By Chelsi Peter
Living in college and having the freedom to buy whatever you want isn’t all the hype people make it up to be. Something I struggled with when I first got to college was being smart about spending money and I not spending most of my money on delivery food services. It is very easy to get sucked into a never-ending cycle of spending money without fully paying attention to how much you’re spending and if your purchases are logical. Financial literacy is the knowledge and ability to manage your personal finances effectively. This includes understanding concepts like budgeting, saving, investing. I think an important lesson I learned my first few months at college is financially literacy is essential today as personal finance continues to be an increasingly complex topic. One aspect of financial literacy that is often overlooked is the role of discount obsession in our financial decision-making.
Discount obsession is the tendency to focus on the price of a product or service rather than its actual value. I found that because of my lack of understanding and knowledge on proper ways to save money, I would buy the cheaper option of an item only to have to go back to the store for that same item either because it didn’t last or because of its low quality. Discount obsessed people may be more likely to buy a product solely because it is on sale, even if they do not need it or if it’s not the best value for their money. In my case, tendencies as such can lead to financial stress, overspending, and an inability to reach/achieve financial goals. You may find yourself in this never-ending battle of still spending more money than you want to or anticipated in smaller doses, instead of all at once all for a discount.
Other habits that I found were very problematic to my spending was constantly trying to justify spending money on an item just because it was priced at a discounted rate. One way to overcome discount obsession is to develop a clear understanding of the true value of a product. Buying items just because you want to is not a good example of practicing financial literacy. Considering factors such as the practicality, durability, and quality of an item should come first before purchasing something. For example, higher-quality dish soap may cost more upfront than cheaper dish soap, but it may last longer and provide more cleaning surface which makes the higher-quality dish soap a better long-term investment. I know it’s silly and its only dish soap, but when you run into the issue of having to use more of an item because it is of low quality you are inevitably going to spend more money.
The National Association of Student Financial Aid Administrators (NASFAA) completed a survey where they collected data from a nationally representative sample of more than 100,000 incoming college students from more than 410 institutions. Overall, the survey found that most respondents struggled to answer basic financial literacy questions, and on average answered 2/6 questions correctly. Most of the lack of understanding in the importance of financial literacy in college comes from the fact that many students were never formally taught the importance of managing their finances properly. Especially in the case of avoiding debt. According to the TIAA Institute, in 2020, the average U.S. adult correctly answered 52% of the questions on the Personal Finance Index exam.
Don’t feel embarrassed or out of place because you never learned the skills necessary to save money or build a strong monetary portfolio because most adults in the U.S. doesn’t know either. In my opinion, one of the most important aspects of financial literacy is budgeting. A budget is a financial plan that outlines income and expenses over a specific period. If you budget correctly, it can help you prioritize spending in certain areas where saving money is an option. I cannot stress this enough, as a freshman in college if I knew the importance of budgeting, I would’ve been able to save so much more money with my low source of income. Allocating money for items such as food or clothing, will prevent you from gaining a discount obsession. Budgeting can be used in this case to prevent impulsive purchases and make sure they’re receiving the most value for their money.
For one to become financially successful and stable, financial literacy is an essential skill. Discount obsession can result in overspending, lost opportunities, and monetary hardship. I believe it is important for college students to either take a class or learn more about how financial literacy can benefit them before college. Living on your own comes with a ton of adult decisions and monetary decisions. In a period of our lives where we are not swimming in money, students who are knowledgeable about ways to save money will be able to relish the feelings of not overspending or not having enough money to go out with friends. With the financial resources I’ve consulted and honestly trial and error of finding what’s right for me, I’ve realized that reaching your financial goals is such a huge success and reward in our early stages of our careers and education.
Chelsi Peter is a broadcast major at the Missouri School of Journalism
