April 25th, 2018 is Financial Health Matters Day, a.k.a. #FinHealthMatters Day. This day was created by CFSI to bring attention to America’s financial health. You might remember CFSI from Episode 042 where I discussed their FinX program with Rob Erich of MoneyNomad.com and Chris Hutchins of HelloGrove.com.
I think the reason why #FinHealthMatters day was focused on students this year was that there are just so many financial issues that are plaguing students right now. Whether you’re a current student or a former student like myself, there are just so many things that students have to deal with now.
- Rising tuition costs
- More than $1.3 Trillion in student loan debt
- Lack of financial education in our school system
Because this situation affects student’s financial health in so many ways, this issue cannot be fixed by addressing just one area. We need to look at the financial situation of our students as a whole.
There are key stages in the financial life of a student where small changes can make a big impact on their future.
Childhood – The Art of Allowance
The perfect time to start financial education is during childhood. It may seem as though money is too foreign of a concept for a child to understand, however, kids are much more intelligent than you may think.
One of the oldest and most reliable ways to introduce kids to the concept of money is through an allowance. John Lanza’s book The Art of Allowance provides some great examples of how to implement an allowance in a way that will help children grasp the concept of money and saving.
Preparing for College
Regardless of where you decide to go to school, applying for a scholarship will never hurt. Scholarships are a great way to avoid one of the biggest financial issues facing students, student loans. Jocelyn from TheScholarshipSystem.com has put together some great resources to help you navigate the confusing world of scholarships.
Because if you’re anything like me back when I was in high school, I had no idea what I was doing. I was just googling random scholarships without any guidance or direction. According to Jocelyn you can begin applying for scholarships as early as four years old. But the real kickoff season to start applying for these scholarships is going to be spring time during your junior year of high school.
Managing Student Loans
So let’s say you didn’t get enough money through scholarships to cover your college tuition & you have to take out a loan. The most important thing to remember is that you should never ignore your loans. Just because you aren’t making payments doesn’t mean that they don’t exist.
I won’t even pretend to be an expert on the topic of student loans. But I do know one. His name is Robert Farrington and he is from TheCollegeInvestor.com. Robert is all about getting rid of student loan debt. He’s so serious that he started The Student Loan Debt Movement which encouraged people to pay off over $1.4 million in student loan debt during 2018.
On TheCollegeInvestor.com Robert has some great resources on student loan repayment plans, loan forgiveness and refinancing your loans.
If you are a fan of podcasts, and I’m assuming you are, you should check out Robert’s appearance on episode 36 of The Journey to Launch podcast hosted by Jamila Souffrant who has made multiple appearances on this podcast.
Building a Budget
We all choose different paths in life. So maybe you decided that college wasn’t for you or at least college in the traditional sense. But it doesn’t matter whether you went to college or not. There is one skill that everyone needs to know, and that is how to budget.
Budgeting doesn’t need to be this complicated, scary thing. A budget is just a way to track and prioritize your spending so that you can focus and work towards a specific financial goal.
I’ve actually done a few episodes on budgeting. On Episode 017 I gave some examples of how I budget using a combination of automation and multiple bank accounts to track my money. During Episode 024 I mentioned mint.com, which is one of my favorite free tools.
If you’re looking for a simple budget that will help you get started & is something that will not be too overwhelming, I would suggest Marcus Garrett’s recommendation, the 50/30/20 Budget. Back on Episode 037, Marcus from the amazing Paychecks and Balances podcast, shared his love for this budget.
This is how it works. 50% of your income goes to needs, 30% goes to wants & 20% goes to savings.
The 529 Plan
So now that you’re getting your financial health in order, I think a great next step is to help set up the future generations to be even better than you. If you have kids, or your friends have kids, or you have young people in your family, a 529 plan is a great way to help them start saving for college.
A 529 plan is a college savings account that allows you to put money aside on a pre-tax (before tax) basis for use towards qualified college expenses.
- Room and board
- Mandatory fees
- Required books and computers
The money contributed in to the account can be invested in stocks, bonds, mutual funds or money market funds. Another great benefit of 529 plans is that the earnings are not subject to federal tax (or state tax, in most cases) as long as the money is used only for qualified college expenses. The plans are open to both adults & children.
One resource that I really like is GiftofCollege.com. I have an episode coming out soon with their CEO. GiftofCollege.com is a website that helps friends and family easily contribute towards one 529 plan for a specific child. So it’s a cool way to allow others help the next generation get started on the right financial foot.
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