Explain Like I’m Five: Student Finance Edition

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Who said the only way to learn about money was to read articles on top of articles? Financial education is all around us—provided you look closely enough. Increase your awareness with the SALT™ Blog video of the week, picked fresh from YouTube.

Remember when you were 5 years old?  Things were great. You only had to worry about four to eight things in your life, and even those were very trivial (5-year-old Shane would be shocked to find out how little coloring I do now).

If something important came up, someone would break it down to a level that you could understand.

New president? He’s in charge now.

Fourth of July? America’s birthday.

Medicine tastes gross? Makes you feel better.

***

Everything at that age gets boiled down to a digestible size. That’s what Reddit is trying to accomplish in their new video series “Explain Like I’m Five.”

Based on a popular subreddit (for those unfamiliar with Reddit, basically this means a smaller site within the Reddit community. See, I explained like you were 5. Pretty effective.), the series takes difficult-to-comprehend subjects, like existentialism or the crisis in Syria, and explains them to 5 year olds. The main point is to actually show adults a simpler way of understanding.

For college students and recent grads, there are a ton of things that can seem tough to understand—paying for school, credit scores, budgeting. Before I worked at SALT™, I often wished that someone would just explain it to me like I was 5. That being said, I have worked at SALT for about 7 months now, so I feel capable to explain some things to others.

Here are some examples for those of you who are really lost (no shame in that; we’ve all been there).

Repaying Federal Student Loans

The 6 months after you graduate are known as a grace period, which means you don’t have to start paying yet. Then you receive a monthly bill. Missing one puts you into “delinquency.” This can cause extra interest and fees to add up and will eventually hurt your credit score. Miss payments for more than 270 days and you fall into “default.” That means you owe the entire loan immediately, and your loan holder can start taking things like wages and tax return money from you. Don’t do this!

Budgeting

This one is easy. Write down how much money you’ll make (like actually write or type it). Write down how much you’ll spend on specific things—housing, food, entertainment, car, whatever. You should even include things like savings or emergency funds, to make sure you have both of those. Finally, make sure the spending is less than income.

Credit Scores

Credit scores are like a grade between 300 and 850 that let lenders know how well you pay your bills. A higher score can help you borrow in the future, while a lower score can hurt you. You can keep your score high by paying all of your bills on time.

Clearly this is all super simplified and there’s tons more to actually learn. You must start somewhere though, and the rest is on you.

What financial terms do you want explained to you like you’re 5? Share with us!

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