After years of hitting the books, early morning classes and taking on student loan debt, recent graduates finally got their long-awaited reward: Virtual graduation ceremonies, parties with a few mask-wearing friends and family members and the opportunity to look for a job while millions are out of work.
The coronavirus pandemic and troubled economy have changed many college students’ views on spending, saving, credit card usage and the importance of having good credit, according to a recent survey by personal finance site WalletHub.
So, what financial lessons college are students taking notes on lately?
Having emergency savings is huge
Around 52% of students surveyed said that the most crucial financial lesson they learned from the coronavirus pandemic and economic fallout is the importance of having emergency savings to cover bills and monthly expenses in case of job loss or another financial setback.
Starting an emergency saving doesn’t have to be an enormous undertaking. You can start small, with an attainable goal – $1,000 for example – and a system for making deposits every payday, according to the Consumer Financial Protection Bureau. [2] That way, next time you have a car repair or unexpected expense, you can tap emergency savings instead of racking up more credit card debt.
Tough times can cause missed payments
According to the WalletHub survey, 30% of college students admitted missing a bill payment since the start of the pandemic. Payment history comprises about 35% of your credit score, so missing payments while planning to catch up next month can lower your credit score, adversely affecting your ability to obtain credit in the future.
Being able to make monthly payments on credit cards and loans during a troubled economy or financial setback is one more reason to have emergency savings account to fall back on.
A steady job is worth a lot
Around 70% of students surveyed said they have greater respect for the value of steady employment due to the COVID-19 crisis.
Whether that view is the result of high unemployment rates, losing a job, watching friends and family get laid off or realizing that steady employment makes saving and obtaining credit when you need it easier, the pandemic cemented the importance of holding down a steady job for many college students.
Don’t take on too much debt
When you’re a broke college student, pulling out the plastic to pay for groceries, gas, utilities and nights on the town with friends can be a lifesaver. However, if you’re not careful, the very thing that helped you survive can turn into an anchor around your neck, pulling you to the bottom of a sea of credit card debt.
That lesson comes later in life for many, but around 14% of college students in the WalletHub survey said they’ve learned from the COVID-19 crisis to avoid going into debt whenever possible.
Mind your credit score
Right now, students should focus on continuing to learn, job hunting and building credit, says WalletHub analyst Jill Gonzalez. “Students who use the coronavirus downtime to begin building their credit will be ahead of the game when the economy reopens,” she says.
Stay on top of your credit score by reviewing a copy of your credit report, which you can get for free from AnnualCreditReport.com. You can also obtain a free copy of the report from Credit Karma, which also allows you to monitor your credit score and review your credit report at any time.
Curtail frivolous spending
Learning from their recent homework on what it’s like to live with the economy in a tailspin, 43% of college students surveyed said they will spend less on non-essential items after COVID-19 than before, according to WalletHub.
If you cut out or reduced online shopping, consider depositing the amount you would have spent into an emergency saving account so you’ll be better prepared for the next financial crisis.
