Students’ budgets tight

Todd Vanderwerff

Todd Vanderwerff

It’s a familiar complaint that wafts over the SDSU campus every week.

“But I don’t have enough money!”

Especially after the first semester, money concerns seize students who have burned all of their summer work money and now have nothing more to spend.

“The first couple months of school, I’d go to Wal-mart all the time and buy things I didn’t need,” said Sarah Leedom, a freshman music major from Sioux Falls.

Leedom and her friends also said that they had spent way too much in the first semester on pizzas and going out to eat and now they are feeling the crunch.

“I worry about money. There’s not enough of it,” said Lisa Donnay, a freshman pharmacy major from Glencoe, Minn.

The girls’ troubles are typical for students, according to economics professor Dr. John Sondey.

According to Sondey, there are steps college students can take to set aside money for the future, conserve what money they do have and eliminate pesky debts.

Sondey believes one of the major money problems facing college students are the credit card vendors who line the Union breezeway, hawking their wares by offering free T-shirts and teaser interest rates, which are interest rates that are ridiculously low for the first few months of credit card ownership before jumping back into the stratosphere like other credit card interest rates.

“What I would suggest is to get the lowest possible fixed interest rate,” Sondey said.

A fixed interest rate will remain the same for the whole time the person owns the card. A low rate will guarantee that interest payments will not later later become so inexorbitant that they require students to file for bankruptcy just to consolidate their debts in an effort to pay them off.

Sondey also said that the best habit for college students to get into is the habit of putting some of their money aside.

While most students would put their money in a savings account, Sondey recommends putting it in an IRA or some other kind of investment.

The interest rate on savings accounts is about one-and-a-half percent, while the inflation rate is two percent. In other words, the money a person puts into their savings account will not be worth as much as it is now twenty years from now, and will be worth much less.

IRAs and mutual funds, however, invest amounts of money in the stock market. Even though the stock market is poor right now, interest rates on IRAs are still better than those on savings accounts. In addition, even a small amount placed in an IRA now will continue to compound funds and eventually become a sizeable amount of money.

“I strongly recommend starting an IRA at a young age because the power of compounding will blow you away,” Sondey said.

Some IRAs can be started for as little as $250. If students feel that IRAs are too risky, they can certainly invest in less risky ventures, such as government bonds, that will make more money than savings accounts, Sondey said.

However, Sondey said, any form of saving is a good form of saving if it gets a student into the habit of saving and practicing self-discipline.

“Getting into the act of saving and denying consumption is a good habit to have,” Sondey said.

Sondey also offered a helping hand of advice to those who may have accumulated so much debt on their credit cards that it seems insurmountable.

Sondey believes that debit cards are just as handy as credit cards and can help students keep track of their finances and spend beyond their means.

However, for those who cannot simply solve credit card problems with debit cards, Sondey recommends getting different credit cards with lower interest rates to pay off credit cards with high interest rates. With that method, a person’s capital can be reduced substantially. Even though that person will still accumulate interest, it will be much less interest per month.

Sondey then says that people with credit card problems should use self-discipline to wean themselves off of their credit cards.

“It’s so easy (to use a credit card). It’s too easy,” Sondey said.

While some students get jobs, Sondey said studies should come first.

Leedom and her friends say they have learned their lessons about watching their nickels and dimes. Donnay said her Christmas money went to a special place.

“(My family) was like, buy something special with this, so I went out and bought groceries and gas,” Donnay said.