Financial advice for students starting college

  • American academic Teresa Ghilarducci offers five financial keys to how students whose families make a monumental effort to earn a degree can successfully achieve their goal.

In the United States, the cost of universities makes it nearly impossible for many American or immigrant families to get their children to a college degree. However, there are certain keys that the students themselves must master in order to succeed in realizing the American university dream.

Professor Teresa Ghilarducci, an expert on employment and retirement issues who has taught “The Economics of Desire” for nearly 20 years at the University of Notre Dame and The New School, offers five tips that should be considered by those who are lucky enough to be able to enter university.

“I always thought ‘desire’ in the title was the pull, but it turns out ‘the economy’ is the pull,” says the American academic. He points out that today’s students are more financially savvy than their predecessors, scoring higher on financial literacy tests.

According to Ghilarducci, these students are more likely to invest in stocks and cryptocurrencies. Some may even have approved high school financial management courses. But they still don’t know how the markets work, and they’re already coming of age amid an economy whose performance is uncertain.

The five fundamental tasks

That’s why students just entering college should focus on five basic financial tasks. This will be what will allow them to keep their finances in order throughout their university journey in order to obtain a degree without dying of envy.

These tasks are as follows: track your expenses in detail; design a monthly/annual budget; have clearly established sources of income; understand how to manage debt and its returns and avoid buying to buy at all costs.

The hardest part of all these tasks is tracking expenses, the academic says. But it proves to be most useful throughout financial life in adulthood. If young people learn this skill before the age of 19, it will serve them forever and ensure healthy personal finances.

So whether it’s through an app or in a notebook, you need to start tracking your daily expenses. In this way, the student will better know how to rationalize his expenses and realize where he must adjust them, if necessary.

The strategy of “cubic budgets”

An effective strategy for keeping track of our expenses in detail and realistically is the bucket quotes. A first bucket or basket is dedicated to fixed recurring expenses such as education, housing and transportation. The second tranche is available for other more discretionary and recurring fixed expenses: food, clothing and entertainment.

While the third bucket is the money that we will reserve for future or unforeseen expenses. There, it is important to know the details of health insurance coverage in depth. Find out if it is derived from parents’ insurance or if it is included in university tuition. No one is immune to unforeseen illnesses and medical accidents, even the youngest and healthiest.

To get a realistic budget, it is essential to know what the sources of income are. Even in cases where the parents promise to pay most of the college expenses. Most university expenses are paid for by student labor (e.g. scholarships – work), student loans, and parental support.

Ideally, young students should know exactly where this money is coming from. Be fully aware of the cost of student tuition and living expenses. Also, be realistic about what your monthly and annual income streams will actually cover. It rarely represents the whole reality.

Many parents do not budget or plan their expenses, so it is up to the student to do so. When this happens, the money the student was supposed to receive does not arrive because of the imponderables that never fail. Ideally, students should convince their parents to also track their expenses to avoid surprises.

Ghilarducci recounts his experience, saying it’s not uncommon to find students who “are left behind when their parents find out they can’t afford the cost or are disappointed with their grades.”

There are students whose parents juggle sending their children to college and taking out expensive and unaffordable mortgages. Caitlin Zaloom, an anthropologist at New York University, has an explanation for this. What’s happening is that families create “financial imaginaries” that an expensive college degree will guarantee a professional career for their children, he says.

Other assignments for the finance student course

On the other hand, it is essential to fully understand how student loans work. Don’t settle for the explanation given by the government financial aid officer. Recently President Joe Biden announced the cancellation of part of the millionaire debt of some students, this does not mean that the same can happen in the future.

It is very important to research the future application for student loans. Find out what the education requirements are and what type of compensation is offered for the jobs that students consider their favorites. With this exercise, students will be able to accurately estimate cost and return, which the Student Aid Officer does not.

A college student who loves dogs changed her job plan to become a vet assistant when she found out she was only paying minimum wage, says Ghilarducci. The direction of cinematography has also fallen out of favor, he argues.

Manage consumer behavior

Finally, becoming a rational consumer is essential to the survival of the college. There are consumer behavior analysis experts like economist Juliet Schor who study the social reasons why people buy things they don’t want.

Similarly, Gabor Mate, an addiction expert, says some of our buying is actually compulsive and destructive. When people buy to reward themselves, the needs and wants established on the Likert scale become blurred.

When consumers choose to buy by following brands or because that’s what others buy, consumption eventually becomes irrational. It’s not that it’s shameful behavior, says Ghilarducci. After all, people follow social guidelines because they live in society.

There is nothing wrong with owning a luxury good and wanting to rise thanks to this type of product, but you have to know to what extent your personal or family budget allows it.

Economist Thorstein Veblen clearly explained in an 1899 study how a husband tried to elevate his wife’s social status by paying her for expensive clothes. Instagram currently creates Veblen products from photos of “experiences,” says Ghilarducci.

The researcher draws attention to what is happening in half of the US states. In these federal entities, high school students are required to take a personal finance course as a condition of graduation. What is ironic is that in none of these states are students taught the psychology of advertising and consumption.

“I taught my Economics and Desire course for 19 years: 15 at the University of Notre Dame and the last four at The New School. I guess the students are learning something,” he says.

“Recently, two first-graders told me that they were going to be transferred to their public school at half price, with the reasoning that they would be re-enrolling in a private school for two years”, concludes the expert.

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