Summary
- It can be a tool that allows you to acquire all the required data that’s necessary to know how these systems work and give them compliance, so you won’t get in trouble, and you will get the possible refunds or benefits.
- They know about the need for accurate early debt payments, and hence, they budget and plan correctly in order to save, invest, and pay back their credit and debit cards to avoid financial traps.
- This is why, in this article, we will be listing important tips and tricks that will enhance a student’s overall development, including their financial ability to study and live abroad.
Financial Literacy Essentials for Students Preparing for Global Education
Students who receive financial literacy instruction are better equipped to manage their money and steer clear of financial pitfalls that can result in debt and other difficulties. Students can build sound financial habits that will position them for future financial success by comprehending fundamental financial concepts.
Instead of letting their money rule them, they can learn how to manage it and make it work for them. This is why, in this article, we will be listing important tips and tricks that will enhance a student’s overall development, including their financial ability to study and live abroad.
With the emergence of sophisticated financial products and services, financial literacy has grown in significance in today’s society. We at GradRight will help you become financially independent, accountable, and self-assured.
Before we get started on gaining a deeper outlook on financial literacy for students willing to study abroad, let’s start with the basics.
What is financial literacy?
Financial literacy refers to the ability to manage one’s finances effectively. This could range from just having a basic understanding of how to budget or how to manage the existing financial resources or save or even invest.
So, to manage your money well, you’ll need to be financially literate. This is a core requirement for students who are planning to travel abroad and study because navigating money abroad is just as complicated as navigating the new culture and education.
Students who are going to study abroad should start by understanding currency exchange, managing living expenses, handling tuition fees, and planning for unexpected costs, which will require strong financial literacy skills.
Why does financial literacy matter for students studying abroad?
Financial literacy is a life-saver for students abroad to study. The reason is that it causes these people to make informed financial decisions that will continue to benefit them until they finish their education and master their financial decision-making.
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Help Manage Student Loans
Students with financial literacy skills are better equipped to handle loans. They know about the need for accurate early debt payments, and hence, they budget and plan correctly in order to save, invest, and pay back their credit and debit cards to avoid financial traps.
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Gaining Financial Independence
Financial literacy also fosters self-reliance. This is when students finally understand how to manage the money for expenses and balance it out with their part-time income; they gain the confidence to handle unexpected expenses, such as their house rent or emergency travel, without turning to family or friends for help.
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Avoiding Debt
For students studying abroad, the temptation to rely on credit cards or loans can be high, especially with varying exchange rates and the cost of living.
Financially literate students can easily understand the long-term consequences of debt, which can help them manage money even while making high-interest payments. They are more likely to make responsible choices to keep their financial obligations manageable.
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Handling Unexpected Financial Emergencies
International students travelling abroad are particularly susceptible to unseen financial problems such as medical expenses. However, financial literacy allows them to be prepared against these unforeseen developments with the appropriate techniques.
Developing an emergency fund or getting to know insurance documents can help students avoid experiencing the costs and stressors of an unanticipated life event.
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Navigating Tax Systems
This is one of the hardest yet core advantages when it comes to mastering financial literacy abroad. If you’re studying in the USA, then you know how complex the local tax regulations can get. If you’re willing to work and settle down in the USA or any other country abroad after studying, then gaining financial literacy would be the first step.
It can be a tool that allows you to acquire all the required data that’s necessary to know how these systems work and give them compliance, so you won’t get in trouble, and you will get the possible refunds or benefits.
Key components of financial literacy for international students
As a student, your main focus should be to learn how to balance your income and expenses and avoid debt. We have discussed some practical core aspects below that will help you be financially stable in a new country.
Here is a breakdown of the most important components.
Budgeting
When you study abroad, you need to take care of a host of expenses like tuition, accommodation, food, and many more. So, if you don’t budget properly, it’s easy to run out of money before the end of the month.
Your first step to be financially literate should be to calculate your total income. The goal is to make sure that your spending does not exceed your income or family support. One of the best ways you can maintain this is by tracking your expenses daily using spreadsheets.
This will help you analyze how much you’re budgeting and help you identify areas where you could be overspending.
Saving
Emergencies like sudden illness can happen anytime. So, you should try to have some money set aside, which gives you the freedom to handle these situations without borrowing or falling into unnecessary financial stress.
The best way to do this is to start setting a small savings goal. It can be as low as 5 to 10% of your monthly income.
Understanding Credit
In many countries, when you have a good credit standing, it’s much easier to obtain a rental apartment or even gain a job. Credit cards are one way to enhance your credit score. However, they can also be highly damaging if you do not understand how interest rates work on credit cards.
Hence, it’s essential to avoid splurging using credit cards and repay by the end of the month. Do not give into postponing paying balance month to month as, if interest rates are high, this can quickly turn into debt.
If you’re not familiar with how credit works in your host country, learn about the rules and regulations first and then proceed with having a credit card.
Managing Debt
Debt is common for students, especially if you’ve taken out loans to finance your education.
