On this episode of Deep Dive, host Olivia Miller sits down with CNBC finance correspondent Sharon Epperson to discuss smart money habits for college students, from budgeting and saving to building credit and investing for the future.
Olivia Miller: Welcome to Deep Dive. I’m Olivia Miller, a podcast contributor at the Daily Bruin, and today I’m joined by Sharon Epperson — CNBC’s senior personal finance correspondent and the creator of the Money 101 newsletter, which recently surpassed 100,000 subscribers. She’s known for breaking down money matters in a way that’s practical and easy to follow, and we’re talking about how college students can budget, save, build credit, and start investing for the future.
Thank you so much for joining us.
Sharon Epperson: Oh, it’s my pleasure to be here.
OM: Awesome. So I wanted to first ask, as the creator of the Money 101 newsletter, tell us more about why you created it and the kind of topics it covers.
SE: Well, one of the things I think about when I think about money is where people are starting — are they starting from a place where they already know about investing because they’ve been investing for a while or their parents have been investing and helped them along, or are they starting from ground zero or maybe even below that because they got into some debt and now they’re trying to get out of it.
Money 101 is really the launch pad for a lot of what people are doing on CNBC.com and CNBC television and all that we have to offer for CNBC. It’s a way to get started figuring out how to budget, how to save for emergencies, how to save for the longer term, what to do when you’re thinking about buying a home and then finally looking at what you should be doing in terms of estate planning or planning for those what-if scenarios that inevitably may happen to you — insurance and those types of things.
So it’s really a way, an on-ramp to the investing strategies and things that we talk about on CNBC television all the time, but giving you a chance to figure out how to manage your money every day and how you can get better at managing, growing and protecting your money. Signing up for CNBC.com/Money 101 for the newsletter series is a way to do it.
OM: Wonderful. And how would you define financial wellness?
SE: Oh my goodness. I think financial wellness is not just about being rich. It’s not just about being wealthy. It’s about feeling financially secure in where you are at various points of your life. That may be just being able to afford to go to college, that may be being able to have a part-time job that lets you go out on the weekends, or that may be getting that first job that lets you get into your first apartment and be able to have that apartment maybe without any roommates.
It’s at various stages for various people but the bottom line is that financial wellness is about financial security and financial security leads to financial independence. I think that’s the goal — so that you’re not beholden to anyone or anything in terms of what you want to do with your life, that you’re financially independent to do that. And that is the height of being financially well.
OM: As college students, what do you think that we should be doing with the little money that we’re starting to make?
SE: I think the first thing to think about is budgeting. I think the first thing to think about is saving as a regular bill. So when you get that paycheck or you get whatever money you’ve made, you’re planning already that you’re going to save 15 to 20% of that. Because if you start early with that discipline, then as other things start to creep in and other expenses, you’ve already marked that as that’s my first bill that I have to pay. It’s to myself.
So I think that’s the first thing you should do with your money is make sure that you’re paying yourself and have a goal for that money. Is it to go on vacation? Is it to buy a car? Is it to get that first apartment? If that’s going to be first month, last month, and a security deposit, you know, So I think having a. Having a goal of where, where you want your money to go is also very important.
OM: Okay, and what do you think are some of the mistakes that come with being in college and getting your first paychecks and things like that?
SE: Well, I think part of it is not tracking your money and overspending or spending on credit, doing. You know, it’s so easy to tap your phone and just get anything you want and realizing what that costs you. If you’re doing that on a credit card and not your debit card, you know, it’s important. So keeping track of your money is key. And I think a lot of people don’t do that at all ages, not just college students.
OM: How should people aim to save each month and just on a student budget?.
SE: You put away a certain percentage every month. I mean, 15% may seem like too much or 10 or 20%. Maybe you start off at 5 or 10. But there’s a certain percentage of whatever pay you’re getting that you put away every month that is in a High Yield Savings account. That’s, I think, where you start.
