The transition to college life is a significant milestone both for either you as the student, or you as the parent. There’s excitement, new experiences, and untold opportunities as a new chapter is born. But this period of time also brings financial responsibilities that may seem overwhelming. Establishing smart financial goals is vital for college students as they navigate new expenses and financial responsibilities.
Creating a budget that accurately reflects your income and expenses allows for better ability to track and save. As a parent of a college student, understanding how to properly explain these essential steps to your child may make all the difference in their financial future.
We want to share some of the important aspects of college finances and planning from basic principles, to short-term goals, and those longer-term ones you may not even know yet. It works for both parents and students to combine forces and develop financial discipline to take with you throughout your adult life.
Building a strong financial foundation starts with understanding some of the more basic fundamental financial principles. We want to start with the time value of money. This means that money you earn today is worth more than the same amount earned in the future due to its potential to earn interest. The importance of saving and investing early may help you maximize returns in the future. Another principle we feel has immense value is that of compound interest, where interest is earned on both the principal and accumulated interest, growing your money more over time and leading to longer-term wealth building.
Short-term financial goals set by you are likely achievable within a relatively short time frame, although that amount of time is different for everyone. You can think of short-term goals as those achievable within roughly one year or less. These goals may help you stay focused and motivated while working towards your long-term financial objectives (which we’ll cover shortly).
Short-term goals to consider include:
While it might not seem as important right now, setting long-term financial goals as a student may make a world of difference in your future. These goals may provide direction and motivation as you make financial decisions throughout your college years and after.
Long-term goals that you as a student may consider include:
Building a strong financial future requires discipline and commitment. As a college student, you understand the time it takes to study and continue to do well in school. That discipline can very much translate into your financial life. By setting clear goals, creating a budget, and managing debt responsibly, you can take control of your finances and make more informed decisions. It's never too early to start building a healthy relationship with a financial advisor who can help you as you continue on your financial journey.
Interested in learning more about financial goals as a college student or as a parent of one? Consider starting a conversation with one of our experienced financial advisor instructors.
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