How to Set Financial Goals as a Student and Why It’s Important
Is it not natural for a student to have lighter wallets than their backpacks? How much pocket money can they have? After attending classes, late-night study sessions, and probably a part-time job, do they not feel overstressed? Despite so much effort, their financial condition does not improve. They still feel financially stretched. What if there were a solution to all this? Even after dedicating hours to studying, their financial situation improves. Though this sounds only like a grown-up’s responsibility, students must also have some idea about setting financial goals. It will not make them millionaires overnight. But they must know where their money goes, how to make smart choices, how to avoid monetary stress in the future, etc. It will give them confidence and make their future secure.
The blog here will discuss some financial goal examples for students and explain how they can impact their lives positively.
Table Of Content
Why is it Important for a Student to Set Financial Goals?
Some Simple Steps to Set Effective Financial Goals for Students
How Can a Student Stay Motivated and Overcome Challenges?
Conclusion
Frequently Asked Questions
Why is it Important for a Student to Set Financial Goals?
Here are some reasons why students should focus on setting the right financial goals:
1. Reduces Financial Stress
What if a student has to buy books for the next semester, and there has been a sudden unexpected expense that has emptied their pockets? For them, this is a tense situation, full of financial stress. They will not be able to concentrate on their studies. Now, setting the right financial goals will help them to combat such problems. It will act as a roadmap for them, showing where their money needs to go. They will feel more relieved if they save in a planned manner, knowing for which purpose they are saving. It brings a sense of security. Their student life will become fun!
2. Develops Good Money Habits from an Early Stage
Student life is the training period and setting financial goals in this phase teaches them money management. It not only reduces their tension but also inculcates good habits. Once the student gets habituated to saving money, it becomes their practice for years to come. They learn to budget and spend in a planned and calculated way, which makes their life journey smoother.
3. Achieves Short-Term Needs and Wants
Student life is full of needs and wants. Textbooks, transportation, and tuition are the “needs,” but there are also those “wants” that make life a little more enjoyable – a concert with friends, the latest tech gadget, or a weekend getaway, and short term financial goals help to balance both. A student only has to set specific targets and ensure they have the funds for essentials without constantly stressing about money. They can even plan for the “wants” without incurring debts, only by making some smart choices.
4. Assures a Financially Secure Life
The small financial steps an individual takes as a student are like planting seeds for the future. Setting goals now, even saving small amounts, starts the process of building long-term financial security. These early habits can grow into bigger savings and investments, helping students achieve major life goals. They can end up buying a house, traveling around the world, or even retiring comfortably. It is only about building a solid base early on.
5. Increases Financial Literacy
Thinking about financial goals naturally forces an individual to learn about money. They start understanding how to budget, how to save, and even the basics of how money works. It gradually makes them experts in handling finances wisely. They also learn the importance of jobs and may feel interested in honing their skills.
Some Simple Steps to Set Effective Financial Goals for Students
Here are some simple steps for setting effective financial goals for students:
1. Identifying the Values and Priorities of Life
The journey to effective financial goal setting begins with understanding what truly matters to each student. It is not just about wanting more money; it is about matching their actions regarding finances with their core values and priorities. What does the student genuinely care about? Do they have experiences like traveling or attending concerts? Is it independence, like having their own transportation or contributing to their expenses? Or is it security, like having a comfortable emergency fund?
Taking some time for self-reflection is important. Students must realize which item gives them more satisfaction and what their biggest financial worries are at present. This realization will give clues about their nature and values. For instance, a student who values learning may prioritize saving for educational resources or further studies. Another who values social connections can prioritize budgeting for occasional outings with friends.
Once these values and priorities are identified, it becomes easier to set meaningful financial goals. Instead of vague aspirations, the students can create goals that directly support what they like the most. This makes the goals more motivating and easier to stick to, as they show the path of happiness and security to the students.
2. Defining SMART Goals
As soon as the student perceives their sense of values, they must focus on defining their financial goals. But how? The easiest method is by using the SMART Framework. The word SMART represents five key factors – Specific, Measurable, Achievable, Relevant, and Time-bound.
- A Specific goal is well-defined. Instead of saying “save more money,” a student might aim to “save Rs.3,000 for a new textbook.” This clarity makes it easier to focus efforts.
- A Measurable goal allows progress to be tracked. In the textbook example, the amount Rs.3,000 provides a clear target. The student can then monitor how much they have saved each week or month.
- An Achievable goal is realistic, depending on the student’s current financial situation. Saving Rs.3,000 in a week with a limited income may not be achievable, but saving it over a few months can be.
- A Relevant goal aligns with the student’s values and current needs. Saving for a crucial textbook directly supports their academic goals, making it highly relevant.
- Finally, a Time-bound goal has a deadline. The student may aim to save Rs. 3,000 by the beginning of the following year. It creates a sense of urgent planning in them.
