. But you’ve got this!
Whether you’re graduating in the class of 2022, still in school or know a college student, please read along with us as we roll out the College Money 101 guide.
And don’t worry if you’re not “good with money.”
“Most of us aren’t born ‘good with money,’ but if you take some time to learn — small steps — it will change your life,” Sun said. “You need to embrace learning about how to better yourself financially. When you have this knowledge, share it with your family, friends, and everyone you care about, because friends don’t let friends struggle financially.”
“College Money 101” is a guide written by college students to help the class of 2022 learn about big money issues they will face in life — from student loans to budgeting and getting their first apartment — and make smart money decisions. And, even if you’re still in school, you can start using this guide right now so you are financially savvy when you graduate and start your adult life on a great financial track. The guide is edited by Cindy Perman.
PUBLISHED THU, MAR 24 20221:01 PM EDTUPDATED THU, APR 14 20226:05 PM EDT
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.