WHAT IS FINANCIAL LITERACY?
Financial literacy is the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial wellbeing.
The purpose of the Financial Literacy Program at California University of Pennsylvania is to provide both students and their parents with the information, tools, skills and knowledge they need to make good general and education-related financial decisions.
The information below was created to help educate our students and their families so that they can make informed financial decisions that will allow them to reach their personal and education financial goals.
Personal Financing Basics
Did you know?
- 43% of American families spend more than they earn each year.
- Average families carry about $16,000 in credit card debt.
- Personal bankruptcies have doubled in the last decade to 1 in 73 households.
What is Budgeting?
Budgeting can be simply defined as living within your financial means. A budget can be a simple written list of basic monthly income and expense amounts or a more detailed worksheet with spending information for each day of the week.
Guidelines for Creating a Budget:
- Track your expenses for at least one month so you know exactly where you are spending your money.
- Pay major bills first. Set aside money for your tuition, books, student fees, and other large annual or semiannual costs. Once these amounts are subtracted from your bank balance, you'll have a more accurate starting point from which to plan your budget for the rest of the semester.
- Evaluate your income versus your expenses.
- Never spend more than you are bringing in!
- Classify your expenses into needs and wants.
- Determine if the expenses in the 'want' category can be reduced or eliminated completely.
- Write down your short-term and long-term financial goals
- Create a budget and stick with it. You can use a simple written budget worksheet or calculate your budget online.
What happens if there are more expenses than income? Increase your income or reduce your expenses.
Here are some ideas:
- Learn to cook. If you cook dinner at home, you can also bring in leftovers to work the next day. Find more than 100 recipes here and here that require only a few items and are perfect for a college student’s budget! Want to eat healthy on a budget? Find ideas here.
- At restaurants, split a meal with a friend. Many restaurant portions provide more food than you actually need. Splitting with a friend is a way to make dining out more affordable and healthier!
- Eat at restaurants early to take advantage of early bird specials.
- Some restaurants offer coupons and discounts that come in with your regular mail. Also, many restaurants provide discounts or free-item coupons and even free birthday meals if you sign up for their emails.
- Drink water. It’s healthy and cheap! Bring a reusable water bottle with you wherever you go and fill it up at water fountains, drink stands, or friends’ houses.
Books and Media
Use the library. Borrow books from the library rather than purchasing them from the store. In addition, most libraries (like Cal U’s own Manderino Library) offer DVDs, magazines, newspapers, and free Internet service. Our library also works with libraries in the surrounding area to allow you to borrow books that they do not carry.
Be a Smart Consumer
- Join SmarterBucks. This website allows you to pay down your student loans by shopping for your favorite brands.
- Learn to use coupons and buy store brands Can’t live without a certain brand of food? Write to the company expressing your loyalty to their products and you may receive coupons for future purchases as a thank-you.
- Take advantage of student discounts. You may be surprised at how many companies offer them!
- Call companies to see if you can receive discounts on products or services because you are a long-term customer in good standing.
- Use only your bank or credit union’s ATMs. Using another financial institution’s ATM once a week could cost you $3 a withdrawal or more than $150 over the course of a year.
- Transfer your prescription drugs to the closest, lowest-cost pharmacy. Some pharmacies offer you gift cards just for switching. Also, ask if they offer a generic version of your prescription.
Utility, Cell Phone, TV
- Mobile phone companies have been known to give discounts to students, employees, and customers in good standing. Also, be sure you understand peak calling periods, area coverage, roaming and termination charges.
- Don’t watch a lot of television? Consider shutting it off (even if just to try it out) and replacing it with Netflix or Hulu. Both offer free trials, so you can try before you buy!
- Reduce your utility bills. You will save roughly 3 percent in energy costs each year for each degree you turn the thermostat down. Turn it down at night and when you are not home to reduce your bill substantially.
- Put your loose change in a jar. Keep it for laundry, gas money, textbooks, or save it for unexpected expenses.
- Use a blank check register to record your daily expenses. You can usually get them for free at most banks.
- Be aware of the unnecessary things you spend your money on that can be easily avoided such as daily trips to the vending machine, lattes, music downloads, out-of-network texting, etc.
- Kick the habit. At about $6 a pack, smoking is expensive — and it takes a toll it takes on your lungs. For help on how to quit smoking, check out www.smokefree.gov.
