Financial literacy for students is crucial when pursuing higher studies in their home country or abroad. It isn’t just about managing the budget, it’s about preparing for life. Students learn to manage their finances effectively, avoid debt traps, and plan towards a stable future.
Financial literacy for students lets them transition to independent living by learning to manage new financial responsibilities, especially when studying abroad. In this blog, we’ll explore essential financial literacy concepts for students, including budgeting, saving, managing loans, understanding credit, and more.
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What is Financial Literacy for Students?
Financial literacy for students includes important knowledge and skills needed to manage personal finances effectively. These skills include understanding budgeting, how to manage debt, savings and investment tips. This helps them in making informed decisions about money management.
Students planning to study abroad learn how to create a plan for spending and saving money. The Reserve Bank of India promotes various centres for financial literacy in collaboration with NGOs across all states in India to teach financial knowledge to students.
Early education in financial literacy for students can help students recognise and avoid common financial traps that lead to debt and financial hardships.
Also Read: What are the RBI guidelines for education loans? Check out the collateral requirements, moratorium period, tax benefits, and much more.
Financial Literacy Skills for Students
As you take a step forward to pursue higher studies abroad, the importance of financial literacy skills helps students prepare for real-world challenges. Financial skills prevent financial mistakes related to money management.
Not only this, but it gives you confidence when you learn to manage daily expenses and transactions. Let’s explore important skills under financial literacy for students-
Budgeting
Budgeting involves creating a plan for how to allocate your income and expenses over a specific period. Learning this financial skill on how to budget is vital for managing higher education costs, including tuition, accommodation, food, and other living expenses.
Debt Management
Debt management is an important skill in financial literacy for students. It refers to strategies for handling outstanding debt, particularly for students who take education loans to study abroad. Learning this skill helps in handling loan repayment without stress, else poor management can lead to long-term financial strain.
Savings and Investments
Saving involves setting aside money for future needs and investment is about allocating money to financial schemes with the expectation of returns. This skill in financial literacy for students helps prepare emergency funds for unexpected expenses.
Money Mindset
A money mindset refers to attitudes and beliefs about money that influence financial behaviour. This is an important aspect of financial literacy for students as it encourages a positive mindset by focusing on long-term goals rather than short-term gratification.
Consumer Awareness
Understanding consumer rights and responsibilities in the marketplace is a crucial skill under financial literacy for students. Being aware of recent updates and changes helps students make informed purchasing decisions and avoid scams.
Tax Management
Financial literacy for students also involves learning about taxes. International students may have specific tax obligations in their host country. Students should research tax implications, for example, tax rules for international students in Canada and keep records of income and expenses for smooth tax filing.
Also Read: Check out the FAQs on the Restructuring 2.0 Scheme of RBI that provides benefits to the borrowers affected by the COVID-19 pandemic.
Strategies to Improve Financial Literacy for Students
Creating a budget, opening a savings and checking account, paying bills on time, and investing for a better future are effective strategies to improve financial literacy for students. Proper financial planning can help you manage the potential costs of studying abroad.
Besides, you can avoid common financial mistakes like overlooking exchange rates and improper usage of credit and debit cards when planning higher studies abroad. Let’s check out the best strategies to learn and improve financial literacy for students.
Create a Budget
Creating a budget is one of the top and most effective strategies to improve financial literacy for students. A well-structured budget helps you allocate funds for tuition, accommodation, food, and other living expenses while studying abroad.
- Various expense-tracking apps like Mint or YNAB (You Need A Budget) help you ascertain your spending habits and identify the scope for savings.
- You can factor in scholarships, part-time jobs, and any financial support from family track income from all sources and allocate a budget towards spending.
- Identify all non-essential expenses and find areas where you can cut back.
Save to Build Emergency Funds
Another way to improve financial literacy for students is to build emergency funds. This strategy involves prioritising savings by setting aside a portion of your income.
- It’s like paying yourself first before you use your income to cover other expenses.
- Decide how much you want to save each month for specific purposes, such as travel or tuition fees.
- By saving consistently, you can build an emergency fund or save for future educational expenses.
Open a Checking and Savings Account
Checking accounts for students are designed for everyday financial transactions in a foreign country. You can easily pay at merchant destinations and online platforms without incurring additional fees. They also help you reduce currency conversion fees when paying abroad.
On the other hand, zero-balance accounts and basic savings bank deposit accounts for students are perfect to begin the financial journey. They help you earn interest rates on the amount saved to grow savings.
- Students must consider setting up automatic transfers from their checking account to their savings account each month.
- This helps in easy money management as well as setting aside an amount for savings while learning to improve financial literacy for students.
Learn Investment
Investment is all about allocating money to financial products with the expectation of generating returns over time. Learning to invest is an effective way to improve financial literacy for students and grow your savings over time.
- If you work part-time while studying, take advantage of any retirement savings plans offered by your employer.
- You can use online resources or courses to learn about stocks, bonds, and mutual funds.
Manage Debt Wisely
For students who have taken an education loan to study abroad, debt management is essential. Financial literacy for students is achieved when they learn to handle outstanding loans and credit balances.
- Students must focus on paying off high-interest debts first.
- If you have multiple loans, explore the best student loan consolidation banks. They compile existing pending loans into one payment with a lower interest rate.
- You must learn how things like payment history and credit utilization impact your score.
Pay Bills Promptly
Timely payment of bills helps avoid late fees and negative impacts on your credit score. Staying on top of monthly bills ensures that you maintain good financial standing while studying abroad. Financial literacy for students can be improved if you-
- Set up automatic debits for recurring expenses like rent and utilities.
- Use calendar alerts or bill-pay apps to remind you of upcoming due dates.
Activities to Learn Financial Literacy for Students
Learning financial literacy can be both engaging and practical for students, especially through hands-on activities. These activities not only make financial concepts relatable but also equip students with essential skills for managing their money effectively. Here are some effective activities to enhance financial literacy for students-
- Utilize apps or games like “The Stock Market Game” to allow students to practice making investment decisions without real financial risk.
- Incorporate financial literacy games that challenge students to make smart financial choices in a fun way. Games like “Financial Football” or “Banzai” help reinforce concepts through interactive play.
- Organize workshops that cover essential skills such as reading bank statements, understanding interest rates, and filing taxes.
- Encourage students to join peer groups or online forums to share financial tips and challenges.
This was all about financial literacy for students. You may also consider seeking advice from fin-tech platforms and avail of their services. You can discuss loan options, and repayment plans, and avail the services to simplify your journey to study abroad.
To learn more about education loans, the best bank accounts for students, forex, banking experience for global students, or international money transfers, reach out to our experts at 1800572126 to help ease your experience with studying abroad.
FAQs
Financial literacy is the ability to understand and manage personal finances, including budgeting, saving, and investing effectively.
It equips students with essential skills to make informed financial decisions and avoid debt traps during and after their education.
Students can use budgeting apps or spreadsheets to track income and expenses, helping them manage their finances better.
Common mistakes include overspending, failing to budget, and not taking advantage of student discounts or scholarships.
A good understanding of credit helps students build a positive credit score, which is crucial for future loans and financial opportunities.
Effective debt management helps students handle student loans responsibly, avoiding excessive debt and ensuring timely repayments.
Students can begin investing by exploring low-cost options like index funds or opening a savings account with compound interest.
Numerous online courses, workshops, and financial literacy apps offer valuable information and tools for improving financial knowledge.
Regularly checking credit reports helps identify errors and maintain a healthy credit score, which impacts future borrowing.
A positive money mindset encourages responsible spending and saving habits, leading to long-term financial stability and success.
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