It must be clear by now that the SMART framework is truly smart. By following this, students can make their wishes come true. It undoubtedly increases their chances of reaching their financial goals. Even undergoing a financial management course may help many.
3. Creating a Simple Budget
A student must understand the meaning of income and expenses. Only then can they know how to keep their expenditure within a budget. Generally, most students get money from their families. However, there are people who earn from part-time jobs or scholarships. Tuition fees, accommodation, food, etc., are some common expenses students have to bear. Apart from this, shopping and entertainment are also available. But these are not essential.
A basic budget calculates the total income of the student from all sources. Then they monitor their total expenses over a certain period. This monitoring period can be for a week or a month. The amounts spent are noted down digitally or in a notebook. This way, the student understands their spending patterns.
Once the picture of their income and expenses is clearly identified, they can start planning how to spend their money effectively. It means deciding on how much to set aside for essential needs, how much they can afford to spend on entertainment, and most importantly, how much they can save. This way, they can set their financial goals. So, a budget develops the sense of control in the students and helps them to learn how to handle their money wisely.
4. Prioritizing the Goals
Students are full of youth, and they dream big. So, they often have multiple financial goals. For example, buying a smartphone or planning a trip. All these they want to achieve at once. But it is not always possible as per their wish. So, they must prioritize each of their goals according to the urgency and interest.
For this, they have to categorize the wants and needs. Some may be indispensable, like buying a textbook. Some others may be short term financial goals like going to watch a movie. Long-term aspirations can also be there, like saving for a two-wheeler after graduation.
Prioritizing helps. But how to do that? The goals must be numbered based on their immediacy. Essential goals like buying books must rank towards the beginning. For other goals, the student can consider which ones they want in the short term and which ones they can delay a bit for their long-term well-being. Focusing on one or two goals at a time can bring them success and joy.
5. Developing Action Plan
It is essential for a student to create a solid action plan after prioritizing and defining the financial goals. This involves breaking down each goal into smaller, manageable steps. It makes the goal seem more achievable.
For example, a student’s goal is to save Rs.2,000 to buy a book within one month. His/her action plan will be – setting aside Rs.300 each week and reducing spending on eating out by Rs.200 per week.
Each step in the action plan must be specific. Instead of only speaking about savings, it shows how to plan effectively and save more. It may involve finding ways to cut down on expenses as much as possible and acquiring some money by selling unused items. A clear action plan has the true power to motivate students.
How Can a Student Stay Motivated and Overcome Challenges?
Just vague advice on financial planning is not enough for a student. They need constant motivation that can help them overcome the hurdles they face. Some practices that can help them are –
- Visualizing the success: How will a student feel after getting the most coveted textbook or the rarest of the pens that they had desired? By sensing and picturing this feeling in their mind from before, they can get even more inclined toward saving. At times, it may seem difficult to follow a budget. However, this image in their mind will keep them going. They will be able to stick to their financial goals under any circumstances.
- Regularly tracking progress: Students should frequently check their progress. Every day or every week, they must monitor how close they are to achieving their financial goals. It gives additional motivation. The closer they come to their goals, the more enthusiastic they will feel. It is truly encouraging to see the savings grow. Through this tracking, they will also be able to gauge any loopholes that they may have overlooked earlier, and they can instantly take action, like adjusting the budget and expenditure.
- Celebrating milestones: Reaching small financial goals for students is critical. It means a lot to them. The targets that they generally fix are sticking to a budget plan for one month, being able to save enough to buy a pair of headphones, etc. All these are outstanding achievements for the students. Celebrating these victories will undoubtedly boost the young learners, developing a sense of responsibility in them.
- Dealing with setbacks: Every time, the outcome may not be satisfactory. Students will have to face setbacks while pursuing their financial goals. Suddenly, some unexpected expenses may occur due to an emergency. They must not lose hope or get discouraged because of this. It should only be a learning experience. Instead of repenting, it is wise to find out the reasons behind this setback and adjust the budget plan accordingly. These steps will help to develop a sense of resilience amongst the students.
- Seeking support and resources: It is not always essential for the students to handle all their finances themselves. They can talk to trusted family members, friends, etc., who can provide valuable advice and encouragement. Getting any information is quite easy nowadays. Everything is available on the Internet. Additionally, they may also learn from others. It will help them to easily achieve their financial goals.
Conclusion
From this blog, it is easy for a student to understand the value of money and the importance of setting financial goals. The difference between need and want is also clear to them. Just by following some simple steps, they can control their finances, achieve their immediate needs, and lay a solid foundation for a financially stable future.
The right financial goals can set up a student for the future, but they can also help students to fund their higher studies and complete certifications to upskill themselves. One such course that they can look at is the Professional Certificate Programme in Digital Marketing for Performance & Growth from IIM Kozhikode. It will help students to hone new skills and move forward in their lives.
Frequently Asked Questions
