As I begin this column, my peers in the Class of 2019 are walking back to their dorm rooms from our first collection. We are coming back from an evening of reflection about ourselves, our position in this world, our transition into college and the conflicts we will face as members of this community. We heard personal insights, complex thoughts, and beautiful analogies about who we are now and what we will become. As we reflect on our personal development at the college, there is one aspect that we may skim over, or forget: our financial development.
I can understand why at a socially responsible college like Swarthmore, we may not always have our lens focused on the monetary. We are focused on our learning, our social life, our career development, and perhaps loftier dreams of changing the world for the better. In fact, many of us have been exposed to texts and beliefs that cast money in a negative light, and that portray those who love money as stingy (like Scrooge from A Christmas Carol) selfish (like Jordan Belfort from The Wolf of Wall Street) or evil (like Cruella de Vil). However, I want to challenge us to view money as a tool — a tool with positive or negative power depending on on who is wielding it. Many of the world’s largest philanthropists are also some of the most affluent individuals on the planet. Money does not have to be the root of all evil. As future conscientious world citizens, we should learn to cultivate our finances so that we have the power to do good in the world.
We are striving to use our careers and our financial growth to better ourselves and our communities, but first we must have a fundamental understanding of how to accumulate personal finances. In this column, I am going to explore several financial questions that Swarthmore students might have.
One of the most fundamental questions that incoming students should ask is: “How do I save?” This question has routinely stumped aspiring super-savers, whether they are smaller children running lemonade stand businesses or seasoned entrepreneurs and finance writers. A good rule of thumb for beginning and advanced savers alike is the 50/50 rule. 50% of your base income should be retained over the long term, and 50% should be available for spending. To break this down further, some economists and financial analysts have coined the 50/30/20 rule, whereby 50% of your income goes into savings, 30% goes into larger, one-time expenses and 20% goes into routine spending. What I mean by ‘base income’ is the portion of your income that is steady, like the 4 to 6 hours required of you at an on-campus job, for example. Any income beyond that, such as an unexpected paid responsibility at an event, is superfluous, and should be deposited directly into savings. Of course, this is a guideline. I personally do something that is more similar to 60/20/20, and someone with more constant expenses than one-time expenses may want to attempt a guideline closer to 50/20/30. Simply try to keep the portion of your income going to savings at or above 50%, and you should be on your way to financial growth. Great ways to keep track of your savings include paper budgets and apps that connect with your bank accounts and cards so you have a more complete view of your spending. I use HomeBudget, an app that tracks monthly income and expenses. I recommend using apps that ask for passwords to offer you greater security with your funds. I also recommend using apps with visual features such as graphs or charts, so you can have a complete picture of your finances.
Another question that is often asked is “Where do I save?”. To determine the right bank for you, you must be willing to explore your options. What fees do your options charge? How convenient is it for you to speak with a representative or go to an ATM? What is the interest rate of funds in your savings/checking account? Do your options offer investment opportunities? One of the biggest debates that often arises when speaking about bank choices is the big bank versus small credit union debacle. For most international students without US bank accounts, I would recommend a small credit union in the Philadelphia area. Credit unions are more personalized, and you are more likely to be granted access speak with a more highly-ranked representative who can better assist you. The Franklin Mint Federal Credit Union is particularly appealing because of its central branch and ATM locations. For domestic students, however, the choice may be a little more complicated. Credit unions do have a more personal feel, but big banks offer more branches and ATMs in a broader area. If you are a domestic student whose home is far from the Philadelphia region, for example, a small credit union may not be right for you.
It is imperative to learn how to manage money as a college student. Learning savings skills can provide a financial cushion so that you can feel secure even in a worst-case scenario. Money does not bring happiness, but having enough money stored away for a rainy day can give us the stability to pursue the things we love and engage in meaningful philanthropy without worries about personal monetary hardship.