OM: Okay. And do you think it’s worth it for students to start an emergency fund or things like that?
SE: Things can happen at any time. So it really, I think it is important to have that. When I said the High Yield Savings Account, when you go to an online bank and you get a High yield Savings Account, something that’s giving you like 4% interest, doesn’t sound like a whole lot, and especially when we look at a market that is up 20% on the year or more. But it is something that gives you some security and interest as well. And so I think it’s important to start there.
OM: Okay, so what are some of the best savings accounts for students?
SE: Well, I think when you go to a website like CNBC select, or if you go to a website like Bankrate, that those will give you FDIC insured banks, which means they’re federally insured, and so you won’t lose your money. Or if something happens. You want to get an online savings account there. And I say online because usually when you go to a regular bank, you know, a bank branch or something like that, you’re not going to get a high yield on your savings. So that’s where you want to start.
OM: Okay, and what’s the best way for students to start building their credit without taking on too much debt?
SE: You get a credit card. You use the credit card. You pay off the credit card right away. You don’t wait. I find that when I actually, if I have the money and I see that I have a balance, I pay it off right away. I don’t wait for the due date or a certain time of the month.
And depending on your pay schedule or how much money that you have in your checking account, you may need to say, okay, I’m going to do this every. The 15th and the 30th when I get paid, I’m going to make sure that I send money to the credit card.
But I, I just like to. I don’t want to have a balance. So right now I actually have an 850 credit score. So the credit scores go from 300 to 850. 850 is the highest. And that’s because I don’t. I’m. I’m not really using my balance, my available credit. Right now, I’m paying off my balance. I should say in full as soon as I can. And so that has helped me raise my credit score. So I think it’s really important that even if it’s like, you know, you have $50 on that credit card, you pay it off as soon as you have $50 in the checking account to pay it off.
When you’re looking at getting a credit card, one of the things to keep in mind is it’s going to have an available balance on it. Right. And it might be several thousand dollars. Right. The idea is, from the credit card company perspective, is that you may use that entire available balance and that’s what they want you to do.
But that’s going to hurt your credit score. That’s not going to help you build credit. The key is to keep whatever that available credit is that they’re offering you. Only use 30% or less. Try not even to get to the 30%. If you can use 10% or less, that’s even better. If you’re in the single digits of using, in terms of the percentage of available credit that you’re using, you will start to build your score.
Paying your bills on time is the a number one thing that you need to do. But your credit usage, how much of the available credit you’re using is also very key to building credit. It is really important to keep that in mind when you are thinking about using your credit card.
And the other thing to keep in mind is we are slowly going to start to see most of the experts I talked to say the Federal Reserve start to reduce interest rates to lower interest rates, and that will slowly impact credit card interest rates as well.
But credit card interest rates are still very high. And 20% or more on a new credit card is a lot of interest. And you don’t want to carry that month to month. So again, I say pay it as soon as you have it. Don’t even wait for the due date of when that bill is due, but make sure you do not carry a balance month to month because it’s just not worth using that, paying that 20% interest on your debt.
And that’s why when you ask me, where should I invest, start investing. That’s another thing to keep in mind of how much money could you be making on the investments that you’re doing?
So seeing your investments up 20% would be great, but you don’t want to do that and have credit card debt that wipes out all that, because on one side you’re investing, on the other side you’re carrying debt.
So really, really important. When it comes to starting out with investing, there are two things to think about. Where should I put the money that I’m investing and what should I be investing in?
And the where of where you should put your money when you’re investing. I think if you have any earned income is a Roth IRA starting with a Roth IRA is a great way to start investing.
The IRA part is an individual retirement account. That’s what it stands for. But I’m not talking about something that you can’t access until you’re like in your 60s.
A Roth IRA is something that if you’ve had it for five years, you can take the money out that you’ve put in at any time, anytime you want. So it could be like, almost like an emergency fund if you, if you need extra money.
