A quick guide to financial literacy for students, covering budgeting, credit, debt management, and early investing.
Financial literacy is a key life skill that students often overlook until they’re faced with the real-world financial pressures of adulthood. Starting early—whether in high school or college—provides an invaluable head start toward building financial security. Understanding how to budget, handle debt, and invest is a foundation that can benefit students long after graduation. Here’s a comprehensive guide to getting started, advice from experts, and valuable resources for learning about money management.
Financial literacy at a young age equips students with skills that translate directly to financial health and security as adults. A study by the FINRA Investor Education Foundation showed that young adults who received financial education were more likely to save, budget, and manage debt effectively. Starting early empowers students to avoid common pitfalls, such as high-interest debt and poor spending habits.
"Financial literacy is as essential as math or English in preparing young people for the real world. Students who understand money from an early age are more capable of managing finances and avoiding debt later on," - Susan Sharkey, Director of the High School Financial Planning Program at the National Endowment for Financial Education.
While early financial education in middle or high school is ideal, college offers another chance to refine these skills as students gain greater independence. According to the Council for Economic Education, only 21 states require high school students to take a course in personal finance. Given the gap in access, high school and college students should proactively seek out financial literacy resources to build a solid foundation.
"Budgeting is a skill that should be learned young. A budget is your roadmap; it doesn’t limit your spending but helps you prioritize," - Carrie Schwab-Pomerantz, President of the Charles Schwab Foundation.
Why: Budgeting provides control over your money and helps track spending, savings, and financial goals.
How: List all income sources (allowances, part-time jobs, etc.), fixed expenses (e.g., transportation, phone), and variable expenses (entertainment, dining out). Aim to save 10-20% of your income if possible.
Tools: Apps like Mint and YNAB (You Need A Budget) offer intuitive budgeting tools, perfect for beginners.
Why: Credit scores affect borrowing options, housing, and even job opportunities. Building a strong credit history now makes adult life easier.
Fact: According to Experian, the average credit score for young adults is 679, but early responsible credit use can quickly improve this.
Tools: Consider student credit cards or secured credit cards as an introduction to credit. Always pay balances in full and on time.
“Your credit score is like your financial GPA. Treat it well, and it will open doors; abuse it, and you’ll find those doors shut,” - John Ulzheimer, a credit expert formerly with Equifax and FICO
Why: Unexpected expenses can derail a budget without savings in place.
How: Start with a small goal, such as $500, then work toward covering three to six months of expenses.
Tools: Open a high-yield savings account at banks like Ally or Marcus by Goldman Sachs for higher interest rates, helping your emergency fund grow faster.
Why: High school and college students often rely on student loans, but understanding debt terms can prevent financial strain.
Fact: The average student loan debt is $28,950, with interest rates for federal loans around 5%, and private loan rates reaching as high as 12%.
Resource: The Federal Student Aid website provides calculators and repayment guidance to help students understand and plan for loan repayment.
Why: With time on their side, students can benefit from compound growth, where even small investments grow significantly over time.
Fact: The S&P 500 has an average annual return of around 10% over the long term, making it a compelling option for young investors.
Tools: Apps like Acorns, Robinhood, and Fidelity Youth Account make it easy to start investing with small amounts and low fees.
“If you can start investing in your teens, the impact is incredible due to compounding. Even small amounts add up over decades,” - financial planner Rachel Cruze
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