When should I start investing?

The right answer to that question is simple: right now. Okay, you might not be ready to invest right this second, but that doesn’t mean that you can’t start planning today. The reason why timing is so important is because of something called compound interest. There is a famous saying that goes: “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it”. Since Albert Einstein is arguably one of the greatest minds in human history, his quote might be worth adhering to.

Compound interest is the process of adding interest to the initial investment including interest that’s already been earned. In other words, compound interest allows you to earn interest on interest, and over time this can make a real impact on the returns of your investments. If you’re planning on investing in stocks, they won’t be earning interest per se, but they’ll be earning returns such as dividends and (stock) growth. Then as long as you don’t withdraw what you’ve accumulated, and allow that to be automatically reinvested, you’ll experience compounding returns.

A quick example of this would be as follows: you have $100 in two separate accounts that both offer 10% returns on your investment, and you keep the money in there for 10 years. The only difference is that one account gives you compound interest but one doesn’t. At the end of the 10 years, the account with the compound interest will have $271.79 in it. And the other account? Only $200. Compound interest really makes a difference.

Furthermore, as a young investor you’ll already be ahead of all of those who started investing later than you because you’ll have had a chance to let your money work for you for longer than others have. Young investors also have another advantage, which is safety. Investing funds that are left over after paying bills, etc, allows you to keep a clear head if your positions lose value, as you’ll have plenty of time to wait until the market makes a comeback. Though it is important to remember that one should only invest once they’ve saved up enough money for an emergency saving fund, to reduce risk in case anything goes wrong. All in all, start planning on putting your savings to work now, and you’ll be glad you did in the future. Then 10 years from now when others say that they wished they started investing years ago, you’ll already be ahead of the game. Also, check out our website to access more resources on investing and finances in general.

Written by Robert Sniezko, Financial Wellness Peer Educator, University of Illinois Extension, 2017.

Reviewed by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension.

When should I use my credit card vs. debit card?

Many people are fear of using credit cards because of the risk of overdrafting, high interest rate and fraud. Some of these worries are not necessary. Nevertheless, when we need to swipe our cards, we should choose between credit card and debit card wisely depending on the situation.

Best situations to use credit cards:

  1. Shopping online: Credit cards are highly recommended if you are shopping online. Purchasing by debit card is just like paying cash. It is hard to get your money back once someone else makes a purchase by your debit card online. However, if you purchase by credit card, it is NOT like paying cash. Many credit card companies offer “zero liability” policies, which means that if you dispute a transaction within a few days that wasn’t authorized by yourself, you needn’t pay for it.
  2. Making large purchases: The credit liability policy also works pretty well for large purchases. In addition, some credit card companies offer warranty policies that go beyond the manufacturer.
  3. Making reservations, buying tickets: Many companies only accept credit card online reservations because of safety concerns. Also, it is possible to get discounts or cash-back when you use a credit card to make reservations.

Situations to use debit cards:

  1. Purchasing a small amount of goods: Debit payment is similar to cash payment, so it is more convenient to use a debit card to make routine purchases than a credit card.
  2. Automated payments: some types of payments can made automatically by using a debit card, which can make your life more convenient.

It is still risky to use a credit card without carefully planning. Nevertheless, using credit cards has a lot of advantages that debit cards do not have.

Written by Bowen Song, Financial Wellness Peer Educator, University of Illinois Extension, 2017.

Reviewed by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension.

How can I successfully achieve my goals?

Creating a savings goal is commonly confused with creating a dream. For example, when asked to create a savings goal for a vacation trip or a car, their response is “I want to go to [location]” and “I want to have a [car model]”. This only represents what individuals want (a dream) without creating a reasonable process (savings goal) to achieve the end product.

That being said, we peer educators at the Financial Wellness Extension advocate, within our budgeting presentation, S.M.A.R.T. Goals. When creating a savings goal, it is important that you incorporate all 5 of these components: Specific, Measurable, Agreed Upon, Realistic, and Timely.

Specific: Making your goal well defined where it can be clear to anyone who has a basic knowledge of your project

Measurable: Creating an easy way to keep track of your goals that allow it to be motivational to achieve

Agreed Upon: In cases when your goal involves others, collaborate and make sure that everyone acknowledges the goal

Realistic: This allows your goal to be results-oriented and reasonable seeming accomplishment is within sight

Timely: Create a timeline when this goal will be achieved. Being able to track your progress encourages you to continue and see that the effort is effective

Written by Rex Wang, Financial Wellness Peer Educator, University of Illinois Extension, 2017.

Reviewed by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension.

Where can I find out more about funding study abroad?

Illinois offers more than 300 study abroad programs that range in cost. Many program costs are comparable to studying for a term at Illinois and some are less. There are also a variety of ways to financially support your study abroad experience, including grants, scholarshipsfinancial aid, and loans. Planning ahead is key.  Below are links to the Illinois Abroad & Global Exchange website, where you can find additional information about funding your study abroad experience.

Funding Study Abroad Resources