Would You Rather: A Guide on Personal Finance for Gen Z

At least 72% of students say personal finance stresses them out. One big reason? Students lack the education and resources to help them make their personal finances make sense. So yeah, stressful for sure.

You can take control of your financial life and help friends do the same. It’s true: If we all have access to easy resources and share them with our friends, we can create the most financially literate generation ever.

It all starts here, with a crash course in personal finance -- from opening an account and establishing credit to saving money and paying for college. The sooner you start, the better, so congrats on taking this first step now (and not in, like, 40 years).

I. Opening an Account

First things first. Before you start earning and saving those big bucks, you’re gonna need a place to put them. That’s why your first step should be opening an account with a financial institution -- or maybe even (gasp) two accounts. Don’t worry, we’ll help you with the basics.

1. Open a checking AND a savings account.

A checking account allows you easy access to your money, so you can pull from it for everyday transactions using your debit card or account info -- sorta like carrying cash in your wallet.

If your checking account is like cash in your wallet, then consider your savings account cash you’ve been collecting in your piggy bank. Sure, you can get it out of there...but at what cost.

Savings accounts are designed to save money, so they usually place limits on the number of times you can withdraw cash, but they’ll also give you better interest on your account balance. In this context, interest is money you earn on the cash you’re keeping in your account. So if you save $1,000, and your account earns 1% interest, then you’ll earn $10 at the end of the year just for having your money sit there (AKA free money, AKA the BEST kind of money). Checking accounts can earn interest, but the rates are usually better for savings accounts.

2. Take advantage of what your bank or credit union offers.

Now you may be asking yourself: “Why do I even need to open an account? Me and my piggy bank are doing just fine, thank you.” We’ll tell you why.

• You can set up automatic payments for bills and services. Because last we checked, Netflix doesn't take cash.
• Your money will be a whole lot safer. Bank heists just aren’t as popular as Grand Theft Auto would have you believe (and your money is likely insured anyway).
• You can potentially earn interest. Again, FREE money.
• You won’t have to pay fees for cashing in paychecks. In fact, you may not even have to cash checks at all if you set up direct deposit with your workplace.
• You’ll probably need it to build credit. Establishing banking history is foundational to building credit, which is foundational to getting a mortgage, taking out loans, and maybe even getting hired (see section III below).
• Your financial institution may offer some helpful tools. A lot of places offer free online banking and mobile alerts, which make budgeting and saving so much easier.

3. Pick a financial institution that works for you.

Now you don’t want to go handing your cash out to the first financial institution that crosses your path. Instead, take your time in finding The One -- that special bank or credit union that really sweeps you off your feet (...or just fits your financial goals the best).

There’s a lot to consider when shopping around for a financial institution. Some will require you to have a minimum amount deposited at all times. Some will charge fees for having an account with them. Some will have free lollipops in their lobby. Lots to think about here, folks. Also remember to look up branch locations and ATMs to make sure they’re near you, and if you’re moving away for college, check for them wherever you’re heading too!

Above all, don’t be afraid to ask questions -- here are a few to ask your banker:

• Do I need to keep a certain amount of money in my account?
• What happens if I spend more money than I have in my account?
• How much money can I spend/withdraw from my account at a time?
• Do you offer online banking?
• What kind of restrictions can my parent(s) set on my account?
• Will I earn interest on the money I deposit in my account?
• Would you consider a hot dog a sandwich?

II. Budgeting & Saving

Short term goal: buying a new phone. Long term goal: swimming in pools of money, Scrooge McDuck style.

Realistic? Maybe not. But you’d be surprised what you can accomplish when you truly set out to budget and save. Here’s how you’ll do it!

1. Set some (SMART) financial goals.

Buying a new car, making a tuition deposit, upgrading your Hulu subscription to get rid of those gosh darn ads -- it all starts here, with a plan.

You’ll need to set some goals for saving and spending. More specifically, you’ll need ~SMART~ goals (ones that are specific, measurable, attainable, realistic, and timely). So your goals shouldn’t be, “Save money,” or “Spend less.” Those are waaaay too broad. Instead, try something like, “Save $2,000 in two years to buy a first car,” or “Spend less than $20 each month on eating out.”

Once you’ve got your SMART goals, it’s time to track your progress towards them. Use a notebook, spreadsheet, or app to keep up with money going in and money going out.

