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College students may be pros at pulling off last-minute study sessions, but when it comes to finances, cramming just doesn't cut it. Hi, I'm Rob West. We often say that everyone needs a budget, and for college students, that might be even more crucial. Today, Dr. Kelly Rush joins us with practical budgeting advice every college student should hear.
And then it's on to your calls and questions at 800-525-7000. That's 800-525-7,000. This is Faith in Finance, biblical wisdom for your financial journey.
Well, our guest today is my friend Dr. Kelly Rush, a finance professor, division chair, and financial planning program coordinator at Mount Vernon Nazarene University in Ohio. She's also on the board of directors at Kingdom Advisors. She's well-versed in the intersection of faith and finances. And today she's here to help us tackle an important topic for students and their families.
That is how to build a solid college budget. Kelly, great to have you back with us. Oh, I really like this topic. Rob, thanks for having me. Kelly, you work with students every day.
So let's start with the big picture. Why is it so important for college students to learn how to manage their money at this stage? I'm reminded of Proverbs 22, 20. Prain up a child in the way he should go. And when he's old, he will not depart from it.
We apply that verse to a lot of areas in parenting, but it holds true in this area of finances and wanting our children to develop those good habits, especially during the college years, so that they'll continue those down the road. And so, whatever those habits are that they're developing during those critical college years is either going to start them on a path of financial success or cause later regrets down the road that they'll then have to overcome. Yeah, that's right. The financial foundation is important.
Now, you interact with a lot of college students, Kelly.
So, what do you experience? I mean, do they tend to have budgets, or is that more of an exception if they do?
Well, yes and no. A lot of college students have a mental budget.
Sometimes we call that mental accounting, but very few have an actual written budget. And they might have a general sense of what they should be spending. But even if they have that general sense, they still don't track their spending. And so they don't have a clear picture of where the finances are going. And they don't have a written budget to compare anything to.
And so over time, what they find is that they're actually spending more than they realize. They're watching those bank accounts dwindle more quickly than they anticipate. And they genuinely don't have a sense of where the money is going.
So it's easy for a college student to think, well, I don't have normal expenses. I have a lot of variability. And so I'll just have a budget later on. But we want to develop those habits early on so that they'll stay with the student and they'll continue those budgeting practices on into the future. Yeah, that's well said.
Now, there's some critical lessons or ideas that they need to learn. This stage, one of those I know is the time value of money. Why is that such a key foundational concept for college students in particular? Time value of money really is critical because the relationship between time and money is not random. There's a system to it.
It's logical. It's reasonable. It really reminds me of the orderly God that we serve. There's an order to this time and money relationship. And so when college students learn how the time value of money variables work together, they realize that the most powerful variable in every time value of money calculation is always time.
Without exception, the financial destination boils down to time and that need to use time wisely. Yeah.
Now let's apply that key concept then, Kelly, the time value of money to budgeting.
Well, often budgeting, the question comes up, well, how much do I save? Or when I save, how much am I going to earn on that investment? And even the broader financial industry, a lot of attention is given to savings rate, return on investments. Those are definitely important variables. But because time is the most powerful variable, college students need to use the budgeting process early on to have the best impact down the road.
You know, scripture speaks of time often. The psalmist asked the Lord to teach us to number our days that we may apply our hearts to wisdom. And Paul told the church in Ephesus to walk carefully, not as fools, but as wise, because we're supposed to redeem the time.
So without exception, the most important thing college students need to understand is that they have time on their side. And if they start early, saving early, giving early, stewarding wisely from the very start, all of those practices go into building a budget and all of them have a positive impact. Impact with time. That is so good. When we come back from this break, we'll talk about credit, when is the right time to open a bank account, and much more.
Kelly Rush here today. We're talking college students. Following this interview, your questions today at 800-525-7000, stay with us. We'll be right back. No.
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Investing involves risks, including possible loss of principal. Thanks for joining us today on Faith and Finance. We're talking budgets 101 for college students. Perhaps you're a college student or you have one in your life.