If possible, start making small payments on the interest while you are still in school. This can help you reduce the overall cost of the loan.
Also, avoid taking on unnecessary debt by being mindful of your spending. If you must borrow, prioritize low-interest loans or financial aid that doesn’t need to be repaid, such as grants or scholarships.
Currency Management
As an international student, currency exchange rates and transaction fees can have a big impact on your finances. Exchange rates fluctuate daily, and if you’re not careful, you could lose a significant portion of your money during conversions.
To minimize costs, use a Forex card or open a local bank account in your host country. These options often provide better exchange rates and lower transaction fees compared to cash exchanges or international bank transfers.
Plan your withdrawals and currency exchanges in advance to avoid frequent fees. Being strategic about when and where you exchange money can save you hundreds of dollars over the course of your studies.
Insurance
Health insurance is usually mandatory for international students, but not all plans cover the same things. Read the fine print to understand what is and isn’t included in your policy.
You might also want to consider renter’s insurance to protect your belongings in case of theft or damage. Travel insurance can also cover a lot of unexpected costs when you’re travelling.
Practical financial tips for students studying abroad
Here are some practical, actionable tips that can help you stay financially secure and focused on your studies.
1. Create a Realistic Budget
As we mentioned before, the very first step to being sensible about money when studying in a new country is to create a budget.
All you need to do is list out your sources of income and your expenses.
If you have multiple sources, consider all of them, such as family support or part-time jobs. Then, categorize your expenses into fixed costs, like your tuition, rent, and insurance, and variable costs, which will include groceries, transportation, and entertainment.
You can assign a specific amount to each of these categories. And the trick is to stick to these limits. Always review your budget on a monthly or quarterly basis so that you can adjust for unexpected expenses or any changes in your financial situation.
2. Open a Local Bank Account
The best way to save money on transaction fees is to open a local bank account in your host country. You can look for banks that have student accounts because these offer lower fees and offer some added benefits as well.
3. Limit Credit Card Use
As we talked about earlier, although credit cards are convenient, they can also lead to overspending.
Use your credit card only for emergencies or planned buys that you can comfortably pay off in full by the due date. Always avoid withdrawing cash with your credit card because this incurs very high fees and interest.
4. Plan Meals and Cook at Home
Cooking at home is a much more cost-effective option than dining out. It allows you to eat healthier, too. So, plan your meals, maybe on a weekly basis, and buy groceries in bulk to save money.
5. Save on Textbooks and Study Materials
Textbooks and study materials are very expensive, but you can cut costs here as well. Check if your university library gives you access to books that you need.
You can also buy used textbooks or share them with your classmates. Some online platforms even offer affordable ebook versions of academic materials. Make the most of them.
6. Monitor Exchange Rates
Because currency rates fluctuate almost on a daily basis, monitor these rates and convert larger amounts when the rates are favorable for you.
You can also get a Forex card because they generally provide better rates than traditional banks.
7. Avoid Impulse Purchases
Because you live abroad, sometimes you may be tempted to buy souvenirs for family and friends or splurge unnecessarily. It’s fine to do that sometimes, but try to avoid making it a habit or buying things on impulse.
A simple strategy a lot of people suggest is to wait 24 hours before buying anything that is non-essential because it gives you the time to evaluate whether you need the item at all or not.
8. Build an Emergency Fund
Try to save at least three months’ worth of living expenses in a separate account. Even setting aside a small amount each month can add up over time and provide peace of mind.
So, on the whole, financial literacy is just an underlying skill yet so powerful that it can easily help students navigate through financial complexities and build a safety net against any unforeseen circumstances.
It is not just about money management but having a full-fledged plan in place that will set them up for academic success along with promoting independence, building resilience, and generating opportunities that will make them invest towards a more secure and affluent future.
FAQs
1. What is financial literacy, and why is it important for students?
Financial literacy means that a person has an understanding of financial concepts and the skills to manage, budget, and invest. These skills are important for students as they can stay abroad and make informed decisions to remain away from financial hardship, debt, or any sort of money shortage during emergencies.
2. How can students improve their financial literacy?
Understanding and learning financial literacy is a gradual process. Students should start with savings and tracking expenses. They can do this by maintaining a spreadsheet. Then, once they start budgeting and saving, they can move on to understanding insurance and preparing for their financial security, which could be meant for uncertainty. Once they get into these concepts, they can move on to investing their savings.
3. What are the common challenges faced by students in achieving financial literacy?
A lot of students struggle to access financial literacy resources, social inequalities such as creating learning disadvantages, and overall financial literacy regarding how to manage financial products. These challenges may limit them in developing good financial decision-making and may result in bad financial practices in adulthood.
4. Do universities abroad play a role in promoting financial literacy among international students?
Yes, universities do have a crucial function in contributing to financial literacy through the inclusion of it in curricula or at least workshops for students willing to study abroad. However, several banks today have customized insurance plans and other variables that inculcate financial awareness through practical application. Options like FundRight also provide access to resources that help students develop responsible financial behavior and make decisions in the right direction.