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That's findacaka.com. 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 800-525-7000. 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: Train 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 at 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 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. What we do is very special and it's very unique. This is Bethany.
She is a Certified Kingdom Advisor. I became a CKA because we're not building bigger barns and we're not trying to figure out how can we just amass more and more and more. We're figuring out how much do you really need? What are your priorities? What has God called you to?
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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 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 FaithFy 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 FaithFund.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 student's 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, 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. 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. Oh, 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 FaithFi app that Kelly mentioned, just go to faithphy.com and click App. Back with your questions after this: 800-525-7000. Stick around.
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Well, it's nice to have you with us today on Faith in Finance. I'm Rob West, and this is the program where we answer your financial questions, help you apply biblical wisdom to what you're considering in your financial life.
So the only thing left is your phone call, 800-525-7000. We'd love to hear from you today. Oak Park, Illinois. Kathy, go right ahead. Sure.
Thanks for taking my call. I am wondering, there is a limit to how much you can gift a child per tax laws. And I'm wondering if that also applies to like student loans. Hmm. Yeah, essentially there is a limit and it changes by year.
For 2026, an individual can give up to $19,000 per recipient each year without having to file a gift tax return.
So therefore a married couple could give up to $38,000 to the same child by electing to split gifts. If the gift is simply to help them pay off the student loans, you're free to do that. The question is just always whether it goes over this $19,000 or $38,000. The recipient, the child in this case, doesn't pay any income tax on the gift. And if you go over 19,000.
Per person or 38,000, that doesn't automatically mean gift tax is owed. It just means you have to report it and it chips away at your lifetime exclusion, which currently sits at about $15 million.
So you got a long way to go. But any giving of funds to someone else, including a child, would qualify in this way.
Okay, is there a way like. to set up a loan. Sure. and have her pay me back over time. where it's not, you know, eight percent interest.
Yeah.
Yeah.
You know, what what is your objective here? What are you trying to accomplish?
Well She's in a service. Yeah.
And it will take a while to you know, be able to earn enough to pay these back.
So I'd like to do it and then have her pay me back over time. Only child, single parent, so Okay. And you're not paying, I mean, if you're paying directly to the educational institution, that wouldn't be true. Treated the same way, but if you pay it to the lender, it would be considered a gift. And if it's a loan that's in her name only, is that the situation?
Yes. It's it's the, you know, government student loans, yeah.
Okay. And it and it's not uh you're not a borrower as well, right? Correct.
Okay. Yeah.
And and she is still actively borrowing or she's already through the school? Done, yeah.
Okay. Yes. So at the end of the day here, with these being if you make the payment directly to the Department of Education, it's still considered a gift. And is your desire ultimately for her to pay this as she's able? Correct.
Okay. Yeah.
And so just wondering if you make that loan to her, the extent to which you don't charge a reasonable interest rate, that portion is going to be considered a gift. But you certainly could do that, you know, if that was your desire.
So you would just have to make sure that you do it in such a way that, you know, I would, do you normally use a tax preparer to prepare your returns? No.
Okay. So that might be the way to go is just to have a CPA take a look at this and just see how to structure that. But you absolutely could, you know, make this a loan to her, then have her pay you back. And then again, the extent to which you're, you know, you're doing it without any interest, you know, that portion would ultimately be less than the annual exclusion.
So you should be fine there.
So I think that could work if that's your intent is to ultimately have her pay this. But essentially what you're doing is you're just getting out of paying that interest as a gift to her. And then now she's paying you at a reduced interest rate, correct? Correct.
Okay. Yeah.
So I like that.
So I would treat that as a loan and, you know, just put that in writing. And if you genuinely expect to be repaid, then that's a bona fide loan. You would need a promissory note. You would need to specify the repayment terms. You know, you would have to charge at least the applicable federal rate and anything below that would be considered a gift.
And then if you forgive part of the loan down the road, then that would be a part of your annual gift limit as well. Is there any concern, though, in just going ahead and filing the gift tax return and Form 709 and just chipping away at your lifetime exemption? No.
That's a good idea. Yeah.
So, you know, you could do that and just make it an outright gift. I think the key is whatever that expectation is, setting the IRS aside for a second, because again, you know, even if you go over the $19,000, you've got no problem there other than just reporting on it, which is not a big deal. I think the key is just to make sure there's clear expectations and communication with your daughter so that we don't get down the road and there's unmet or mismatched expectations that leads to a strain in the relationship. But if she full well understands what you're doing, you expect to be repaid. And I would just put all of that in writing with the terms and make sure that it's, you know, everybody is kind of on the same page so that that doesn't ever come back in the future.
So, you'd have to get a lawyer involved at that point. And not really. You could download a promissory note on the internet. I mean, there's plenty of them that would give you a template.
Okay. You know, if that's what you're looking for, it doesn't have to be filed anywhere. It's really just to make sure there's clear communication. And, you know, if you do it as an interest-free loan, the IRS is going to treat some or all of the foregone interest as a gift. But again, because of the amount that we're talking about here, you know, I don't think there's a real issue here.
So you've got a couple of options. You could pay off the $40,000, have her sign a promissory note. The note requires monthly payments, charges at least the applicable interest rate, and then this is truly a bona fide loan. Or you do it below the interest rate, you treat it as a gift, but you're just documenting it so you and your daughter are on the same page. You could go either direction.
Okay. Alright?
Alright, well thank you. You're welcome. This will be a real blessing to her, and I appreciate your call today. By the way, that applicable federal rate is between 4% and 5%, where the IRS considers it a bona fide loan.
So if it's short-term, 4%. three to nine years 4.3 percent long term nine years or more uh 4.98 so right at five percent would be the the rates they would want you to charge for this to be seen as a true loan versus a gift but again if it's a gift let's just report on anything over 19 000 and you're covered hey kathy thanks for your call today hey folks our desire for you is that you would see god as your ultimate treasure and that money would be a tool to accomplish his purposes i hope today's broadcast has been an encouragement to you. We're certainly grateful that you've been along with us today. Thanks to my team today, Robert Sutherland, Devin Patrick, and Robert Youngblood, couldn't do it without them. For those gentlemen, I'm Rob West.
This has been Faith and Finance, and we'll see you next time. Bye-bye. Faith in Finance is provided by FaithFi and listeners like you. Uh
