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5 Ways a Finance Degree Can Ensure Money Management Skills in You
While our education system places great focus on doing well in academic areas, it pays little or no attention to teaching students some of the most useful skills required to function in a particular niche. Students head out of college with a degree in hands, without having the basic knowledge of financial literacy. They often lack decision-making, interpersonal or time management skills which leads them into a critical position when addressing money management.
According to a recent study, 44% of the college graduates surveyed, had no knowledge of how to create a budget and 21% said they are ‘barely’ managing their personal finances.
With the current economic situation, where the majority of people are in some kind of financial trouble, it is essential for every individual to know how to manage their finances. This is where a finance degree comes in handy as it instils the basic financial concepts in you, making you a lot more financially literate than other grads.
Below we have listed 5 ways through which a degree in finance can help develop your money management skills.
Learn About the Basics of Finance
Many students do not have personal bank accounts. They either receive money from parents or have joint accounts where an adult is responsible for dealing with bank issues such as reviewing the bank statements. As a result, many students would be lost if told to operate and manage an account by themselves. A finance degree teaches you how the financial system works.
You learn about the banking system and how it works – how to maintain an account, how to withdraw money from it, the different taxes and charges levied on accounts. Most importantly, you learn how to read and reconcile a bank statement like an expert, which is a very useful skill in the corporate world because, at any point in time, your boss may ask for your expertise in proofreading the bank statement.
Balancing Income and Expenditure
A finance degree teaches you how a business manages its finances – how they calculate their income and expenses for the period to gauge their financial performance. Based on this information, decision-making is done. For instance, if your business experiences a cash shortage, you can achieve your short-term financial goals by borrowing loans.
This decision is based on the financial statements of the firm—a paradigm shift in strategy is required. This teaches students the general rules that can be applied to managing money on a personal level. Every individual should access their income and expenses from time to time and evaluate whether they will be able to meet personal goals with the available funds.
Importance of Credit Management
A degree in finance teaches you about the different financial instruments available in the market such as debit cards, credit cards and loans and the terms and conditions applied with each of these tools. You get to know how credit works and the options available to attain funds. For instance, if you’re planning to buy a car or set up a business venture, you’ll need to raise capital for any such activity. With a degree in finance, you’ll be able to choose the right funding option, based on your credit history, so that payback is easier.
This knowledge is particularly important for a student just getting out of college because the financial decisions you make today can have a lasting impact on your future. According to a study, most students today hold credit cards and while the majority of college seniors had a credit card balance under $1000, 20% had a balance of over $7000. This shows why credit management is essential even for students still in college.
Protip! Find out more on credit management here:
Learn Various Aspects of Budgeting
Simply put, a budget is a plan for the future — how to utilize the money you have. Budgeting tends to get a bit complicated when you become ‘independent’ and realize that your needs will no longer be looked after by somebody else. The reason why many young adults are in poor financial conditions today is that they cannot understand the difference between their financial needs and wants.
If you spend too much on things you want, you will not have enough left for the things you need. A degree in finance will help you set up an effective budget allowing you to achieve your financial goals. It will also help you in the later stages of your life when you will need to account for retirement savings, mortgages etc. It basically encourages you to think about the future early on; saving you from financial troubles later on in life.
Know About Savings and Investments
A degree in finance teaches you about the importance of savings to fall back on. A lot of college graduates do not consider savings a priority—they have nothing at hand for unforeseen circumstances. Setting aside a portion of your earning every month is crucial if you want to become financially stable in the later years of life.
Investing is another area that takes a backseat when you don’t have knowledge of the possible options available and how you can use your savings to generate maximum returns. A finance degree teaches you the basics so that you can make sound financial decisions with greater confidence, allowing you to make the most of the funds you have.
The Bottom Line
At the end of the day, if you want to educate yourself on money management and handling finances, it is you who has to find the means to do so. With some valuable money management resources for high schoolers out there to benefit from, you can surely improve your financial literacy before you step into the corporate world. -
About the author
Mathew Jade is a business, finance and technology blogger who spends his entire day writing quality blogs. He is a passionate reader and loves to share quality content prevalent on the web with his friends and followers and keeping a keen eye on the latest trends and news in those industries.
For more updates follow him on Twitter @MatthewJade
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