Why should I build an emergency fund?

It’s easy to spend all the money in your budget (even if you don’t have one), but what happens when you have an expense you can’t anticipate? Whether you have a flat tire or need to make a surprise purchase, having an emergency fund can be a financial lifesaver.

Of course, some emergencies don’t impact the amount of money that you spend, but the amount that you earn. A common issue people face is losing their job. Suddenly, you have little or no income, but your fixed expenses stay the same. Any surprise that causes you to spend more money than you earn is an emergency.

So, what is an emergency fund? Simply put, an emergency fund is an amount of money that you set aside to cover expenses that you can’t anticipate. Generally, an emergency fund is kept in a bank account to accumulate interest until it is needed, as well as to ensure that the money is safe, both from being lost and from accidentally being spent. The best part is that starting an emergency account is easy!

  1. Know your Needs and Wants: The first step is knowing how much money you would need if an emergency occurred. If you lost your job, how much would you need to live your life for a month? Two months? Also, be realistic about your needs. You might be able to cut back on your trips to the movies if money is tight, but it’s unlikely that you can instantly move to pay lower rent.
  2. Know How Long to Prepare For: Do you feel safe having one month of expenses on reserve, or do you need more? After the Great Recession, many people agree that you need between three to six months of expenses to be completely safe.
  3. Get Started: This is the hardest part. Start with small goals and add to it over time. If you can only start with a few dollars a week, it will grow over time and be a lifesaver when you need it!

Written by Collin Smith, Financial Wellness for College Students Peer Educator, University of Illinois Extension, 2017.

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

How can I lower the cost of my utility bills?

According to the U.S. Energy Information Administration, energy use for air conditioning has doubled since 1980, and U.S. households currently plug in more appliances and electronics at home than ever before. Natural gas and electricity are the most-consumed energy sources in homes as the home electronics market is constantly innovating new products integrating to our modern lifestyle. While certain appliances have long been standard in homes, such as refrigerators, stoves, and cooking equipment, owning other appliances like dishwashers, clothes washers and dryers has increased over the past 30 years. One reason for high utility bills may be due to unawareness of energy use that could be easily avoided. Although it is almost impossible to completely eliminate any of these three from your utility bill, there are several methods to assist in reducing utility costs:

  1. Turn off lights when you are not using them
  2. Unplug chargers while not charging
  3. Increase/decrease the temperature of your thermostat by a couple degrees depending on the season
  4. Use natural energy such as sunlight for lighting
  5. Wash clothes in cold water
  6. Hang-dry clothes instead of machine drying them
  7. Replace traditional incandescent bulbs with compact fluorescent light bulbs

Being aware of your energy usage may be the greatest step you can take to help lower your utility costs!

Written by Rex Wang, Financial Wellness for College Students Peer Educator, University of Illinois Extension.

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

How do I lower my weekly food costs?

If you’re struggling to keep your personal food costs down, there are several ways to cut your spending while still getting the most bang for your buck.  A good way to start reducing your own personal food costs is to first track your spending on food for a period of time—week, month, etc.—and see the amount of food you spend.  Ask yourself a few questions such as how much you spend on at-home cooking and eating out?  What do you spend more on?  Do you find yourself in need of eating out more or eating at home?  Once you figure out your personal expenses and answer these questions, you can start to sort out way to minimize them.

There are quite a few ways you can cut your costs on food such as:

  • Going out to eat less. According to The Huffington Post, the third largest way students waste their money is by eating out too much. If you cut back on your expenditures while you eat out or become more aware of the prices of food you are eating that is a large point of spending for many people.
  • Cooking with a friend. If you are eating meals with more than one person it is typically more economical to cook food, reducing the cost per head for food.  If you live with roommates, shop together and buy certain items together that you know you would not finish on your own which can also reduce food waste.
  • Utilizing sales and coupons. Saving a few cents on several items can quickly add up and give you more money to spend elsewhere.
  • Buying staple items in bulk. Many non-perishables can be bought in bulk at cheaper prices thus reducing your average costs on them and resulting in you visiting the store less often.
  • Shopping at cheaper retailers. This can give you the opportunity to buy most traditional items for a cheaper price.
  • Freezing fresh produce. This can extend how long fresh produce lasts and can reduce food waste in general.

If you take small steps in your day-to-day life it is very possible to reduce your food costs resulting in an overall reduction in your expenses.  Good luck!

Written by Libby Cocagne, Financial Wellness for College Students Peer Educator, University of Illinois Extension.

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

Cash at College: Spending, Saving & Student Loans (Recorded Webinar)

Cash at College is a must-see webinar for all students headed to college. University of Illinois USFSCO’s Student Money Management Center and University of Illinois Extension have teamed up to offer this educational and engaging webinar for all University of Illinois students. This free webinar features lessons on:

  • how to effectively budget your money while in college
  • the basics of banking
  • options for paying your college tuition
  • understanding credit
  • and how to make the most of your college education

Cash at College offers an important guide to managing your finances, so don’t miss out! Watch it below or on YouTube now!

Test your knowledge. Take the quiz!

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

By participating in three Spending Badge eligible events, you could earn a digital badge to enhance your online professional portfolio. Learn more about the Financial Literacy Badges Program by visiting: badges.illinois.edu/usfsco/.

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