And you should have another emergency fund in a high yield savings account. But you can use that money if you need access to it.
Ideally, you are investing it for a long time. And so then at 59 and a half, you can take out the money that you’ve invested, that’s grown, the earnings that you’ve gotten. You can take that money out then. But you can take out your contributions at any time and you can put in up to $7,000 this year or next year. And the great thing about it is you don’t have to do it by the end of the year. Ideally you should, because compound interest and, you know, being able to watch your money grow is really important.
And starting as early as you can and putting in as regularly as you can is one way to make sure that you’re doing that. But you have until the April 15 or the April tax filing deadline of every year to make your contribution to an IRA, to a Roth IRA for the previous year. So you can put in $7,000 by April 15th of 2025 and you’ll still, it’ll still count for money that you’re putting in for the 2024 tax year and then you can do it again for 2025.
And the great thing about a Roth IRA is the money goes in after tax. You don’t get a tax write off or anything with your income tax return when you put the money in, but you’re using after tax money, it’s growing tax free. And then when you take the money out, you can take it out tax free. So your contributions you can take out at any time, penalty free, tax-free.
And the earnings you can take out after 59 and a half tax free. That’s great because a lot of times you look at a number of a retirement account if you’re working and you have a 401k or some type of workplace plan, or you have a traditional IRA and it’s pre tax money that’s going in and when you take that money out, it’s taxed. What I like to see is a balance, that’s the actual balance. So if I see the money that I have in my Roth IRA, the that is actually the full amount that’s in there. If I see a money, the amount of money that’s in an IRA or a regular 401k, that’s that money minus whatever my tax bracket is at the time that I take the money out. So that’s the, where you put the money. What you invest in is pretty simple to start. I think starting with A S&P 500 fund is where you start. And that’s the Standard and Poor’s 500 index, 500 companies, broad range of different types of companies that you probably use every day that it’s in that index and you don’t really have to think much about it.
So if you have it in S and P 500 mutual fund or exchange traded fund, I think that’s a great place to start. And you have it in a Roth IRA from a tax perspective, that’s a great place to start.
And you just start building it from there. And be regular about the money that you’re putting into this account to invest and that you’re regularly, regularly investing what we call dollar cost averaging into the account to make sure that you’re getting as much growth as you can over time.
OM: Okay, wow. So I was kind of thinking what could be an example of so someone turns 18, you know, starts going to college. What can that those four years in that timeline look like for someone who wants to start investing and building their independence?
SE: Well, you have a lot going on in those four years. Right. And so depending on the type of job you have, the job might be a work study job. So you are using that money to help pay for school.
It could be a part time job that is allowing you to do the things that you want to do socially. Right. I think it’s important to, to think about how much money you can actually put away every month to invest.
And so there again I’m saying that you’re putting away 15 to 20%. Now some of that money might go into the high yield savings account that you can then have access to at any time if there’s emergency.
And another portion of that could be into the investments. So 10% into that high yield savings account and 10% into a Roth IRA invested in a S&P 500 fund could be another way that you go about it.
But doing that as regularly as you can with the jobs that you have I think is great. And it’s a discipline that when you, after the four years, have a full time job that you’re already used to having a portion of your pay going to a savings account that you’ll have access, could have easy access to and an investment account that will allow you to have growth over the long term.
OM: Okay, so what are some ways for students to manage their loan debt when they’re in school?
SE: No one wants to hear this and think about this, but the best thing you can do, if you can, and again, now I think the pie is getting smaller and smaller, Olivia. Put this money here. What are we going to have left? But if you can start to pay some of the debt while you’re in school, first of all, some places will give you a little bit of a break in terms of, you know, not necessarily the interest, but maybe they’ll give you some type of, you’re paying a little bit less if you’re paying it while you’re in school.
Also, you’re not going to have the, you know, you want to make sure that you’re not having the interest rack up in terms of your student loan debts.
