Getting in the game: Answering students' most common financial literacy questions

What if you showed up to play a sport and didn't know the rules? Would the ball fly past you at unexpected times? Would you run the wrong direction? Would you score points for the other team?

When it comes to money management, many college students find themselves in just this situation. If you're still getting used to being on your own, trying to figure out personal finance can often be confusing. A poor understanding of financial concepts can cause you to make the wrong choices, potentially leading to a weak start in the post-college financial game.

To help you get moving on the right track to a winning financial strategy, this week's issue of AIEmail answers several of the most common financial questions students ask.

Why should I take the time to build a budget? I hear it's complicated.
Building a budget is simple. Sticking to it, on the other hand, requires a little more work. But the consequences of living beyond your means can be serious — painful overdraft fees, hefty credit card bills, anxious nights spent wondering if you'll have the money to eat this week. Building a budget helps you live within your means and provides a "go-to" guide on how to spend your money. If followed, your budget can save you the stress of not having enough money to cover necessities.

If I live on a budget, does that mean I can't have any fun?
You can have fun and still make smart choices. Sticking to a monthly allowance for entertainment within the budget makes it easier to have fun without having to worry about overspending or figuring out how to pay for it later. Plan for your fun by building it into your budget. Unplanned items and activities can easily throw you off budget or worse, into debt. If you have a big event coming up, save for it so that you have the money set aside, rather than charging it and facing the credit consequences later.

Why should I balance my checkbook if I can find out what's in my account online?
While fewer people use checkbooks these days, that doesn't mean they leave their finances to chance. You should always know what's in your checking account in order to avoid making costly financial mistakes. Not keeping track can lead to overdrawn accounts, denied transactions, and bounced checks.

It's not enough to just check your bank account balance online. You should be aware of what your balance will be after each purchase or paycheck. If that's too much information to keep in your head at all times — and it is for most people — use a system. It doesn't have to be a checkbook: download one of the mobile phone apps for this purpose, or use account management software.

Do I need a credit card to build good credit, or is there another way?
Whether you have good or bad credit is based whether you have a pattern of paying your bills on time, as well as on the amount of debt you have compared to your income and savings. If you have a job or bank account, rent an apartment, or pay utility bills, you are already establishing a pattern that will help build a credit history. Using a credit card wisely is one way to build good credit, but it's not the only way. You should research all of your credit options, including those that limit what you can spend, such as secured credit cards or debit cards.

I'll have plenty of time to save and invest when I get a job after college. Why should I be worried about that now?
It's never too early to think about saving and investing. The earlier you start saving, the better off you'll be in the long run. It may seem as if you have very little money to spare or save now, but saving any amount is better than nothing. Build an allowance into your budget or spending plan that is directed to your savings account; this way you're paying yourself. Starting with $5 a week now can help you build up to $100/month in a couple of years, and more after you graduate and start working full time.