4 tips for students to start building a strong financial future
As part of CNBC’s Invest in You coverage of Financial Literacy Month, CNBC + Acorns has partnered with NBCU Academy to present a live virtual town hall for students. In a high-profile personal finance conversation moderated by Sharon Epperson, CNBC’s senior personal finance correspondent, students put their most pressing questions directly to a panel of business leaders.
John daymond, founder and CEO of FUBU and a “Shark aquarium“investor; Dr Anthony Chan, treasurer of the Skyhook Foundation founded by Kareem Abdul Jabbar; Lauryn Williams, CFP, founder of Is it worth it and triple Olympic medalist, and Martin Cabrera, CEO and founder of Cabrera Capital Markets, provided students with advice on credit, budgeting and savings, healthcare spending, and long-term financial success.
1. Think about finances in terms of family
Viviek Patel is a first-year graduate journalism student at the University of Missouri. Raised by a single mother who immigrated to Mississippi from India, Viviek asked the panel what strategies he should adopt to achieve long-term financial success for himself and his family.
Your parents may be more of a financial aid to you in early adulthood – Daymond John’s mom helped him get funding for FUBU afterwards 27 banks rejected it. But that will change over time.
âStudies have shown that you will take care of your parents for twice as long as they took care of you,â noted John. âThe question is, what long term investments can you have that will have tax benefits on them that you can set aside for your parents,â John said. “Save a little of what you have for the long term so that in 20 to 30 years these things will ripen and be there for your parents.”
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According to PWC, the average lifetime cost of formal long-term care is $ 172,000.
Government programs like Medicare can help, but only pay for long-term care services up to 100 days. Medicaid is reserved for those who qualify under their state’s program.
Care for the elderly is expensive. According to Genworth Financial, the median cost of a private room in a nursing home was $ 102,200 in 2019. Assisted living can be cheaper, with median costs of around $ 50,000. Costs vary by state, so be sure to research which state your parent is retiring in as well.
Dependence insurance may be an option for those who can afford it. About 7.5 million Americans have some form of long term care insurance. As with most types of insurance, the younger the applicant, the cheaper the policy.
2. Start investing
Shavanah Ali, an international relations student at the University of Maryland, wanted to know what steps her immigrant family needed to take to create a more secure financial future.
Martin Cabrera, member of CNBC Advisory Board and a son of two immigrant parents himself, suggested that Ali start investing. “When immigrant families come from all over the world, it’s a great opportunity to see the growth of the stock market, but to get them to invest. They are a part of that American growth and living that American dream.”
Cabrera pointed out that investing creates wealth and that it is possible that today’s investments allow parents to afford a house or pay for their children’s college.
3. Build your credit slowly and carefully
Tigist Ashaka, a sophomore journalism student at Hampton University, worries about having her first credit card. Growing up, many of the adults around her warned about the dangers of credit cards and how they can tank her. credit rating. âI’ve even heard stories of people coming home for a break and spending too much money on their cards, not being able to make payments and wasting their score,â Ashaka said.
Many students had questions about improving their credit rating.
Anthony Chan, former chief economist at JPMorgan Chase, compared building a credit score to learning to ride: âYou don’t start by training on a motorcycle, you start on a bicycle, maybe with drive wheels. “
Chan suggests opening a startup account with a secure credit card. Secured credit cards are backed by a cash deposit from the cardholder.
It’s also important to set up automatic payments on your credit card by logging into your checking account, according to Chan. You also don’t want to open too many credit card accounts as it could hurt your credit score.
The use of credit was also noted on several occasions. Credit usage is the amount of credit you use against your credit limit. Panelists agreed that anyone looking to build a strong credit rating should avoid exceeding 30% of their credit usage.
âFocus your efforts on that first starting map and you will be successful,â Chan said.
4. Keep savings and checking accounts at separate banks.
Chaniah Brown wants to start saving and investing, but doesn’t know where to start. Brown, who is self-employed as a dasher for DoorDash, said one of the first steps she will take will be to transfer a savings account to a different bank than where she has a checking account. âI currently have a savings account and a checking account at the same bank, but I intend to transfer my savings account to an online bank. “