- Discuss spending limits for gift-giving with family and friends. This way, you can buy gifts you can actually afford to give. Discussing this well in advance gives you time to shop the sales.
- Sell/trade things you don’t use. Use the money you earn to pay down your debts or save it for emergencies.
- Have friends chip in to help pay for gas.
- Visit GasBuddy.com for a comparison list of current gas prices in your area.
- Better yet: Take advantage of public transportation, carpooling, or your feet to get you to where you want to go.
- Wait 24 hours before purchasing a high-priced item. This gives you time to think about it and avoid impulse-buying.
- Don’t lend money to friends.
Did you know?
- 84% of undergraduates have at least one credit card.
- 50% of students have 4 or more credit cards.
- 82% of students carry balances and incur finance charges each month.
- The average balance carried by college students is $3,173.
What Type of Card Should I Get?
Below are descriptions of different types of credit cards.
- Co-signed card: This is a card that a parent and student apply for together. The issuer uses the parents' income as proof that the loan will be repaid. Parents are liable for the debt incurred by the student.
- Secured card: This is best for first-time credit card users. The limit on the card is whatever you give the bank as collateral. You cannot go over the limit of the card.
- Department store or gas company credit cards: These cards typically have low spending limits that can allow you to start small and build your credit.
You’re Approved! Now What?
Pay on time. Paying your credit card bill on time helps you avoid late fees and improves your credit record. A good credit record leads to a higher credit score, which helps you qualify for lower interest rates.
Tips for managing credit card use:
- If your bill is due at an inconvenient time of the month (if it's due on the 10th and you get paid on the 15th), contact your credit card company to see if it can change your billing cycle to fit your situation.
- Pay more than the minimum payment. If you can't pay your balance in full each month, pay as much of the total as you can. Over time, you'll pay less in interest charges, and that's money you'll be able to spend on other things. Also, you'll pay off your balance sooner.
- Keep your balance below your credit limit. Keeping your balance at or below 20 percent of your available limit can ensure you can continue to pay it efficiently.
- Keep a record of your spending or check your balance online.
- Avoid unnecessary fees. Credit card companies not only charge fees for late payments and when your balance is over the limit, but also for cash advances, transferring balances and returned payments. Some companies also charge a fee when you pay your bill by phone. Read your credit card agreement to learn more about the fees that your credit card company charges.
- Read notices regarding changes to the terms of your account. Credit card companies can change the terms and conditions of your account including fee amounts, interest rates, billing procedures and other features. Reading these notices can help you decide whether you want to change the way you use the card or close the account completely. If you have a card with a variable rate or if you have an introductory rate that is ending, be aware that the credit card company is not required to send you a notice prior to raising your interest rate.
- Set a low minimum balance. This helps you control your spending habits. Spending an amount close to your credit limit or maxing it out entirely may make you appear to be a credit risk, as it shows you may be likely to overspend.
- Review your monthly credit card statement for errors.
Tips for New Users
- Understand the terms of the card. Know the interest rate, fees and payment schedule.
- Beware of 0 percent teaser rates. While 0 percent interest is enticing, the offer may tempt you to spend more than you can afford to repay. When the introductory rate is over, the interest rate will swell and so will your balance.
- Play with interest rates. To show how debt can accrue thanks to interest, plug some hypothetical numbers into credit card calculators. Those $50 shoes and last week's $15 pizza delivery can get really expensive when a 20 percent interest rate is applied.
- Pay on time. You will start to build a good credit history if you pay on time, every time.
- Pay in full. To avoid costly interest charges, you should try to pay your bill in full each month. If you can't, you should pay as much as possible.
- Don't go over the limit. If you spend too much, you'll incur additional fees for spending more credit than you've been allotted.
- You can deny raises to your credit limit. If you receive a letter that congratulates you on being given an increased credit limit, call the company and say, 'No thanks.' Why deny the increase? Having too much credit available can negatively affect your credit rating.
- One late payment will affect your credit for seven years.
- Your credit card issuer can close your account any time, for any reason. Credit card companies have been known to do this even to customers in extremely good standing simply because their account may not generate enough profit for the company.
- Many credit card companies solicit college students on or near college campuses or other public places and entice them with free merchandise such as T-shirts or small amounts of money.
Credit Reports and Scores
What is a credit rating?
