Introduction to Financial Literacy
In this module, you will learn what Financial Literacy is and the tools that you need in order to be successful in your financial endeavors. The President’s Advisory Council on Financial Literacy defines financial literacy as “the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being”. Our goal is to introduce you to some of the necessary skills and resources so you can achieve financial well-being.
The 5 Principles of Financial Literacy
There are five major principles of financial literacy that are crucial to achieving financial well-being: earn, spend, borrow, save and invest, and protect.
Earn - There is a difference between earning and making money. Earning money involves gaining money in exchange for your time and energy on a timely basis. Making money consists of frequent payments in exchange for one significant installment of your time and energy.
Spend - It is important to recognize spending that you need vs spending that you want. Those that you need should include absolutely necessary transactions, including housing, transportation, electricity, and food. Spending that you want should include non-essential transactions, such as travel and entertainment. It is recommended that you spend 50% on what you NEED, 30% on what you WANT, and 20% on savings or debt.
Borrow - Borrowing money can be a great option for students, and is often a necessary one. Not only will it give you greater flexibility in your transactions, but can build your credit and increase your chance of receiving loans in the future, if done correctly.
If you want to get started, but do not know how, visit this page https://studentaid.gov/understand-aid/types/loans.
If you are worried about your student loans at UMD, visit this page on our website https://financialaid.umd.edu/resources-policies/loans-faqs to learn more.
Save and invest - It is very important that you begin to save at an early age. To find out why this is so important and how it can benefit you, watch this video (https://www.youtube.com/watch?v=2p3xdVIy8VY ). It is especially important to begin saving early because compound interest can speed up the growth of your money. This is because you earn interest every time that money is reinvested into your savings account. The more frequent, the faster it grows!
Remember that there are differences between savings and checking accounts. Visit this page to see the differences and understand how each account can benefit you. https://www.investopedia.com/checking-vs-savings-accounts-4783514
Protect - Life can be unexpected, so it is important that you plan to avoid any major damages to your finances. Insurance is a great way to do that. It can protect you from considerable costs, including unanticipated deaths, accidents, and more. We all live different lives, so insurance is going to look different for everyone. This is based on your lifestyle, socioeconomic status, and how you plan to protect yourself in the future. Watch this video (up to 3:30) to learn about the different types of insurance and how they benefit you https://www.youtube.com/watch?v=FVE51Lq77Hg.
Now that you know the different types of insurance, start applying! Your insurance eligibility will differ depending on your job, location, spouse, etc., so look into each insurance plan offered to find the best fit for you.
The Graduate School believes that it is paramount to ensure your mental and physical wellbeing while you are a graduate student. Therefore, since Fall 2020, policy has been enacted requiring all graduate students to maintain health insurance coverage while enrolled in school.