When you are a college student, money is something that is hard to keep track of amid your busy schedule. While you’re certainly not expected to be a financial wizard by the time you graduate, it does help to educate yourself on the world of finances. In this article, you will learn ten key financial terms that will help you through your college years and beyond.
Interest Rates for a College Student
Interest rates are particularly important to understand when it comes to paying off your student loans. As a college student, the amount of money that you owe on your loans is directly related to the interest rate of the loan, and if you remain in the dark on the details of this concept, you are likely to end up paying more money than necessary. By understanding interest rates you give yourself the chance to navigate your student loans with poise.
An interest rate is simply the amount of money, or interest, that you will pay when you take out a loan. As a simple example, if you borrow $100 with a 10% interest rate, then when you pay back the money you will give the lender $110 dollars. Learning how interest works will empower you to make better financial decisions both when taking out student loans and when entering the job market after school.
Inflation is another key financial term that will impact your life during college and afterward. As a broader financial term, inflation has more of an impact on job markets and the larger global economy which trickles down to your personal finances. Staying abreast of inflation and similar economic issues will help you to remain conscious of your spending and other financial behaviors.
When inflation occurs, prices rise. This means that if something used to cost one dollar in the 1990s but it now costs two dollars, the price has experienced inflation. The more complicated financial workings of inflation are difficult to understand, but knowing the basic concept will assist you in your spending and saving habits.
Fintech has become all the rage in the world of finance as of late. The term refers to financial technology, a new hybrid blend of novel technologies on the internet and financial services. You have probably heard of several companies in the fintech space, such as JP Morgan Chase, Stripe, Klarna, and PayPal.
Many of these companies make use of a hybrid cloud to simplify financial transactions and help customers manage their finances with digital platforms. Other companies in the space, such as SoFi, create lending services to provide users with more access to cash when they need it. Fintech is a booming industry and will only continue to grow as technology blossoms in popularity around the world. As a college students its important to be aware of changes in this sector.
The stock market refers to a public collection of companies that investors can buy into and out of. The market contains all kinds of companies, many of which you probably interact with on a daily basis. From Uber and Tesla to Coca-Cola and McDonald’s the stock market allows everyday people to buy shares of companies that they know and trust.
When you buy a stock share in a company, you are placing your money behind them and taking a small piece of ownership of the said company. As a college student in the stock market, you can buy and sell your shares from 9 AM – 4:30 PM Monday through Friday. Interacting with the stock market involves risk, so be sure to learn more about it before you put too much money into a company’s stock.
Blockchain and Cryptocurrency
Blockchain and cryptocurrency are the new terms in the financial landscape. Blockchain refers to a technology of decentralization where financial transactions are logged on a public ledger and verified on a complex network of supercomputers. Cryptocurrencies are the native digital currencies that are traded across these networks using blockchain as a foundation.
Some examples of popular cryptocurrencies include Bitcoin, Ethereum, and Dogecoin. There is much speculation in the realm of blockchain, as the industry is still in its infancy. There are many unique applications for blockchain technology, and many financial experts believe blockchain and cryptocurrency represent the future of money.
A credit score is a comprehensive metric that is used to measure your creditworthiness. If you have a bad credit score, this means that you have not been paying your bills on time and you have taken out too many loans that you can’t pay off. On the other hand, a good credit score is a sign of financial responsibility, showing lenders that you can be trusted with their money.
If you are aiming to build a strong credit score so that you can take out loans when you need to, then there are a few fundamental steps you can take today. Credit cards are a good way to build up your credit when you’re young, but they can also be extremely dangerous and harmful if you are not careful. You should only be using a credit card to build your credit score if you pay off your balance each month and trust yourself to never spend more than you can afford.
Assets and Liabilities
An asset is something that provides value in your financial landscape, such as shares of a company in the stock market, or a piece of real estate that can rent out to tenants for monthly income. A liability, on the other hand, is something that costs you money. Examples of liabilities are expensive cars, boats, luxury goods, and credit card debt.
Budget for a College Student
Your budget is your best tool for measuring your financial activity. A good budget will show you much you make each month and compare it to your monthly expenses. You can make a simple budget today to help you start tracking your spending and setting up some financial goals for your future.
There are many online budgeting tools that will help you get started. One popular tool is Mint. This app tracks your income and your spending to provide you with an accurate picture of your finances.
Cash flow simply refers to any asset you own that creates consistent income for you. A popular example of a cash-flowing asset is a business or a real estate property. Cash flow is a bit different from the income you earn at a job because it is the result of an asset you acquire rather than employment.
Income Statement for a College Student
An income statement is a record you receive at the end of the year when it’s time to file your taxes. If you work a job as a college student, you will get a yearly statement showing how much money you earned, how you much you owe in taxes, and other important information. You should always keep track of your income statements and use them to file your taxes in an accurate, timely fashion.
Navigating the complex financial landscape while also juggling classes and other activities is certainly no walk in the park. By educating yourself on basic financial terms and committing to practicing good money habits, you will put yourself in a far better position after graduation. Remember to learn about these terms and keep them in mind as you spend, make, and save your money.