Every month, each of your lenders (your bank, department store, landlord, etc.) reports your recent credit history to one or all of the three major credit bureaus — Experian, Equifax and Transunion. The bureaus then compile and save these reports to determine your credit rating. Credit rating information that may appear on your credit report includes:
- Date each account was opened, current balances and credit limit
- Whether you paid on time or missed payments
- Whether your account has been turned over to a collection agency
- Any judgments or tax liens
- Any court judgments from small claims
- Delinquent civil and child support payments
- City, county, state and federal liens for unpaid taxes and bankruptcies
This credit rating creates a credit score, which is the numerical value calculated from information in your credit file. It is used by lenders and landlords to assess your “credit risk.” It helps to predict how credit-worthy you are, i.e. how likely you are to repay a loan and make payments on time.
There are many reasons to learn about your credit score. Having good credit:
- Determines whether you will be approved for auto or consumer loans. This includes private and graduate PLUS loans to pay for your education.
- Determines whether you will be able to rent an apartment. Many landlords use your credit score to determine if you are a worthy risk and may even reduce your security deposit if you have good credit.
- Influences the interest rates and fees that are assessed on some loans.
- May determine whether or not an employer extends a job offer to you. Some employers use credit to assess a person's character.
Building and Maintaining Good Credit
The two most important things you can do to maintain a good credit rating are:
- Paying at least the total minimum monthly payment on or before your payment due date. A history of on-time payments is one of the best things you can do for your credit.
- Maintaining a balance that is 20 percent or less of the overall credit card limit. Having a high credit card balance may indicate to lenders that you are a higher risk.
You are legally entitled to a free credit report every 12 months from one of the three major bureaus. Make sure to request a free copy of your credit report once a year at Annual Credit Report to stay informed about what your creditors are saying about you.
You can also quickly estimate your credit score here.
First, define your financial goals:
- Short-term goals are those that can be achieved in three months or fewer.
- Medium-term goals are those that will take between three months and one year to achieve. For example, you might choose to save for six months to take a trip or pay off a credit card.
- Long-term goals take more than one year to accomplish. One of your long-term goals could be to pay off your student loans early by paying an extra $300 per month or to pay off your mortgage.
Basic Rules to Money Management:
- Determine your living expenses, periodic expenses and monthly debt payments. Compare your expenses to your monthly net income.
- Determine the difference between needs and wants and create a realistic budget by first taking care of your needs (food, housing, clothing, transportation) and then spending on wants.
- Always pay bills on time to maintain a good credit rating and avoid late charges. If you are unable to pay your creditors, call and explain your situation and they’ll help you set up a payment agreement.
- Do not wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.
- Determine what you can comfortably afford to purchase on credit by reviewing your budget. Don’t allow your credit payment to exceed 20 percent of your monthly paycheck.
- Pay more than the minimum on charge accounts. If possible, add a few extra dollars to your payment. Remember that there are consequences for not paying your bills.
Methods to Pay Down Debt:
- Decide the total amount you can possibly afford to put toward debt every month. Pay minimum payments on the cards with lower interest rates and put the rest toward your highest interest-rate debt. Once the highest interest-rate debt is paid off, apply the total amount you were paying on the first debt to the next highest interest-rate debt. With this method, you’ll be paying less interest over time.
- Organizing your cards by balance amounts with the smallest first. Then, like with the avalanche method, determine the maximum you can pay toward all your debts. Pay the minimum on all the debts but the smallest. Apply the rest of your debt-reduction budget to it. Once the smallest-balance debt is eliminated, apply what you were paying to that debt to the next-largest balance. (Often, with this method, a debt can be eliminated within the first month or two).
- Freeze your credit card in a bowl of water if you are likely to overspend impulsively. When you find something you'd like to purchase, remove the card from the freezer and thaw it in the refrigerator. This will give you time to think about whether you really want to make the purchase now, buy it later or not at all.
Identity theft occurs when someone uses another person’s identifying information, such as name, Social Security number, or date of birth to commit an unlawful activity. Thieves can obtain personal information from many sources, such as lost or stolen credit cards, Social Security cards, checkbooks, or health insurance cards. To get you started, Cal U’s University Technology Services has provided some helpfulTips to Prevent Identity Theft.
- Don't carry your Social Security card with you.