Well, we've got a great guest today. My friend Dr. Kelly Rush is finance professor, division chair, and financial planning program coordinator at Mount Vernon Nazarene University in Ohio. And she's been sharing with us some of these key foundational concepts and ideas that are so important for college students. And Kelly, before the break, you were talking about the importance of the time value of money, and you made this really important distinction that really time is on your side when you're a college student.
And that's important. But when you say that, is that always true in terms of money?
Well, this is a great clarification to make, Rob.
So thank you. Time is always on a saver's side. It's always on an investor's side because the longer runway for those good practices leads to a positive impact down the road. But time has the opposite impact for debtors. Long runways for someone who's trying to pay off debt means that more interest is paid.
So time is not on a debtor's side. If college students can build good financial habits early on, if they can avoid that consumer debt, if they can steward well early, they will always have a compounded blessing over time. Yeah.
Let's shift to budgeting. Kelly, I know another concept you've talked about is this idea of momentum. You say that money has momentum in college. Unpack that for us. Oh, absolutely.
I tell students that money moves and money has momentum. You know, I think about my kids when they were little, they saved for a few big purchases. They saved for that first car. They saved for their portion of the college tuition. But they didn't understand the small purchases that mom and dad were making all of the time.
And so when you get to college and those small purchases tend to fall on the shoulders of the college student, they just don't realize how many transactions happen in the course of normal day-to-day life. Whether that's ordering pizza or coffee run or streaming services or whatever those things are, the frequency of small purchases tends to gain momentum throughout college. The sheer number of expenses that results in the momentum of how money moves over time. Yeah, that's really helpful and a powerful idea. Let's turn to practical tools.
Kelly, do you have any favorite go-to resources for students who are just getting started with budgeting or are facing the momentum of money moving that you just described? For sure.
So, for young children, a lot of parents will use the envelope system. They'll have a few budgeting categories, and that's a really great way to tangibly teach young kids about money. But that's probably not going to be the plan for a college student. I don't know if you've heard college students say this, but there is this mindset out there that cash doesn't count. And they'll just say that real flippantly: oh, cash doesn't count.
As in, when money is moving, they think of the cash as already being spent because it never shows up in an online transaction. Interesting.
So, because Gen Z operates in the world of apps and easy online access, we want to meet them where they are. And so, we want to use those finance apps. I really like the FaithFi app. It's a great place to begin with budgeting. It's customizable to meet the students' needs, has different money management options.
It's a great place to be a very practical resource for college students.
Well, I couldn't agree more. You can go to faithfy.com to check it out. Let's stay in the practical category, Kelly. At what point do you think students should open their own bank? Accounts and start managing money independently rather than relying on mom and dad.
Oh, that's a great question, Rob. And so, something that we say at our house all the time is that we're on the same team, right? Parents and students are on the same team. And so, in order to be on the same team, we want to have a game plan. And parents need to communicate to their students the game plan of turning over the expenses to the college student.
When will they pay for their own gas? When do they pay for their own clothes, their own cell phone, and so on? And so, we need to communicate not just which expenses are going to move to the college students, but when do they move? And so, having a plan for that really puts people on the same team on the same page, and then they can map out how much to budget for, when to budget for, and when those expenses move to the students' responsibility, that was probably the time when they're going to want to open up their own bank account, have their own responsibility for those specific expenses that mom and dad said, Okay, now these are yours. Yeah, and I think one of the keys there, and you said this, is clear communication.
Kelly, naturally, when One of the other conversations that needs to be had is around credit. Should college students start building credit now or do they wait until after graduation? You know, I think either is going to be fine in the long run, but there really is some value in starting the process of building credit during college. That longer runway of building credit can have a benefit down the road for that first apartment or when they're shopping for insurance and things like that.
So, what I suggest is starting with a secured credit card where a one-time refundable deposit is put down and that acts as collateral to the credit card issuer. And so, once they open that secured credit card, then they have to think about, okay, well, which expenses am I going to move to that credit card? And I always suggest start with gas, right? Nobody spends more for gas than they have to, and so that's a very easy budget item to begin putting on a secured credit card. And then, very critical, they have to pay that credit card off every month.
