Financial Literacy

What is Financial Literacy?

Financial literacy is the ability to understand and apply basic money management skills, including managing personal finances, budgeting, and investing.

Being financially literate helps you build a smart and healthy relationship with money. It enables you to make informed financial decisions and develop the skills to handle money responsibly throughout your life. The earlier you start learning about money, the better prepared you will be for your future, since financial education is an important part of long-term success.

The Office of Financial Aid and Scholarships aims to reduce NDSU students’ loan debt and improve their overall financial well-being. To do so, we provide information on a variety of topics related to basic money management and financing higher.

Budgeting is the process of creating a plan to know where your money goes. By budgeting your money and understanding where you spend it, you can cut back on costs. For example, if you save money by not buying coffee every day, you can use that money to buy a coffee machine and a good thermos.

A popular method of budgeting is the 50/30/20 rule or percent-based budgeting. 50% needs, 30% wants, 20% savings. In a higher cost of living or tighter debt situation, the breakdown may vary to 60/20/20 or 70/20/10.

There are many other methods of budgeting:

  • Line-item budgeting
  • Zero-based budget
  • Envelope method
  • Pay yourself first

A free budgeting tool is available at “Smart with My Money”.

Monthly Budget Worksheet

Earnings: include your wages from work and can include gift money.

Needs: include mortgage/rent, gas, car maintenance, insurance, groceries, utility bills, healthcare/medical, and school supplies.

Wants: include travel, entertainment, eating out, subscriptions, new tech, and a new car.

Savings: are made up of the portion of income that is not spent on your expenses now and instead set aside for your future use.

  • The importance of having savings is that 56% of students have stated they would have trouble coming up with $500 to cover unexpected expenses, and 68% of students ran out of money at least once in 2024. A total of 92% of students indicated being stressed about their finances.
  • When setting up your savings, you could think of dividing them into 3 sections.
    1. Financial Emergency or a rainy-day fund
    2. Gradually, to save something expensive
    3. Nest Egg for the future
  • Saving the minimum now and budgeting small increases to your savings over time could be your method to having savings in the future.
  • Growing wealth over the long term through assets like stocks, bonds, or real estate to meet goals like retirement.

Overspending: A survey from 2025 concluded that 71% of students have experienced financial challenges while in school, and 48% reported that the financial challenges interfered with their ability to concentrate on schoolwork

"Live as a college student now, so you don’t have to later."

Consider setting aside part of your income in a savings account and setting limits on non-essential spending. Small, everyday purchases can add up quickly.

For example, your annual spending might look like this:

Daily Beverages:

  • Coffee: 4× per week at $2.50 → $520/year
  • Soda: 3× per week at $2.00 → $312/year

Food & Entertainment:

  • Quick late-night snacks: 3× per week at $6.50 → $1,014/year
  • Weekend fun: $25–30 each weekend → $1,560/year

TOTAL YEARLY SPENDING: $3,094

Over four years of college, that’s $12,376—enough to buy a used car.

Keeping this in mind, be intentional about how you choose to spend and save your money. Small changes now can make a big difference later.

Setting Financial Goals

One of the best ways to prepare for opening a credit card is to understand how credit works and create a plan for managing it responsibly. Before applying, it is important to review your budget, ensure you have a steady source of income, and become familiar with key terms such as interest rates, credit limits, and minimum payments. Credit cards can be valuable tools for building a strong credit history and improving your credit score, which can help with future financial goals such as renting an apartment, purchasing a vehicle, or qualifying for a loan. However, the convenience of using a credit card can also make it easy to overspend if purchases are not carefully tracked within a budget. To avoid this, consider setting a personal spending limit lower than your card's credit limit and charging only what you can afford to repay. Responsible credit card use includes making payments on time, keeping balances low, and monitoring your credit regularly. Many credit card companies now provide free access to your credit score and insights into factors that affect it, such as payment history, credit utilization, and new accounts. Reviewing this information can help you maintain good credit habits, address potential issues early, and support long-term financial wellness

Building and maintaining a strong credit score for better loan terms, based on factors like payment history and amounts owed.

