Alice Murphey: Financial Aid Expert

What is financial literacy and how do I get it?

May 4, 2011 | News

What is financial literacy and how do I get it?

You may have heard the term “financial literacy.” Unfortunately, it’s not something that is taught in college, but it’s essential that you master it so you can plan and pay for your education.

It’s so important that April has been declared National Financial Literacy Month. Financial literacy is the ability to understand money concepts, including budgets, credit cards and debt.

It’s not as boring as it sounds because it can put “free” money in your pocket, and it doesn’t cost you a cent to learn it.

First of all, you need a daily map for managing your money. The booklet “40 Money Management Tips Every College Student Should Know” from the National Endowment for Financial Education, smartaboutmoney.org/40moneytips, will get you started.

Once you get your financial aid package from your college, you will know

how much you have to spend. All you have to do is figure out how to make

it last through the semester. That’s easy: Make a budget and stick to it.

There are many creative ways to save without cramping your lifestyle.

Here are some ideas:

• Buy used textbooks or rent them. At CUNY, for instance, the book allowance in the financial aid package is more than $1,000 per year; you get that much regardless of how much you spend.

• Don’t send your car to college. Walk, use public transportation, and/or ride a bike. Use your gas money for more important things.

• If you aren’t required to have a full meal plan, sign up for the one you will use, and instead of going out to eat, make it your meal ticket to savings.

• Living off campus may be more costly, so crunch the numbers. Beyond rent, you have to pay for utilities, groceries and transportation to classes.

Financial literacy also involves establishing good credit now that will

help you in the future. To get on the right track:

• Pay your bills on time. Even if you can’t pay off your entire credit card balance, pay something every month.

• Don’t bounce checks. You’re responsible for bounced-check fees.

• Don’t get more than one credit card. If you have several and max them out, you can get into debt quickly, plus you’ll have to pay high interest rates.

A financial-aid adviser I know recommends freezing your credit cards in a block of ice. The idea is that if you have to spend time defrosting them, you won’t have time to spend the money.

There’s no excuse for not being financially literate. You can find lots of information online:

• mymoney.gov is the federal government’s money-management site.  The link http://www.mymoney.gov/category/topic1/going-college.html will take you to other government websites.

• 360financialliteracy.org/Topics/Paying-for-Education, sponsored by the American Institute of Certified Public Accountants, contains a variety of articles, including “Freshman Finance 101: Money Management Skills for College Students” and “College Students and Credit Cards: What You Don’t Know Can Hurt You.”

So be a good teacher and a great student on the subject of financial literacy. You’ll find that it makes a lot of dollars and sense.

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