Pursuing a college degree is a challenging yet rewarding undertaking; between classes, extracurriculars, social activities and self-care, it can be easy to overlook the importance of building financial literacy. However, while you’re getting an academic education, your financial education is just as important. From managing your student loans to understanding how to budget, Master Your Card is here every step of the way to help you confidently build your financial foundation and set your personal finances up for stability and success after graduation.

When planning how to pay for your education, it’s likely you’ve considered student loans. While these are an incredibly helpful way to finance a degree, understanding how they work is key to successfully navigating what might be your first line of debt.

There are two types of student loans: federal and private. Federal student loans come from the government and are either subsidized (meaning no interest will accrue on the loan until you graduate) or unsubsidized (interest begins right away). Private loans come from independent providers or banks. There are pros and cons to both options, so consider your unique situation to decide which is best for you.

If you have already taken a student loan, you may be wondering how you’ll pay it off. Keep in mind that interest compounds on principal, which is the amount of the loan, and that paying down principal whenever you’re able will prevent snowballing interest. Additionally, paying off high-interest loans first will save you money in the long run.

Building good credit while in college will allow you to get credit cards, take out loans, and get approved for leases, among many other important things after graduation. Credit scores are determined by credit history length, credit utilization, payment history, credit mix and new credit. While in school, there are a few things you can do to maintain good credit:

• Make your payments on time. Missing a payment can seriously dent your credit score. Autopay is a great option for recurring payments, when available.
• Try to keep your credit utilization below 30%, meaning that no more than 30% of your credit limit is spent without paying it off.
• Make small purchases and pay them off often. If you have an older credit card, keep it open to use occasionally for these purchases.

With all the new opportunities and independence that comes with college, it’s easy to lose track of spending. Creating a budget starts with separating financial needs and wants – for example, costs like rent and utilities are unavoidable, but going out for drinks and dinner is more negotiable.

From there, determine what your sources of income are and build a savings plan. Try tracking your spending for a month and use that information to determine a realistic, sustainable budget plan for you.

The most important part of budgeting is sticking to your plan. While it can be a challenge, staying focused and true to your budget will allow you to create good habits and financial success in the long run.

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401(k)s and IRAs are the two major types of retirement accounts. The money you save in these accounts is invested by fund managers who control those accounts. Both types of accounts have things in common, such as penalties for early withdrawal of funds, however there are some key characteristics that set each apart.

If you are employed at a salaried job, your employer might offer a 401(k) as a retirement option and may even match your contributions. The money you put into your 401(k) is “pre-tax,” meaning you pay tax on that money when you withdraw it.

Investment options can vary for these plans, but investment gains you make within your 401(k) are never taxed. Additionally, these accounts have higher contribution limits than IRAs, meaning that you can invest more money in your 401(k) if your budget allows.

IRA stands for Individual Retirement Account. Typically, IRAs aren’t employer-sponsored, meaning the account is set up by you the account holder rather than the company or organization you work for. Like 401(k)s, earnings on IRAs are not taxed, but for most IRAs, taxes are paid on withdrawals.  IRAs generally offer more investment choices than 401(k)s, but there are stricter rules on how much you can contribute to that account.

Additionally, simplified employee pensions (SEP) and SIMPLE IRAs are two types of IRAs designed to allow smaller businesses and to offer retirement plans for employees. SEP IRAs can only be contributed to by employers and have higher contribution limits than standard IRAs; in fact, employer contributions can be up to 25% of an employee’s gross salary.

SIMPLE IRAs are set up differently – your contributions as an employee can either be matched up to 3% by your employer, or your employer can contribute an amount equal to 2% of your salary, which does not require you to contribute at all. 

While there is no right answer for which type of investments to pursue and when, knowing your options is important to building a robust financial knowledge toolbox. Being familiar with all the tools available to you is key to meeting your financial goals. Master Your Card provides a database of resources to support your financial empowerment journey, so you can feel more confident in managing your money today.