Financial Literacy is a term that is mainly used for understanding financial concepts like budgeting, saving, banking, and investing. Maintaining debt and credit as well as healthy financial planning. Students must be aware of this financial education before college to manage their education loans or personal loans for executing their ideas as a business.
Financial literacy for students is considered as an essential thing whereas educating financial literacy from scratch makes them understand the difficult concepts very easily and also allows them to make clear financial decisions.
6 Financial Literacy for Students
6 types of financial literacy are crucial for every student as follows:
1. Basics of Budgeting
A. Creating a Budget
The foundation of financial literacy starts with budgeting. If you start to spend what you have then you automatically stop spending on what you don’t have. Your expenses must align with your budget to avoid unnecessary spending. Start with small habits like a monthly budget to maintain your monthly expenses.
B. Tracking Expenses
Tracking helps you to identify your flow of money. It directly shows where your money is going and how much you are spending. You can easily track your daily expenses by simply noting them down in a notebook or else you can use expense tracker apps available online.
C. Setting Financial Goals
Make your goals specific and measurable, so that you can achieve them easily. Set both long term and short term financial goals to attain what you want in your life. If you set vague goals then you lose your concentration and are not able to achieve your goals. Instead of setting attainable goals allows you to work towards achieving your target.
2. Saving Smart
A. Importance of Saving
Developing the habit of saving early makes you attain your financial goal effortlessly. Establishing your emergency fund helps you handle unseen challenges in the future. You can also set goals for your savings to achieve what you want like buying a new phone, savings for your higher education, etc.
B. Types of Savings Accounts
Student savings accounts offer low fees for maintenance and zero opening charges. It helps them to receive any scholarship for their education as well as maintaining some minimal amount for their future expenses.
C. Saving Strategies
The first to save your money is budgeting. It helps you to see the expenses you spent and the cash flow. Pay off your debt as soon as possible. It may reduce the interest amount you are paying at regular intervals.
Don’t hesitate to save and invest your money. Investing helps you to build a better future. Stop spending lavishly on unwanted things and start investments for your brightful future.
3. Banking Know-How
A. Introduction to Banks
Banks are private financial institutions that help us to deposit our money and provide interest and loans. Students must know about creating a bank account, depositing money, and transferring funds online or offline.
B. Types of Bank Accounts
There are a few types of bank accounts you have to know about. They are current accounts, savings accounts, salary accounts, fixed deposit accounts, recurring deposit accounts, and NRI accounts.
C. ATM and Debit Card Usage
While using ATM and debit cards you must be aware of fee charges and safety measures must be taken to not share the passwords and ID’s with unknown sites or unknown persons.
D. Understanding Interest Rates
You must know the difference between borrowing and savings. If you are a borrower you have to pay your loan amount with a monthly interest amount. On the other hand, if you have your savings amount in the bank then they provide a monthly interest rate for your savings.
4. Managing Credit and Debt
A. Credit Scores and Reports
A credit report is a statement that has your loan history about current financial status and credit scores are based on your reports.
B. Responsible Credit Card Usage
Use your credit card wisely to pay off the payment early or on time. This increases your credit scores which creates credibility. Don’t use credit cards for your unwanted purchases. This may lead to a financial crisis.
C. Loan Types and Repayment
There are different types of loans available such as secured loans, unsecured loans, home loans, gold loans, loans against property, loans against security, vehicle loans, etc. The repayment methods are Monthly EMI, prepayment or foreclosure, flexible loan repayment, etc.
5. Investing Essentials
A. Introduction to Investments
You have many options for investments like stocks, mutual funds, and bonds. You can explore everything with comfortable risk levels.
B. Types of Investments
There are several types of investment available in India such as stocks, bonds, real estate, fixed deposits, mutual funds, NPS, public provident fund, etc,.
C. Risk and Return
The terms risk and return are directly connected. In simple words, the greater risk provides the chance of a higher return, or else the lower risk provides a low return.
D. Diversification
It allows you to lower the risk by investing in different assets.
6. Financial Planning
A. Setting Financial Goals
The brilliant way to set your financial goals is by selecting a smart way.
- S– Specific
- M– Measurable
- A– Achievable
- R– Relevant
- T– Time Consume
B. Creating a Financial Plan
Your financial plan should be based on budgeting, investing, and saving. You can also set long term and short term financial goals to make them easier to achieve.
C. Emergency Funds
Always be aware of the emergency funds to meet your unforeseen challenges.
D. Retirement Planning
Start your retirement plan today. Secure a future life that you want to live independently.
Check out our article on the Importance of Financial Planning.
Conclusion
“Recap of Key Points, Encouragement to
Practice Financial Literacy, Final Advice for Students”
Financial literacy for students is an investment for a fruitful future. Financial education for students directly impacts the results and outcomes. It improves their financial behavior and helps them to make healthy financial choices.
Students can start from scratch to excel themselves in the field of investment. Start now and grow your assets from the initial practice like budgeting to trading and investment.