Write down the money you earn each month, keeping in mind that your paycheck will look a lot different after paying taxes and deductions. Then write out all your required expenses (ex: car, cell phone, and tuition payments), and keep up with your discretionary expenses (ex: movie tickets, fast food, and that pair of tiny sunglasses you ordered after seeing Zendaya’s Insta post.) To make it even easier, we’ve put together this budgeting worksheet for you…so you really have no excuse 👀.

2. Make saving a habit.

The best way to save is to do it without even thinking, so make saving a part of your routine! Start by always paying yourself first. That means taking a chunk of every paycheck or allowance and putting it in your savings account before you spend on anything else. (Yes, savings come before your Netflix subscription, car payment, and the second pair of tiny sunglasses you ordered after seeing Ariana Grande’s Insta post.) As for how much to save, most recommend saving 10-20% of your income, but start with however much you can afford. It doesn’t have to be a lot -- even a few bucks every so often really adds up. For example, if you save $3 every week, by the end of the year you’ll have enough to buy a mid-size bounce house (about $144).

So if you take one thing from this section, let it be this: the little things add up! If you take two things, let it be this: tiny sunglasses are cute, but nobody needs more than one pair (and that goes for most things in life).

3. Resist overspending.

All it takes is one impulsive, coffee-fueled online shopping spree to tank your savings goals, so try your best to stay within budget by avoiding overspending. Easier said than done, right? Here are some methods to try out:

• Ditch your debit card. When spending money is as easy as swiping a card, things can get out of hand fast. Leave your debit card at home, and only carry the cash you need for the day/week/month.
• Be mindful of payment apps. It’s really convenient to be able to Venmo or CashApp your friend for dinner -- almost... too convenient. Hide them in a folder on your phone or delete them altogether to avoid overspending.
• Just...wait. The next time you want to buy something unnecessary, give yourself a week or two to think about it first. You’ll either realize that you really do want it, or that you can live without.
• Schedule your big spends. When it comes to big purchases, set a date a few months in advance and work out a saving schedule to get you there. You’ll be more likely to stick to your budget if you know there’s something waiting for you at the end.

4. Make more, spend less.

Beefing up your savings basically boils down to increasing your income and decreasing your spending. It’s time for a SPEED ROUND of ways to do just that:

Make more:

• Babysit, dogsit, housesit (sit, sit, sit)
• Tutor younger students academically, musically, or athletically
• Sell your extra stuff on Depop, Poshmark, or EBay
• Charge for your skills on Fiverr
• Collect and cash-in recyclable materials
• Try becoming a YouTube partner

Spend less:

• Instead of buying new clothes, host clothing swaps with friends
• Borrow books, movies, and even video games from the library
• Take advantage of discounts using your student ID
• Carry a reusable water bottle to avoid buying disposable ones
• Bring your own lunches and snacks when going out

(In light of the current COVID-19 pandemic, please follow the guidance of local and federal leaders and medical professionals for best practices for staying healthy and safe.)

III. Establishing Credit

Imagine that your friend wants to borrow 20 bucks. Before you say yes or no, you’ll probably consider a few things first. Are they always asking you to spot them cash? Have they paid back your other friends? Do they still owe you money from last month?

That’s basically the same idea behind building credit -- letting lenders know that you’re a reliable person to lend their money to. You’ll need a strong credit score to be able to rent an apartment, get a mortgage on a home, and take out student loans. There are a few things you can do right now to start building it.

1. Start with a credit card.

Besides opening an account, getting a credit card will probably be the first thing you do to start up your credit history. But before you do, make sure you have a reliable source of income (y’know, so you can actually make those credit card payments).

A credit card works on credit (duh). Credit is the ability to obtain goods and services before you pay for them. So when you use your credit card to pay for something, you’re using money borrowed from the credit card provider, which you’ll pay back later.

Consistently making these credit card payments shows financial institutions that you’re a responsible borrower. The sooner you start, the longer your payment history will be, and the more responsible you’ll appear to lenders.

2. Borrow enough, but not too much.

Just because you have a certain amount available in credit doesn’t mean that you should be maxing out your card every month. If you borrow too much, lenders may see you as being overextended and more likely to be late on repayment.

On the other hand, you’re not getting the most out of your card’s credit-building potential if you never use it. If you borrow too little, lenders won’t get a good enough idea of your repayment habits to tell if you are or aren’t a responsible borrower.

Aim to keep your credit balance at less than 30% of your total credit limit.

3. Keep tabs on your credit.

Wondering who keeps up with all this credit stuff? That’s a task for the 3 major credit reporting agencies (AKA credit bureaus), TransUnion, Experian, and Equifax. They’re kinda like the Jonas Brothers of creditworthiness in that there are three of them, and they’re usually lumped together despite being unique individuals with successful solo careers (...except Kevin).

