How can I prepare financially for transitions while in school?

What’s up next for you?  A big move? An internship? Graduation? Marriage?

Unexpected costs can often be overwhelming and sometimes difficult to manage.  The busier we get, the easier it is to miss something or develop a bad habit.  It could be a bad eating habit or it could be a bad spending habit.  Both increase stress, which is the last thing you’ll want during that time.  So, take some time now to prepare so you don’t experience even more stress during what should be an exciting time!

Create or maintain savings.  Savings is often that last thing we add to our budget, if at all, but even setting aside $5 a week yields $260 after 1 year!  It can be hard to predict how much money we need during times of transition, which is why creating a habit of saving can reduce the burden if not eliminate it.  However, to prepare for a transition you can consider all the costs you know you’ll experience and use that amount, or a little more, to help set a goal.  Divide your total goal by the amount of time you have until your transition. For example, if you need $1,000 by September 2017 you’ll need to save $91 a month, or $3 a day.

You can use a savings account to separate that money and you’ll earn some interest!  Take a look at our blog post Why get a savings account? for more information about why savings accounts can be beneficial for you.

It’s easy to make split second decisions that can derail your savings goals.  If you don’t have a budget, this is a great time to make one.  If you feel comfortable and confident to make it on your own—great!  Stop by the Student Money Management Center’s website for tips and tricks to create a solid budget.

Written by Carol Brobeck, University of Illinois USFSCO Student Money Management Center.

Making the Most of Job Benefits (Recorded Webinar)

In today’s economy, we are happy to have jobs, but many college graduates are underemployed. This webinar on job benefits is to inform students across the state how to get the most from their employment perks. Topics that will be discussed include salary negotiation, pension plans, and many more employee benefits. This is a great opportunity for students to prepare for the working world so they can be better informed when making decisions on those post-graduation job offers.

University of Illinois Extension, along with the University of Illinois’ Student Money Management Center, hosted the webinar “Making the Most of Job Benefits” on February 24, 2015. The FREE webinar focused  the types of job benefits employers could offer you and how to make sense of them. Watch it below!

Earning badgeThis is an Earning Badge eligible program, so make sure to take the quiz after watching to get credit!

“Making the Most of Job Benefits” is part of the Get $avvy: Grow Your Green Stuff webinar series.

 

Written by Andrea Pellegrini, University of Illinois USFSCO Student Money Management Center

Why get a savings account?

The most noticeable benefit of a savings account is interest earned on money deposited. The interest rate on a savings account is currently very low, but it still provides extra money. A savings account has many characteristics of a checking account, but it offers other benefits. A benefit of having a savings account is that it can create a saving mindset. Finally, a savings account will provide additional security.

A savings account annual interest rate is, as of April 2015, ranging anywhere from .05% to 1%. This may not seem like a high number, but it is still creating money. For example, 1% of a thousand dollars is ten dollars. Current rates can be checked regularly through your institution’s website or other online sources such as http://www.bankrate.com/.

A savings account is a great offer because it has very high liquidity. Liquidity measures how quick an asset or any financial instrument can be converted into cash (usually into a checking account). The process is as simple as doing a quick online transfer from savings to checking. In addition to having liquidity, a savings account is backed by the FDIC in conjunction with a bank’s checking account, or the NCUSIF if your saving account is with a credit union. Your account is insured up to $250,000. (Personal limits also apply if you have multiple accounts.) Basically, a savings account provides interest with zero risk on savings up to $250,000. Specific variations on a savings account, like a money market account, may provide higher interest rates but may limit the amount of transactions that can occur. It is important to talk with a bank or credit union representative to figure out which account fits your needs.

Besides earning interest, savings accounts are great for creating a saving mindset. First, while savings accounts are liquid, the money is set aside from regular checking. This makes it more difficult to spend unexpected amounts of money on any good or service. The process of transferring money from savings to checking creates time to mull over the decision and can prevent unnecessary expensive purchases. However, the money is still available and accessible in times of emergency. Next, taking extra income and depositing into a savings account can develop a mindset more geared towards saving. Saving money is important for achieving future financial goals, and a savings account is the first step in saving and earning interest income.

Finally, a savings account can create additional security for money stored in an account. For example, a savings account has a different account number than the checking account, so if account information were to get stolen, the savings account funds would remain difficult to be stolen. It is a good idea to not link your debit card to your savings account. This will create an extra barrier if your debit card were to get stolen.

In conclusion, a savings account is a great complement to a regular checking account. It provides many of the same features of a checking account but earns interest on the money deposited. It also allows you to create a saving mindset which is important in the long run. Savings accounts can also come in many different styles, so it’s important to contact your financial institution to figure out which is right for you!

Written by Jonathan Alton, Financial Wellness for College Students Peer Educator, and Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension

How does the time value of money help young investors?

The time value of money concept is one of the most important factors individuals face when it comes to investing assets. Time value of money is the idea that money available today is worth more than the same amount of money available at a future date, because of interest earning potential.

Let’s say you are offered $100 today, or were given the opportunity to collect $100 one year from now. Would you take the money now, or later? Your best option would be to accept the $100 today, because of interest earning potential and opportunity cost.

Taking the payment today would allow you to invest your money in a savings vehicle like a savings account or money market account. Investing your money allows you to earn interest, meaning the bank is paying you a small percentage for using your deposited funds. Therefore, depositing your money in a savings account will allow your money to grow every year.

Going back to the example, the opportunity cost of choosing to defer a $100 payment today is the interest you could have earned through investing your money. Opportunity cost is a trade-off between what you chose and what you could have had. For instance, if you pay $10 for a movie ticket, your cost of attending the movie is not only the $10, but also the time and value of what you could have enjoyed doing instead of going to the movie. That being said, when choosing to spend or save your money, it is important to think about the opportunity cost of your decision, making sure that the benefits outweigh the costs.

The main idea of the time value of money is that as a young investor, you should start saving as soon as possible! The sooner you invest, the higher your interest earning potential, and thus, the more likely your money will grow over time.

Written by Jessica Wesser, Financial Wellness Peer Educator, University of Illinois Extension

Steps Toward Investing (Recorded Webinar)

Stocks, bonds, and IRAs – oh my!  Where should a young investor start? The recorded webinar, “Steps Toward Investing,” explores investment options and strategies. Learn about important investment concepts such as diversification, purchasing power risk, and market risk. Don’t miss out on the opportunity to have your money grow; learn how to invest while you’re still young!

University of Illinois Extension, along with the University of Illinois’ Student Money Management Center, hosted the webinar “Steps Toward Investing” on November 11, 2014. The FREE webinar will focus on terms related to investing & the benefits of investing early. WatcSaving Badgeh it below!

This is a Saving Badge eligible program, so make sure to take the quiz after watching to get credit!

“Steps Toward Investing” is part of the Get $avvy: Grow Your Green Stuff webinar series. Don’t miss the next webinar, “Making the Most of Job Benefits,” on Tuesday, February 24, from 4:00-5:00 p.m. Register here.

Written by Andrea Pellegrini, University of Illinois USFSCO Student Money Management Center