As young adults begin to plan ahead for their financial future, one professor at the University of North Georgia’s Mike Cottrell College of Business shared her advice for students looking to save money.
Kahmilah Williams, Ph. D., an Assistant Professor of Economics, emphasized the importance of developing financial literacy as a young adult.
“There are many definitions for financial literacy, but I would consider financial literacy to be the ability to understand relevant information to achieve your financial goals… I think financial literacy is not just a problem for college students. I think it is a problem for most people. So, I don’t think college students are unique in this issue.” – Kahmilah Williams, UNG assistant professor of economics
Williams explained that while anyone can struggle with financial literacy, the most common challenges for college students are managing debt and saving money long-term. She said a primary source of these issues tends to stem from not consistently following a budget. While there is no one-size-fits-all guide for how students should save, Williams advised a practical first step is understanding one’s spending patterns.
“If you’ve heard the saying, ‘if you fail to plan, you plan to fail,’” she said, “I think most students don’t know how much they’re spending on a monthly basis, so before you even get to ‘what’s the best credit card?’ ideally, you want to sit down and take a look at your income…and compare it to your expenses.”
While financial advisors generally recommend keeping spending costs as low as possible, Williams reminded students to avoid placing too much emphasis on smaller purchases. Instead, she recommended finding options that fit with a budget.
“‘Don’t buy that $10 coffee’–it’s trivial advice, right,” she said. “…In economics, we say, everybody’s spending to make themselves happy. Okay, fine. If you want to buy the $10 coffee, that’s fine. But maybe think about other things where you can get discounts. So, a lot of firms will give you discounts. A lot of stores will give you discounts if you show that student ID, so you can cut back in that way, right? A lot of subscription services will give you discounts if… you show your student ID. So you have to really be aware of the expenses that you have.”
Once students understand how much they need to spend to maintain their lifestyle, Williams said they must consider the credit card options available to them. While many credit cards offer rewards or other spending benefits, she emphasized that most should consider a card’s interest rate above other factors.
“A lot of students are not aware of the interest rate when they take on loans,” she said. “A lot of the time, what they do is they say, ‘Okay, well, you know, I got full spoilage loan. I’m just going to go with it.’ In most cases, you have options, so you want to make sure you are exploring your options and you’re looking for the best interest rate, the lowest interest rate that you can get.”
In addition to low interest rates, first-time cardholders should consider other card costs, such as annual fees, overbalance fees and late fees.
For those looking to save money for long-term benefits, Williams recommended that students consider a high-yield savings account to achieve their goals. High-yield accounts have higher interest rates compared to traditional savings accounts, allowing deposits to grow faster over time.
“If you have, say, a high-yield saving account right now, you’re looking at between 3 – 5% interest,” she said. “And let’s say you want to have $10,000 in four years; you can use one of these online saving calculators, and you can calculate how much you need to save each month to get to your goals. So to get to $10,000 at the end of four years, assuming you’re getting maybe around 4% [interest] you probably have to put away $200 a month, right?”
She noted that most college students may begin with a general savings account, where money can easily be withdrawn in the event of an emergency.
