The ability to understand financial management and use financial skills such as budgeting, borrowing etc is very important these days. As a college student, you must have financial literacy in order to manage your personal finances. When you study in a foreign university there are a lot of things to be planned such as education loans for tuition fees, accommodation costs, money management abroad, forex cards, currency exchange etc.
Being informed about these things will help you plan your finances in a more efficient way. Let’s understand the importance of financial literacy for college students in order to make informed loan choices.
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Also Read: Inflation and its Effect on Education Loan
Importance of Financial Literacy for College Students
As per the U.S. Financial Literacy and Education Commission, there are five principles of financial literacy i.e. save and invest, earn, protest, borrow, and spend. Your dream of studying abroad comes with a long list of financial difficulties that need to be addressed properly. Every student can’t just simply go and study in a foreign university on their own. To cover the tuition fee to study abroad and the accommodation cost you may require an education loan.
While taking a loan you need to understand the terms and conditions, interest rate and its types, repayment structure, moratorium etc. It will also help you a lot in making the right decisions while making investment decisions. Savings and investments are essential parts of your financial planning and that’s why it’s very important to stay informed about it. Let’s check some of the major importance of Financial Literacy for College Students.
Understanding Financial Terms
With the knowledge of financial subjects, you will easily understand the terms and conditions provided by the bank and will be able to make smart decisions. When you take an education loan you will have to consider a lot of things like floating rate of interest, fixed interest, mortgage, collaterals, repayment tenure, coverage etc. At each step, you will have to deal with financial terms and related information. Hence, it is better to keep sufficient knowledge about personal finances.
Savings and Investment Plans
When you are studying in college you wonder about a lot of things like job, salary, relocations etc. If you have taken an education loan then the repayment of the loan will also be a major concern for you. While you complete your study and get a job it is very important to understand how to save money regularly and how to make a smart investment. If you are financially literate you will be able to invest your money wisely in SIPs, mutual funds etc. This will ultimately help you to manage your entire finances in an efficient manner.
Also Read: What is Exchange Rate and Who Governs it?
Knowledge About Student Loan Options
With proper financial knowledge, you will be able to explore and understand different schemes of education loans or student loans offered by the banks. For example, when you get a loan offer you need to pay a margin money. If you know the details of margin money then you will explore scholarship options covering margin. Again you will refer to the terms and conditions of different lenders and then you will figure out the best-suited scheme for you. Hence, a financially literate student will be able to choose the education loan plan wisely.
Improving Spending Habits
You may have a habit of spending a lot on unnecessary or less important things. This ultimately puts you under financial problems. For example, you went to a shopping mall and started trying shoes. The salesman told you about ‘buy now pay later’ plans and you bought that shoe which was an expensive one. In this case, you were influenced by the credit plan and bought the item which was not required at that time and now you owe that much amount. You may also end up paying extra charges as processing fees or interest rates. If you have a better understanding of how to save money and how to deal with the credit system you will improve your spending habits.
Loans and Borrowings
As a student studying in a foreign university, some banks may offer you credit cards and forex cards. Considering the benefits of cards it will help you a lot in emergency situations. Also, it will make payments easier for you and you will calculate your weekly or monthly expenses and plan accordingly. However, it is very important to manage the cards properly as credit cards may hamper spending habits. Always remember that you are a student and you are bound to repay the loan which you took for your study. With proper financial knowledge, you will be able to plan your borrowings and credit card use properly.
FAQs
There are five principles of financial literacy i.e. save and invest, earn, protect, borrow, and spend.
You can take free lessons available on YouTube through reputed channels. Also, you should regularly research financial terms and read financial magazines, newspapers etc.
While taking an education loan, go through all the terms and conditions proposed by the lenders and then compare them with each other. By doing this you will be able to figure out the best-suited plan for your education loan.
Financial Literacy is very important these days. Whether you are studying in a foreign university, taking an education loan, or shopping in a mall you must understand the basic financial terms and systems.
To know more about financial literacy, education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience. Follow our social media handles on Twitter, LinkedIn and Instagram.
