Culver Academies seniors and first classmen got a quick 45-minute lesson in personal finances during a special session designed to answer a variety of questions that dealt with paying for college, investing, establishing credit, and using your phone to track your spending.
The event, sponsored by The Ron Rubin School for the Entrepreneur featured instructors Andy Dorrel and Scott Johnson ’94 and financial advisers Elisha Porterfield ’01 and Greg Farrall ’88. The questions were submitted earlier by the students.
Dorrel told students to “take ownership” of their finances because the only person concerned about their financial well-being “is you.” Johnson added that they should write a personal mission statement that would help align how they manage their funds.
“You can live by design or live by default,” he said, adding that doing the work now will help the students align their financial plan around what they value and care about the most.
Regarding paying for college, Porterfield said if you know what your major will be, consider going to the least expensive college offering that degree. It would save money at the start and students could transfer to a more expensive school later if they wanted. The financial difference between an in-state public school and private school can be substantial, she added.
Dorrel encouraged the students to apply for “every grant and scholarship” they could. He explained that applying for a $5,000 scholarship may take five hours; but, if you receive the scholarship, that is equivalent of getting paid $1,000 per hour. Plus, the information you supplied on that application can be used to apply for other scholarships and grants.
Also getting an internship or summer job in your field will go a long way to help you find a job after college, Porterfield said, adding she walked through the Graduation Arch on a Sunday and started an internship on Monday.
Farrall added that college expenses are rising at an average of 8.2 percent per year and show no signs of slowing down. That is why it is important to start “managing your debt now,” he said, because of the impact it will have on you later.
The group also covered other “grown-up stuff” like knowing your credit score, the difference between credit and debit cards, how compound interest works, using budgeting apps available for cell phones, and understanding what it means to diversify investments.
A person’s credit score is similar to a student’s GPA, Dorrel said. If a person has a credit score of 800 or better, that is like having a 4.0 GPA. If your score is 500 to 600, that is like having a 2.0 GPA. The better a person’s credit score the better the terms on loans. Consider the score as a “measurement of trust” banks and credit organizations have in a person’s ability to pay. Checking your credit score is free.
Concerning whether a person should have a credit card while in college, the group said it is not needed. Too often, people don’t look at a credit card as a loan, which is what it really is. It has to be paid back with interest of up to 25 percent. And if you are late, a fee will be tacked on, too. And that impacts your credit score.
A debit card is directly connected to a person’s bank account and the money is withdrawn directly at no interest.
When looking at investments and trading, Porterfield said people should invest “for the long run” and Farrall added that diversifying your investments will help you “sleep well at night.”
Students interested in day trading should think twice, Porterfield added. When she first started at Scottrade, she saw people’s initial portfolio go “down and down and down,” but they only talked about the one trade that went right.
“There are no quick tricks to make a quick buck,” she said, adding that one client brought her one potential investment to look over that is now being investigated by authorities as a possible ponzi scheme.
Johnson said budgeting and tracking your cash flow is very important. It is a proactive measure everyone can do. He added that Farrall has a blog post that names 15 apps that can assist people in doing this.