And that secured credit card will help them to build credit over time because, again, time is on their side. Yeah, no doubt about that.
Now, of course, sticking to a budget, Kelly, is not just about controlling expenses, these students also have. To think about their income when it comes to building a budget.
So, what should students be thinking about beyond just the paycheck when it comes to working during the school year? I really like to see students working a consistent part-time job during the college years. You know, it shows that they can juggle responsibilities of schoolwork and employment, builds that discipline of being a faithful steward over time. And my favorite part-time jobs are the ones that have high impact with reasonable flexibility. It's pretty hard to find a position where they can come and go whenever they want to, but with some reasonable flexibility for them.
I think of things like go get a referee certification or learn to cut hair on campus, those are really great ways to have high ROI on some really easy investments of their own time. And then just keep in mind what they're moving towards. Maybe if they're a nursing major, they're going to be working at a local hospital, but Trying to find those positions that are in their field of study are going to be a blessing for them over the long run. Yeah, that's really helpful. Kelly, we've got just about a minute left.
So before we wrap up, let's finish with a few common pitfalls. What are some of the issues college students need to be cautious of as they begin to build their budget?
Well, one of the pitfalls that I'm seeing right now is just a desire for a shortcut. Students are tempted to be drawn to that biggest financial return in the shortest amount of time with the least amount of sacrifice. That's just human nature. And so that shortcut is showing up on college campuses, especially right now, in terms of this growing popularity of sports betting. And I liken the rise of sports betting on college campuses to a modern-day gateway drug.
It's addictive, it leads to escalating financial snares, and it can be really dangerous for college students. You know, Paul told Timothy that those who would be rich. Fall into a temptation and a trap, and many foolish, harmful desires. It's not that they may fall into a trap, they do fall into a trap. Then many foolish and harmful desires escalate into financial destruction.
And that just brings us back to the time value of money. Wise stewards don't try to circumvent time. They use the time that's on their side to follow biblical wisdom. They gather little by little over time. They watch those financial resources grow.
They see the blessing of time that the Lord gave them. Wow. This has been so good, Kelly. We have given students and their parents a lot to think about. We really appreciate you being here today.
Thanks for having me, Rob. Absolutely. That's Kelly Rush, Professor of Finance at Mount Vernon Nazarene University. And if you want to check out the Faith Phi app that Kelly mentioned, just go to faithphy.com and click App. Back with your questions after this: 800-525-7000.
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So glad you're along with us today. Lines are open. We're taking your calls and questions. The number to call 800-525-7000. I'm really excited about one of the opportunities you have to engage with one of our partners.
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Let's go to Tennessee and welcome Mark. Go ahead, sir. Hey, how you doing? Doing great. Thanks for your call.
So my question is, I live on I live in rural Tennessee. I live on 55 acres and I'm getting a self-power put in my property. and it's a fifty nine year lease. I live on there. My my two boys live on the property with their wives.
And of course it's going to be over the course of their what I'm looking for is try to invest that money. That doesn't compound annually, that would compound either monthly or something on that, 'cause it's going to be deposited monthly into a Wi-Fi account. Yeah, very good. Yeah, that's great.
So I would just say, with regard to the cell tower, that can provide some really steady income. You know, I've seen them anywhere from $500 to a couple of thousand a month. You know, are you making a long-term commitment, or like a 20 or 30-year lease, or what is that looking like? Yeah, so it goes five years. Every five years you renegotiate the lease, but the lease for sure is 59 years.
Okay, yeah, I got it. And then the only thing to consider is just the property value impact.
Some buyers do avoid properties with towers, so do you just need to think about resale? And I would say just keep in mind, and you oh, go ahead. Both my boys live on the property. And The plan is that their kids are going to stay on the property. It's going to be a family plot for.
