At age 17, Scott Gamm founded HelpSaveMyDollars, a personal finance website focused on increasing financial literacy among teens, college students and adults. He's now a 21-year-old student at NYU's Stern School of Business, and his latest book, ”More Money, Please: The Financial Secrets You Never Learned in School” (out April 30), offers an overview of essential money management skills for college students and recent graduates.
In this interview with CreditCardGuide, Gamm discusses how the education system is leaving young people naive about money — and why college students need to hit the ground running when it comes to credit.
CreditCardGuide: You were just 17 and still a junior in high school when you founded your website HelpSaveMyDollars.com. What inspired you to do that?
Gamm: The subject was not taught in school, and I wanted more information on it and I wanted my peers and parents to have a resource to get this kind of information.
CreditCardGuide: You've said that most students are paralyzed by the words, “personal finance.” Is it really your experience that students just don't have that much knowledge about the basics of personal finance?
Gamm: Most schools don't teach students about personal finance. Only four states require students to take an actual personal finance course in high school. Another 20 states mandate finance to be included in some way into other classes. But more than half the states have zero personal finance requirements for their high school curriculum. So we have students graduating from high school and going off to college, or even graduating from college and going off into the real world, without any financial training.
But personal finance is a subject that everyone will have to deal with at some point. So the fact that personal finance is rarely taught, or not taught at all, is pretty amazing. With the current budget cuts, it's not likely to get introduced any time soon, so it's important for students to take their own action and look for alternative resources to get this information.
CreditCardGuide: There are hundreds of personal financial books out there. What did you want to communicate with “More Money Please” that's unique to your audience?
Gamm: The main issue I sought to address is that money management for young people right now is left up to trial and error. And that's a problem. Instead of preventing students from getting into financial trouble, we're seeing a lot of students having to dig themselves out of the hole after the fact.
While “More Money Please” does offer advice on how to get out of debt, the emphasis is on preventing students from getting up over their head in debt in the first place. Obviously, that's a much better option.
CreditCardGuide: So what you're trying to convey is that financial planning doesn't start once students graduate and have a job with money coming in, but long before that?
Gamm: Exactly. And not only that — when it comes to your financial standing, you want to hit the ground running when you graduate. You don't want to have to start building from scratch. Some people avoid getting credit cards in college, but it's important to get your first credit card in college and not after you graduate, because it will take a couple years to build up credit. You want to make sure you're graduating with a stellar credit history. That's why we recommend starting with that credit card-hunting process a few years into college.
CreditCardGuide: What's a key piece of advice you want to offer your readers?
Gamm: Well, for starters, teaching students to use credit cards responsibly. Many young adults use their credit cards and leave a balance on the card, so they end up paying 20 percent and upwards in interest on the balance. That really hurts one's finances over time. So a simple, but key takeaway is to pay the bill off in full every month, so you don't have to worry about credit card interest charges.
The other important thing many young adults don't realize is the importance of viewing credit cards as a way to build credit, and not as a way to extend your spending habits. It's all too easy for people to fall into the trap of using credit cards as a way to finance a fancier lifestyle.
CreditCardGuide: Student loans are a big issue for people of your generation. What advice would you give to someone currently in college or about to start college to avoid accumulating huge student loans by the time they graduate?
Gamm: Well, of course the tuition cost of the college you choose is important. But college planning is a very personal process, and it's not my place to tell anyone, “Oh, you can only go to these types of schools or these types of schools.” It depends on your goals or on what you're looking to do. I am a fan of studying at a school that's in a big city, where you have access to companies and opportunities so you can intern during the school year. That's important.
So the takeaway is to do what's comfortable for you. If you can get into a top school in the field you're studying, go for it. On the flip side, if you are getting into a top-tier school with top-tier tuition, do whatever you can to save money while in college and pay the interest on your loans while you're in school. That will dramatically decrease the number of years you're in debt and the overall interest paid on the loan.
Also be sure to familiarize yourself thoroughly with the different types of student loans and their terms, so you know what you're getting into. If you do end up with some debt, there are various repayment plans out there just to assist you when it comes to federal loans. As with all things personal finance, a little planning often makes all the difference.