Getting Started with a Credit Card

Responsible Credit Card Uses

Credit Scores

A credit score is a three-digit number, typically ranging from 300 to 850, that predicts how likely you are to repay debt on time.

Credit Reports

A credit report is a detailed summary of your personal credit history, including loan repayment, credit card balances, and payment habits, typically covering the last 7-10 years.

What Impacts Your Score?

  • Payment History details how you have paid your debt accounts over time, on time, late, missed, and in collections.
  • Credit usage, commonly referred to as the credit utilization ratio, is the percentage of your total available revolving credit that you are currently using, such as credit cards or lines of credit.
    • The calculation to find your ratio is: (Total Revolving Balances ÷ Total Credit Limits) × 100 = Credit Usage %
  • Credit History, a record of how you manage debt, including credit card usage, loan repayments, and payment punctuality.
  • Credit Mix reflects how diverse your credit accounts are. Successfully managing different types of credit shows lenders you’re reliable, and over time, a strong mix can help push your credit score into the excellent range. Two of the main types of credit available are revolving credit and installment credit.
  • New Credit (Inquiries), how recently and how often you apply for and open new credit accounts.
  • Article: How Do I Get and Keep a Good Credit Score?
  • Video: What Is Credit and Why Do I Need It?
  • Course: Mastering Credit and Optimizing Your Score

Credit Bureaus

Borrowing

Federal
Private

Interest

Repayment

Refinancing

Whether earning it or paying it, interest can have a large impact on your finances.

Paying It

If you have a loan, the interest the lender charges is calculated based on the principal balance of the loan plus interest that has accrued since the last payment, creating a compounding effect.

For example, let's say you borrow $15,000 with a 6.75% interest rate and a five-year repayment term. In this case, your monthly payment would be approximately $295.00. The total paid interest would be $2,700. Your total repayment would be about $17,700.

Earning It

On the other side, if you're saving money for retirement, investing $100 per month for 30 years with a 7% return in the stock market would give you a $116,945 investment account balance. But if you wait ten years before you begin, you'd only have $50,754.

Understanding different types of debt (loans, credit cards, car payments) and creating strategies to pay them off effectively.

Differences between Debit (my money), Credit (money I borrowed), and Debt (money I owe).

5 tips to manage debt:

  • Track your spending
  • Grow your savings
  • Prioritize keeping your debt low and paying debts off
  • Keep accounts in good standing
  • Debt consolidation may be an option at times. A major thing to consider when looking at this option is going to be if you have changed habits to prevent from maxing out cards again or will you have a debt consolidation loan and maxed out cards?
  • Article: The Power of Habit as it Applies to Personal Finance

How can Financial Literacy help in your academic journey?

Financial literacy can seriously level up your academic journey in a few key ways:

1. Helps you manage student money wisely

When you understand budgeting and expenses, you can:

  • Stretch allowances, stipends, or part-time income
  • Avoid running out of money mid-semester
  • Plan for high academic costs like books, projects, or exams

Less money panic = more focus on studying.

2. Reduces stress so you can perform better

Money stress is a huge distraction. Financial literacy helps you:

  • Plan instead of reacting to emergencies
  • Avoid unnecessary debt
  • Feel more in control of your situation

A calmer mind makes learning way easier.

3. Helps you make smart decisions about education costs

You learn how to:

  • Compare tuition fees, loans, and scholarships
  • Understand student loans and interest before committing
  • Decide whether certain courses, certifications, or schools are worth the cost

That’s huge for long-term success.

4. Encourages responsibility and discipline

Budgeting, saving, and planning teach skills like:

  • Goal setting
  • Time and priority management
  • Self-discipline

These habits naturally spill over into your study routine.

5. Prepares you for life after graduation

Financial literacy helps you:

  • Plan for internships, relocation, or job hunting
  • Understand your first paycheck, taxes, and benefits
  • Start saving or investing early (time is your biggest advantage)

6. Empowers independence

Instead of relying on others for money decisions, you:

  • Make informed choices
  • Avoid common financial mistakes students make
  • Feel confident handling real-world responsibilities

Bottom line:

Financial literacy supports your academic success by reducing stress, improving focus, and helping you make smarter choices—so you can spend more energy learning and less energy worrying about money.

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