5 Important Tips on Financial Freedom For Students: Power of Compounding!

Important Tips on Financial Freedom: Financial freedom, the ability to make life decisions without being worried about their financial consequences because you are prepared. It means that your finances don’t control you, you control them.

Invest in stocks!

Buy XYZ portfolio! Follow these 10 steps to be financially free. But why? Why should college time be not devoted to
study alone and maintaining decent grades? My parents pay my college fee. I’ll grab a good placement in the final. I’ll be earning good money then. Why now?

Why is financial freedom important for college students?

Because college is often the first time when you are on your own. It is the time that opens up the doors for freedom. After being in the protective environment of school and parents, for the first time, you step out of your city. It is a time when you learn to be independent, a time when you get the taste of real freedom. If you don’t understand how to manage personal finances at this stage, you can easily end up in huge financial trouble just because you don’t
know what you are doing.

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5 Important Tips on Financial Freedom

Confidence

Taking steps towards achieving your financial goals at this age instils a sense of confidence and accomplishment. In college, most of the students receive fixed allowances from homes. The budget is tight. You either cut down on your expenses according to the available budget or you create additional sources of income for yourself. Smart management of money plays an important role here. By practising proper finance management and budgeting techniques now, you’ll feel confident about your ability to manage finances in your adult life, save money and avoid debt in the future. 

Strong Financial Foundation for Future

Your college is essentially preparing you for the real world but isn’t loans, savings, investment, insurance a very real part of the real world.  Money management is a skill that you carry throughout your life and the money management habit you develop in college are likely to stay with you forever. A study conducted on educated young adults in India revealed that respondents tend to overrate their financial literacy by 50%. While in reality, they could answer only 44% of questions related to personal finances. It highlights how unprepared young adults are when it comes to finances. Spending some time on this in college leaves you in control with a good idea of how the system works. 

The Compounding Effect

Investments work on the principle of compounding. The biggest advantage of financial freedom at a young age is time. Not only you can experiment more and take more risk, but also the earlier you invest, the more returns you get. 

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Take Risks

Since you are in college and do not have a family to support, it is safer for you to make mistakes. You are in this wonderful phase of learning by doing. You have the flexibility and time to learn from your successes and failures. So go ahead, make mistakes and learn from them.

Independence

Financial freedom brings with it the joy of independence. You would not be forced to take a job that you don’t like after your degree. You don’t have to rely on someone for your survival. You do not need to ask anyone for anything. That is the sense of independence that comes with financial freedom.

Important Tips on Financial Freedom: Frequently Asked Questions (FAQs)

• Is it too early to start managing my finances?

No, indeed it is the perfect time to learn about money management.

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• How much money is required to be financially free?

There is no fixed number for this. It depends on your living expenses and income.

• How to manage finances as a student?

It is important to set personal and financial priorities to manage your finances.

– Article Edited by Sara Gogna (Connect)