In keeping with the theme of money management from our last post, I’ve decided to talk a little about saving this month. Poet Samuel Johnson said it quite well, “The chains of habit are too weak to be felt until they are too strong to be broken.” This statement gives a good basis for doing everything in our power to help enrich the lives of today’s generation with financial literacy education. With many of our youth burdened with student loans and other debt (credit cards), becoming financially literate often times comes by “learning the hard way”. Instead of standing around and talking about the poor spending decisions being made, or the lack of savings, why not start early with financial literacy and avoid the problem altogether?
To put our youth’s debt problem into perspective, consider that two-thirds of college students borrow money to pay for college and that the average debt load is $23,186 (not including credit card debt) by the time they graduate (WSJ Article). Rising tuition costs, coupled with rather stagnant wage earning abilities for college students has the ability to dramatically alter the lives of college graduates. With mounting pressure of their debt loads, many college graduates are forced to put off many major life decisions such as investing in their first home, or even marriage and children. How might this all change if students understood how the concepts of interest rates, time, and compounding interest all work together? Might people start saving earlier and more altogether? I’d like to think so.
According to Weblog Get Rich Slowly, you can use the acronym, WEALTH to keep your savings goals and budgets on track by asking yourself a few simple questions before purchasing:
Want or Need? A simple question that can quickly help set priorities.
Ego? Am I purchasing this to keep up with the Joneses?
Add-ons? If I purchase this, what other items will I need to use it? Batteries, etc?
Lifestyle? Do I have time to use and enjoy this, or am I buying it to satisfy an urge?
Time? Is this a one time purchase, or might there be multiple purchases for upkeep?
Happiness? Will this really make me happier, or is it something that will quickly fade?
After asking yourself these six questions, you may just find it a bit easier to keep that money in your wallet instead of buying something you may later regret.
With the financial planning tools available today, i.e. iThryv Professor and others, saving money can be a simpler, more visual process. In iThryv Professor, users can create any number of Savings Goals, spanning different time lengths, amounts, and for various items. It gives students the power to understand how much money must be earned and saved to attend college, as well as to be able to afford other items like cars and homes. With iThryv Professor, 1st grade students can create a Savings Goal for college and begin saving toward that goal immediately. Why wait until they reach high school to begin saving for their major goals? Even if it’s not a lot, the power of compounding interest can get students that much closer to their long-term goals.
So start saving today, and encourage your friends and family to as well. A couple of easy ways get started that won’t cost you much, but will payoff later: Save your spare change and put it in a secure place at home; Set aside and save any $1 bills you receive as change. Starting small may sound silly, but go back and count your savings after 6 months or a year, and I’ll bet you’ll find you’re glad you started when you did.
If you haven’t already, join the weProsper community. Also, send us your comments, thoughts and concerns about our articles and what we’re doing to enhance financial literacy education nationwide. Remember, together we will prosper!
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