You know, except Jesus comes back. Yep, love it. All right. I would also say, and you may be beyond this. I don't want to back up here if we're covering ground you've already been through, but you don't have to accept the first offer.
These terms are always negotiable, including the rent and the escalators and the land use. And then I would just say, probably good for you to have a real estate attorney or someone just review the agreement before you sign anything. But I think bottom line is it can be great passive income as long as you make sure the terms serve you, not just the telecom company. With regard to the investments, you know, I love this because if you don't need the money, this is a way for you to just dollar cost average into the market, which is always a good thing. And, you know, I think the key is to always match your values, your goals, and your time horizon with the investments.
So, you know, how are you thinking about this money? Is this money you plan on using at any point in the near future? Or are you just wanting to kind of just. Let it grow and kind of forget about it, and it would have at least a 10-year time horizon.
Well Yeah. My wife's fifty, so And I I own a business which I'm gonna start with my son and he's gonna pay me dividends on it.
So I really don't need a whole I'm not counting on that as far as my retirement.
Okay. I'm counting on part of it as. good and generational wealth for myself. Yeah.
I force my entire make sure they didn't touch my children. Yeah, love it. All right. Well, I think that's the key there. I mean, if you've got your emergency fund, you don't have any high interest debt that you're looking to pay off, and you can kind of, you know, set this and forget about it, maybe have an automatic sweep into an investment account.
I think that's a great option. You know, I think if you're wanting to invest in a way that aligns with your Christian values, you know, there's some incredible asset managers out there right now that have not only mutual funds, but exchange-traded funds in the faith space. And, you know, so these would be all investments that are screened for Christian values so that you wouldn't be owning something, you know, or your kids down the road wouldn't be owning a company that was creating an abortion drug or involved in the gambling industry or using their corporate profits that are in a way that's misaligned with your values. If you're interested in that, what you could do is set up an account at Schwab or Fidelity, and then you could check out all of the faith-based investing providers on our website. Faithfy.com and just click on the show.
And any of those asset managers, like Eventide, Praxis, One Assent, Crossmark Global, they all have ETFs now. And you could just set up an automatic sweep into one of their investments and just let it grow and forget about it. If you're wanting to take more of an indexed approach, Mark, which is kind of a turnkey solution with a Robo-Advisor, there is a Robo-Advisor coming. I was actually on a call with the founders of it just last week in the faith-based investing space, but it doesn't exist today.
So you could use like Betterment or the Schwab Intelligent portfolios, and essentially you'd answer a series of questions. They would build kind of a turnkey portfolio that's suited for you, but it's very low cost. You would just be capturing the broad moves of the market and not trying to outperform the market through the ingenuity and expertise of a manager. You're just kind of getting the market movements over time, which is not a bad way to invest. It's low cost and actually performs better than active management in most markets, interestingly, when you look at the data.
So I would say either open an account at Fidelity, set up an automated transfer to sweep it in so you're dollar cost averaging every month, no matter what the market's doing, and then use one of the faith-based investment companies on our website at faithfy.com. Or if you want more of a turnkey robo solution, I would look at Betterment or the Schwab Intelligent portfolios. Is that helpful? I appreciate it. Yeah, so that's what made me call because I'm having a monthly deposit.
It's constantly changing. That's why I called for it. Yeah, no, it's a good question. And so I think for you, is you know, they're going to do an automatic ACH, I would imagine, into your checking account or savings account, whatever it is, and you can set up a sweep.
So essentially, you know, a few days after it hits your account every month, you have an automatic transfer out. Into whatever investment plan you select, whether that's a kind of a do-it-yourself approach through Fidelity or Schwab or through the Robo solution, and it will just automatically reinvest. And the good thing is, when the market's down with the same investment, you're buying more shares. And when the market's up, well, you're winning then too. Hey, thanks for your call, Mark.
God bless you, bud. Big thanks to my team today, Dev and Robert and Taylor. We'll see you next time. Bye-bye. Faith in Finance is provided by Faith Buy and listeners like you.