You want to be very strategic about making sure that you’re paying that regularly and on time as well. If you can. Again, if you can do some of it in school, that’s great. And if not, and you do have a grace period on some loans, but you want to make sure that you’re ready when you have to start paying that to pay it back.
So whenever you have a debt, whether it’s, I tell people this, whether it’s student loan debt or whether they’re trying to, you know, going to get a mortgage for a home or a condo or something, practice it.
So you, your student loan debt may not be due for six months until after you graduate, but the moment that you get out of school and you have that job, you’re starting to pay money to an account, if not directly to the student, you know, for student loans to practice making sure that you can budget and have that debt being paid every month.
So I just think it’s really important to start as early as you can, paying it off and then be very regular about it.
OM: Okay, and how can I prepare for financial life after graduation?
SE: Well, it takes discipline. I mean, you know, first of all, you said after graduation, so that means you’ve already done something, a monumental, wonderful, fantastic feat of getting your bachelor’s degree, finishing your undergraduate education. And so you know about discipline. If you’ve done that, you know about discipline. And that’s what having, being financially well and Having a financial security throughout your life is about.
It’s not. It’s not like, you know, there’s some magic thing that happens you have to do. You have to focus on it. You have to look at a budget, you have to put the money away. You have to pay the bills on time, and it takes discipline. So I think that’s the number one thing that to think about when you graduate is how I’m going to. How am I going to be strategic about doing this? And whether, you know, you keep notes on your phone or you keep a planner book that you write things down and however you may have managed your undergraduate life, to be able to get to where you are once you get your degree, you need to keep those skills in terms of your financial life and making sure that you’re managing that very well also.
OM: You are the mother of two children in college, and how did you set them up financially to be financially prepared?
SE: Sometimes I wonder if I did that, Olivia. You’re assuming that I’m supermom. I tried, I tried. But I think. I think I did a good job. My daughter, I was doing a segment on NBC’s Today show about credit cards, and it just so happened that, that morning, or the night, maybe it was the night before, my daughter sent me a text, and she’s like, mom, I got my first credit card bill, and it’s for, like, $25. Should I pay it now or just, like, wait until the card says it’s due? Till the bill says it’s due? And I was like, pay it right now. And she’s like, okay. And then she texted me back. She’s like, okay. I did. And I’m like, right?
And so I, you know, put on social media our text exchange, and they showed it on the Today show, and they’re like, look at what she’s doing with her kid.
And my poor daughter was a little bit embarrassed that all her business was out there for Today’s show viewers. But that, I mean, that’s part of it. Knowing that they have credit cards, they know to pay them off as soon as possible. My son was just traveling abroad and has a credit card that is attached to my account, too. And I was like, you know, I know you have another credit card, but it has foreign transaction fees. So I am saying, you can use the card we have together, but you got to pay me back. You got to make sure that, you know, you can give me.
And when he got off the plane and we were coming back from the airport, he gave me the cash for the card. So because he didn’t have to, he wasn’t using the cash when he was abroad.
So, you know, I think that that’s somewhat helpful creating a budget for this trip that my son, who was a senior in college that he took, he created a budget just like you would for anything for this trip.
It was for one week. What are all my expenses going to be? What income from his part time jobs is he going to use to put in to be able to do that? And so that, that’s, that’s what he did. And then both of my kids also, they’re 19 and 22 and since they were 14 and started working, they’ve had a Roth IRA account. So that when they’re, you know, their summer jobs, their earned income, they put some of that money into account that they’re investing.
OM: Awesome. Thank you so much.
SE: Thank you.
OM: Thank you for listening to this Deep Dive Episode with Sharon Epperson. You can listen to this episode, other Deep Dives on various topics, and more Daily Bruin Podcasts, on Spotify, Soundcloud, Apple Podcasts, and more. I’m Olivia Miller and thank you for listening.
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