Financial Literacy
Financial Literacy is important because it gives people the knowledge and skills to make smart choices about their money. When individuals learn how to budget, save, manage debt, and invest, they are more ready to face financial challenges and seize opportunities that can enhance their lives. It helps them avoid expensive mistakes, lowering money related stress, and encourages lasting financial stability. In the end, financial literacy enables people to create a secure future, reach goals, and make confident decisions in their lives.
What is a Budget and why is it Important?
A budget allows you to see where your money is going instead of wondering where it went. Tracking income and expenses can help prevent overspending, reduce stress, and help build a solid foundation to ensure you reach your financial goals. Google Sheets offers a Monthly Budget Tool that you can track expenses and create a budget. It’s important to find and use a budget tool that works for you.
Why do I need a Savings Account?
A savings or emergency account allows you prepare for the unexpected events that happen in your everyday life. By not having a savings, credit cards and loans become your emergency plan. A savings account can give you an additional option to help pay for these events. Check with your bank or credit union for more details on how to establish an account.
How do Loans, Credit Cards, and Interest Rates work?
t’s important to know and learn how loans, credit cards, and interest rates work. A loan is a lump sum of money given to you up front that you agree to pay back over a period of time. Parts of a loan include the Principal (the amount you borrowed), Interest (the fee for borrowing), and Term (how long you have to repay the money). These factor to make up your payment, which is typically paid monthly.
Credit cards are a revolving loan, meaning you can continue to borrow and repay over and over again within your credit limit. A credit limit is the max amount you are allowed to borrow. Each month you receive a statement, which includes a statement balance that you are required to pay a portion of as your monthly payment. If you don’t pay the full statement balance in full, interest is added to your balance which increases the amount you owe. Credit card monthly payments can very based on interest rates and statement balance.
An Interest rate is the price of borrowing money. Interest rates can be fixed (rate stays the same) or variable (rates can go up and down). Interest is calculated based on your balance, therefore bigger the balance means more interest paid and a higher rate means it can grow faster.
How do I Manage Loans and Credit Cards?
Managing loans and credit cards can be accomplished by knowing exactly what each debt is and including the monthly payments in your budget. You can schedule autopayments from your checking to ensure payments are made and are made on time. When using credit cards make sure you are aware on how you’re using them. Strive to pay the full statement balance every month and avoid carrying a balance. If you have a balance, stop using the card and pay more than the minimum payment to reduce the balance quicker. Review your monthly statement and check your balances to ensue accuracy. If you are having difficulties making your monthly payments, reach out to your lender or credit card company.
Frequently Asked Questions
Interest rates for Subsidized and Unsubsidized loans are determined by the US Government annually and updated on studentaid.gov.
Financial need is the difference between the cost of attendance (COA) at the school you plan to attend and your Student Aid Index (SAI)
Cost of Attendance (COA) - Student Aid Index (SAI) = Financial Need
Defaulting on a loan means you are unable to make your minimum loan payment by the due date.
It could lead to difficulty in obtaining additional loans, credit cards, car loans, a mortgage, higher interest rates, and/or being unable to rent an apartment.
Contact the loan servicer immediately to discuss options.
Federal Loans are loans received based on the student filling out their FAFSA. Private loans are loans that come from any other source. Additional information can be found on our Education Loans page.
A credit score is a number between 300-850 which represents the likelihood a person will repay the debt. The higher the number, the more likely you will be approved for a loan or other types of credit.
Your payment history, amount of debt owed, the number and types of accounts you have, how long your accounts have been open, your available credit, the number of inquiries in the last 12 months, and any derogatory accounts (accounts sent to collection agencies, foreclosures or repossessions, bankruptcy).
If you are having troubles making your payments, the first and most important thing is to contact your creditor or loan servicer.
Explore other repayment options that could lower your monthly payments.
Request a deferment or forbearance. These options may temporarily stop or reduce your monthly payments which can allow you to catch up. It is important to ask questions to ensure you understand deferment or forbearance options.
Look into loan forgiveness programs. Depending on your career and loan type, you may be eligible for loan forgiveness programs.
Fixed interest rates do not change and remain the same throughout the life of your loan. Payments on fixed-rate loans typically remain the same and allow for easy budgeting.
Variable Interest Rates can change over the life of your loan. Payments can vary, making it difficult to create and stick to a budget.
Parents can request a deferment through your loan servicer by logging into their studentaid.gov account. Parent PLUS loans can be deferred while the student is enrolled at least half-time, and for an additional six months after the student graduates, withdraws, or is no longer enrolled.
Student loans help cover the cost of attending school. Additional information can be found on our Financial Aid website or at studentaid.gov.