- Don’t give your PIN or Social Security number to anyone.
- Know what information you’re putting on your social networking sites.
- Learn about how to stay safe on social networks, courtesy of UTech Services.
Shred or tear up anything containing your personal information, credit card information, or bank account numbers before putting it in the trash or recycle bins. This includes unused credit card offers.
Beware of shoulder-surfers — people who look over your shoulder at the ATM to obtain your PIN or other personal information.
Keep documents and statements in a safe place.
- Write down all of your current credit cards and store the information in a safe place so that you can contact the correct companies if they get stolen.
- Monitor account activity closely.
- Use only secure websites for credit card transactions.
- Never disclose personal information over the phone or Internet with companies or people you do not know. Tell anyone who calls asking for your Social Security, credit card, or bank account numbers that you don’t give that information over the phone and that they can contact you by mail.
- You can call back the company and ask if they have asked for your information to double check.
- Opt out from pre-approved credit card offers. Identity thieves can use them to set up fraudulent accounts in your name. To put a stop to having prescreened credit offers mailed to you, call 888-5OPTOUT (888-567-8688) or go online to www.optoutprescreen.com.
- Don't leave your purse or wallet unattended anywhere: a party, lunch table, bathroom, etc. Use a zippered purse to prevent pickpocketing.
- Never open up e-mails from people or companies you do not know.
What to Do if it Happens to You?
Replacing Credit, Debit, and ATM Cards:
Report the loss or theft of your credit cards and your ATM or debit cards to the card issuers as quickly as possible. Many companies have toll-free numbers and 24-hour service to deal with such emergencies. You will need to know your account number and when you noticed your card was missing. Make a note of the date you first reported the loss.
Dealing With Credit Card Loss or Fraudulent Charges:
The government provides protection for credit card holders in the event that their card is compromised:
- If you report the loss of your credit card before anyone uses it, the card issuer cannot hold you responsible for any unauthorized charges. Also, if the loss involves your credit card number but not the card itself, you have no liability for unauthorized use.
- If you notice unauthorized charges on your statement after they've occurred, you still have protection. As long as you report the charges within 60 days of receiving your statement, you are only liable for a maximum of $50—regardless of the amount charged.
Dealing with ATM or Debit Card Loss or Fraudulent transfers:
- If you report the loss within two business days after you realize your card is missing, you will not be responsible for more than $50 of unauthorized use.
- If you don't report the loss within two business days, but do report it within 60 days, your liability is capped at $500.
- However, if you wait longer than 60 days to report the loss, you become at risk of complete loss of all assets in your account.
Reporting and Replacing Your Missing Driver's License:
If your driver's license has been lost or stolen, report the incident to your local police department's nonemergency line. The local police likely will have forms you need to fill out to report the incident. Be sure to get a copy of the report.
To replace your driver’s license, you will need at least one proof of identity and you’ll be charged a fee. Contact the Department of Motor Vehicles for the state that issued your driver's license for office locations and additional information.
Reporting Your Passport as Lost or Stolen:
Once you report your passport as lost or stolen, it becomes invalidated and you no longer can use it for travel—even if you find it.
You can find more information about reporting your passport as lost or stolen or replacing your passport at the U.S. Department of State website.
Scholarship Scams (How to Avoid)
Need money for college? Many students and their families are looking for creative ways to finance a college education.
The Financial Aid Office urges families to be very cautious in paying for scholarship searches. While there are legitimate organizations that do charge a fee, there are also organizations that take advantage of students' and parents' fears about meeting the costs of higher education.
Tips to avoid deceptive offers:
If you must pay money to get money, it might be a scam.
If it sounds too good to be true, it probably is.
Spend the time, not the money.
Never invest more than a postage stamp to get information about scholarships.
Nobody can guarantee that you'll win a scholarship.
Legitimate scholarship foundations do not charge application fees.
The Federal Trade Commission cautions students to look for these phrases used by scam artists:
“The scholarship is guaranteed or your money back."
- No one can guarantee that they will get you a grant or scholarship. The refund guarantees that are offered usually have so many conditions or strings attached that it is almost impossible for consumers to get their money back.
“You can’t get this information anywhere else.
- Scholarship information is widely available in books, from libraries, financial aid offices and the Internet.
“I just need your credit card or bank account number to hold this scholarship.”
