Budgeting

The first thing you might want to do as a student is budget. I know this sounds like challenging work, but I can promise you — budgeting is easier than ever! All you have to do is map out a plan and stick to it as well as you can. However, there are certain rules that might help you set it up.
Establish the income that you have coming — how much and how often do you get paid?
What are your outgoing expenses? What will you be spending money on? Write down everything that you think you might spend money on every week.
After you come up with your total income and figure out your expenses, it’s time to see how much money extra you have left. Subtract the second from the first and check out the result. Then, divide that into savings and luxury costs (like going out for an expensive dinner or buying yourself your favorite pair of shoes)

• Prep your meals, stop the cravings
• Have fun but don’t overspend
• Consider all of your subscriptions
• Sell unnecessary items
• Set goals
• Keep track of your records

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Investing

Saving is one of the most important ways to prepare for your financial future. It’s one of the most critical principles for young people to learn. This encompasses everything from how to open a savings account to how to actually save money. A critical part of this principle is to create the habit of savings. This is something that parents can teach their children from a young age, with gifts first, and then later with money from a part-time job. Other important parts of this principle include:

• Paying yourself first
• Tracking your saving and investment accounts
• Planning for short and long-term
• Building an emergency savings
• Consulting financial professionals
• Investing for future expenses

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Borrowing

There’s never a better time to learn about the financial literacy principle of borrowing than as a young person. Well over half of students borrow money to get through college, and the class of 2019 graduated with about $29,000 in student loan debt. This important component of financial literacy revolves around understanding how to get a loan and, more importantly, how to pay it back afterward. It starts with learning about credit scores and credit reports, which are some of the most important determining factors when it comes to applying for credit. Once someone has built up the financial history to qualify for loans and credit, it’s critical that they understand their loan terms, such as APR. Finally, you must be able to track your debt and make debt payments on time each month.

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Taxation

Gaining knowledge about the different forms of taxation and how they impact an individual’s net income is crucial for obtaining financial literacy. Whether it be employment, investment, rental, inheritance, or unexpected, each source of income is taxed differently. Awareness of the different income tax rates permits economic stability and increases financial performance through income management.

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Personal Financial Management

The most important criteria, personal financial management, includes an entire mix of all of the components listed above. Financial security is ensured by balancing the mix of financial components above to solidify and increase investments and savings while reducing borrowing and debt. Achieving an in-depth knowledge of the financial components discussed above guarantees an increase in an individual’s financial literacy.

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Earn

One critical component of financial literacy is the ability to earn money. But even more than that, it’s about the understanding of what happens to the money you make, including:

• The amount you take home on your paycheck
• The benefits your employer offers
• The amount you pay in taxes and where that money goes

It’s especially important that young people learn this principle of financial literacy early before they join the workforce. Since many students will take on their first part-time job during high school, parents can turn to that job as a learning tool for their teen.

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