For many Gen Zers, going off to college comes with equal parts of excitement and trepidation. While it’s easy to understand why they would be excited, the trepidation is more nuanced.
Most Gen Zers nowadays aren’t just concerned with the grade on their report. They are also, understandably more anxious about the number in their bank account. With skyrocketing inflation and the looming global recession, they are under immense pressure to manage their finances smartly and effectively to deal with the cost-of-living crisis that’s pummeling economies worldwide.
This is actually quite a tall order since most of them have had little to no formal training in managing their own money. This is why the first order of business is to remedy this. As much as this won’t be what most Gen Zers want to hear – it’s imperative that they make time to get properly educated on the basics of personal finance.
A good program in financial education will properly cover knowledge of all the fundamental concepts, which is beyond the scope of this article. But more importantly, a good program will mold their mindset and attitude. And this is key to long-term behavior change.
It’s important to keep in mind that managing one’s finances smartly and responsibly isn’t a sprint, it’s more of a marathon. It requires long-term thinking and financial behaviors that align with this objective. Impulse control and delayed gratification become keywords in this quest.
These two inextricably linked concepts underpin all teachings in personal finance and are essential for students to master if they are to be fiscally responsible. They are, however, not easy, especially given our culture of instant gratification. Training themselves to resist temptation and hold out for a better reward in the future is a skill worth cultivating and not just for better finances. This skill has been shown to directly correlate to better academic performance, higher paying jobs, better health, and more successful relationships.
With these three concepts of long-term thinking, impulse control, and delayed gratification forming the strategic framework, we can now look into some of the tactical ways for students to deal with the cost-of-living crisis.
Be wary of taking on debt
Whether through credit cards, car loans, or personal loans; with the cost of credit increasing, Gen Zers should carefully evaluate whether the debt being taken on is prudent and consistent with their financial goals for the future.
Be extra vigilant with all financial transactions
This encompasses everything from going through credit card and bank statements to grocery and restaurant bills with a fine-tooth comb. Aside from picking up on fraudulent transactions, it has the added benefit of making students keenly aware of the prices and costs involved. Particularly in today’s frictionless payment culture, simply swiping or tapping our payment cards insulates us from knowing exactly how much we’re spending, which of course makes us spend more.
Pay off all credit card balances in full and on time
Though this comes under the aspect of taking on debt, it’s significant enough to bear flagging and repeating. Unpaid balances and late payments are the first steps in a rapid downward spiral toward financial ruin. It’s important to take steps to prevent this early on – by being careful not buying anything they can’t pay off in full at the end of the month, and by activating trip wires to ensure all payments are made on time.
Maintain a budget
This habit of planning for and allocating money goes a long way to developing financial discipline. It sets up guard rails for expenditure and makes students aware of how well they are progressing in their financial goals. The process of deciding how much to spend and on what, gives students a sense of control, and successfully managing and sticking to a budget gives them a well-deserved sense of accomplishment. Budgeting also tends to sharpen important money skills of bargain hunting, comparison shopping, and price negotiation.
Be mindful of social media use
With its hyper-targeted advertising, and algorithms that seem to exactly know what Gen Zers want even before they do, social media platforms make it increasingly difficult to resist buying temptations. It’s hard to not fall prey to these tantalizing baits and that means even the best-laid budgeting plans will suffer a massive setback if students aren’t careful. Social media platforms also seem to fan the desire to ‘Keep up with the Joneses. Watching the deeply enviable lives of celebrities, influencers and friends paraded before them in high-definition makes ‘FOMO’ very real. Being aware of how insidiously this works to trigger their spending impulses is a necessary bulwark against this rising tide of excessive social media use.
These tactical steps work in tandem with the strategic framework detailed earlier in the article and together they help create the best chance of success; not just against the current cost-of-living crisis but also against the financial headwinds that students are bound to face in their journey to adulthood.