- This is never a requirement for a legitimate scholarship offer. Don’t give out your financial information in this kind of situation.
“We’ll do all of the work.”
- Only parents and students can determine and provide the financial information needed to complete the forms.
“The scholarship will cost some money.”
- Legitimate scholarship offers never require payment of any kind.
“You’ve been selected by a ‘national foundation’ to receive a scholarship” or “You’re a finalist in a contest (that you never entered).”
- If you have not applied for a scholarship sponsored by the foundation, be skeptical about this claim.
CashCourse is a valuable resource for those seeking assistance with important money matters. It contains helpful information and practical tips for managing personal finances and is available for use by both alumni and current undergraduates.
California University of Pennsylvania's First Year Seminar courses incorporate and utilize the Cash Course eLearning Courses as extra credit opportunities. Contact your First Year Seminar professor for more information.
National Endowment for Financial Education (NEFE) ®
Cal U has partnered with The National Endowment for Financial Education® (NEFE ®), an organization that provides money management and basic personal finance resources for college students.
Financial literacy is an essential life skill for the 21st century. It is especially important for today's college students, who will have more financial choices and opportunities than any generation before. NEFE is seeking to aid students with this challenge by creating a website for college students and recent graduates that contains comprehensive, non-commercial information to help them make informed financial decisions.
For more information or to provide feedback, please contact us by e-mail at firstname.lastname@example.org.
- http://nslds.ed.gov/ - This federal government website that allows students to view a summary of all of their federal student loans and federal grants. -This summary is labeled as “Financial Aid Review.”
- http://www.annualcreditreport.com - This secure website allows you to pull credit reports from all three credit reporting bureaus annually for free.
- www.mint.com - Mint pulls all of your financial accounts into one place. Set a budget, track your goals and do more with your money, for free.
- www.smarterbucks.com – Smarterbucks is reward program that can help you pay down your student loans by making everyday purchases. It even allows friends and family to participate and help.
- http://www.mappingyourfuture.org/ - This site is a free resource for career, college, financial aid, and money management information.
- http://www.360financialliteracy.org/ - 360financialliteracy.org is a free program endorsed by the nation’s certified public accountants to help Americans understand their personal finances.
- http://www.MyMoney.gov - MyMoney.gov is a federal government website dedicated to teaching all Americans the basics about financial education.
- http://www.americasaves.org/ - AmericaSaves is a national campaign involving more than 1,000 non-profit, government, and corporate groups that encourages individuals and families to save money and build their personal wealth.
- http://www.mybanktracker.com/ - This site is an online resource that helps consumers make smart banking and money decisions.
- http://www.youcandealwithit.com/ - Provides practical and easy-to-understand advice on how to deal with common financial situations facing college students and recent graduates.
- How Much Would My Loan Payments Be?
- How Long until My Loan is Paid Off?
- What's the Impact of Making Extra Payments on a Loan?
- Loan Consolidation Payments/Interest Estimator
- Loan Repayment Calculator
- Loan Discount Calculator
- Cost of Interest Calculator
- Student Loan Interest Savings Calculator
- How Much You Can Afford to Borrow in Student Loans Based on Expected Salary
- Estimate Your Student Loan Repayment
- Expected Family Contribution (EFC)
- Estimated Financial Aid Calculator
- Credit Card Debt - How Long it Will Take to Become Debt Free
- Estimate your Current Credit Score
- How Much Am I Spending?
- Make an Online Budget/Personalized Spending Plan
- Should I Live at Home, On-Campus, or Off-Campus?
- Should I Rent or Buy a Home?
- Becoming a Millionaire
- When Should I Start Saving for Retirement?
- Salary vs Debt Calculator
- 5 Things to Know before Taking out a Student Loan (WSJ)
- Savings Tips for New College Grads (Forbes)
- Monthly Guide to Maximizing Your Money (TODAY)
- Six College Money Myths (FOX Business)
- More College Students Defaulting on Student Loans (USA Today)
- How I Paid Off $90,000 in Debt in Three Years (Forbes)
- Student Debt is the Chief Concern of College Applicants (Huffington Post)
- The Hidden Truths of Student Loans
- Three Things to do During Your Grace Period
- Wanna Move to Niagara Falls? Student Loan Debt Gets a Daring New Fix
- Better Business Bureau Warns of Scholarship Scams