You can request a free copy of your credit report from each of the 3 credit bureaus every 12 months from the Annual Credit Report website. We’d recommend spacing them out every four months so you can keep tabs on your credit throughout the year. For example, you could request your credit report from Experian in January, Equifax in May, and TransUnion in September.

Learn how to read your credit report, and be on the lookout for inaccuracies -- like credit cards you don’t remember applying for or loans you never took out. If you find anything fishy, dispute it with the corresponding credit bureau because they may be a sign of identity theft. Here are a five more ways to protect yourself from identity theft:

• Be a smart online shopper. As much as we love a good online deal, be sure to do a little research on the retailer you’re ordering from first.
• Keep your Netflix log-in to yourself. When you share your log-in, that person can get access to your personal and payment information through the account settings. (And even if you trust your friend with your log-in, you can’t be sure they’re not passing it along to other people.)
• Don’t let Google remember you. Sometimes Google (or whatever browser you’re using) will ask you if you want to save your passwords or card information with them. Doing so leaves your info vulnerable, so...don’t!
• Avoid auto-connecting to wifi. Your connection isn’t secure when you use public wifi. That means your info can be intercepted by third parties -- definitely not worth the convenience.
• Mix up your passwords. From online banking to online shopping, your password is your first line of protection. If you use the same one for everything, it only takes one website data breach to put all your stuff at risk.

IV. Paying for College

Ahh, college. A time for learning new subjects, making lifelong connections...and going thousands of dollars in debt? Hopefully not! We know that paying for college can be a huge source of stress (and 69% of DoSomething members say it’s their #1 financial stressor). So here are a few things to keep in mind while you start planning.

1. Consider the options.

Beyond the fun brochures and campus tours, choose a college that fits you financially and educationally. There are a lot of choices that can impact the cost of college, so consider them wisely.

For example, tuition at a private college will typically be more expensive than tuition at a public college ($25,960 more on average). Likewise, it’ll usually cost more for out-of-state tuition than in-state tuition -- not to mention the additional costs associated with attending out-of-state, like travel and housing. Finances don’t end with college either. That’s why you should also research the earning potential of jobs you want. Your major will help determine your job and how much you stand to earn after college. You should study what interests you but also take finances into account. This tool can help you start exploring!

Finally, there’s nothing wrong with waiting to attend college or opting out of it altogether. A lot of folks choose to attend less expensive community colleges for their first two years, then transferring to a more specialized institution. You could even take a gap year to save money, attend a vocational college or trade school, or just go straight into the workforce.

You don’t need college to achieve success, so whatever works for you, go for it!

2. Fill out your FAFSA.

For those planning on attending college, we cannot stress enough how important it is to fill out your FAFSA (Free Application for Federal Student Aid).

The FAFSA determines your eligibility for federal, state, and school-based financial aid in the form of grants, loans, and work-study. Literally everyone should fill out a FAFSA, no matter what school you’re attending or how much your family earns.

It’s free to apply, takes about 30 minutes on average to complete, and most American students qualify for some kind of aid. So just do it! Learn more here. This is also a good time to sit down with your parents or guardians and have a conversation about if and how they’ll be helping you pay for college. Will they contribute towards your tuition? Do they already have a savings plan set up for you? Will they co-sign on any loans you may take out?

3. Know what you’re getting into.

Once you’ve got your FAFSA completed and you receive a financial aid offer, it’s time to evaluate what you’d like to accept. Before you do, know what you’re signing up for, especially when it comes to loans.

Learn about the different types of financial aid, and pay close attention to student loans. There are both federal and private loans, each with a different set of rules and rates. (Generally, federal loans offer some advantages over private loans.) Using Federal Student Aid’s Repayment Estimator, you can see what your loan repayment might look like, with estimates for the size of your monthly loan payments and how long you’ll be paying them.

4. Get serious about scholarships.

We’re gonna be real with you -- student loans aren’t ideal. Sometimes they can be super helpful, but if you can make your college dreams happen without them…do it.

Scholarships will help you pay for school, and you don’t have to pay them back (and as we know, free money is the best kind of money). Your school’s financial aid package can include scholarships, but what a lot of people don’t know is that you can find scholarships in other places too.

It’s crucial to search and apply for as many scholarships as you’re qualified for. Here are a few resources to get you started:

• How to Apply for Scholarships Like a Pro
• 10 Places to Find Scholarships for High School Seniors
• 6 Free Places to Find No-Essay Scholarships