With some background knowledge and financial education, a student can set up the groundwork for a successful financial future or even financial independence. Often, this right financial start requires a road map. Understanding how to set financial goals, and the types of goals to reach for, can help students create that road map and keep them on track. Let’s take a look at financial goals, how to set them, and ways to increase the chances of success down the road.

What Is a Financial Goal?

A financial goal is a money objective that you hope to achieve. This might be to build a million-dollar nest egg or save enough for a week-long trip next year. Your financial goals can help guide you as you build up savings, decide to invest, or become debt free. Your financial goals are milestones on the road map to living the kind of life you want.

Why Is It Important to Set Financial Goals Early?

Setting financial goals early can help establish effective money habits that can provide you with a greater chance of achieving financial well-being later in life. Plus, the earlier you start setting goals like saving and investing, the more money you’re likely to have when it’s time to retire.

Types of Financial Goals

As you set financial goals, consider the three main types of goals, which can be broken down by time frame:

• Short-term: These are goals that you expect to accomplish within a year. Items might include taking a small vacation, moving to a new apartment, or making a major purchase, such as a new computer or furniture.
• Medium-term: In this case, you know that you probably won’t accomplish this goal for one to five years. Perhaps you plan to take a bigger trip or study abroad, or maybe you’re saving up for graduate school, a wedding, or a home down payment.
• Long-term: Goals that you know will take more than five years, such as saving for retirement or getting a bigger down payment for a home, are considered long-term.

Be realistic about what you hope to accomplish and a potential time line.

7 Financial Goals for Students

When setting financial goals, , the founder of , and a licensed attorney and registered investment advisor, suggests that you start with your values.

“Your list of what you value most can guide you in making the best decisions for you, making you more successful at reaching your goals,” Maizes says. “Next, decide what financial goals you want to achieve that align with your values, starting with smaller achievable and measurable goals that you can track, knowing you can always revisit and tweak them.” Here are some potential goals for students.

Create a Budget

Your budget helps you visualize your income and expenses. No mater how much money you have on hand to start with, outlining what you have, spend, and save (where applicable) is essential. You can use your budget to see how much money is coming in and list your most common costs. “Creating a budget is an essential step toward financial stability,” Markia Brown, a Certified Financial Education Instructor and Registered Financial Associate at , said. “It helps you track your income and expenses, prioritize your spending, and identify areas where you can cut back. It’s a short-term goal that you can achieve within a few hours or days.” Brown suggests listing all sources of income and then reviewing your spending. Then, she recommends determining whether your expenses are needs or wants. This can help you determine what to cut back on when things get tight. It can also help you figure out how much money to direct toward other goals, such as paying off debt or saving for retirement.

“Review and adjust your budget regularly to reflect changes in your income and expenses,” Brown says.

Open a Savings Account

Build a habit of saving now, and you’ll feel more comfortable with it later. Brown points out that many financial institutions will let you start an account with as little as $5 or $10. Set up recurring transfers so that money automatically goes into your savings account. Even $5 a week can help you start a good savings habit.

“Although opening a savings account is usually as easy as going online and entering your information, first consider whether you prefer a brick-and-mortar location near school,” Maizes said. “Consider the interest rate they will pay you for money in your account, or whether they have student accounts offering bonuses, fewer fees, no ATM fees, and lower minimums.”

Compare two to four choices and choose an account that works with your lifestyle.

Start Investing for Retirement

No matter how much money you make, investing for retirement can be a major goal for you, according to , Chartered Financial Analyst, a former portfolio manager, and editor and founder of .

“Compounding may be the eighth wonder of the world, but it takes time to see the results,” DeMaso said. “So, you want to start investing as early as possible, even if you are starting out small.”

If you have an employer that offers a plan, such as a 401(k), have a portion of your paycheck deducted each period and set aside for the future. You can also open a roth individual retirement account (Roth IRA), Maizes points out. With this approach, you can take advantage of your current low tax rate to start building a nest egg for the future.  

DeMaso recommends looking for low-cost index funds and making sure you automatically invest, whether you’re using an employer-sponsored plan or opening your own account. Over time, as your income increases, boost the amount of money you set aside in your retirement account.

Establish an Emergency Fund

Maizes points out that an emergency fund can help you prepare to live independently, once you finish school. You might have help from your parents or some other source, such as scholarships and grants, to cover most costs. Once you graduate, though, dealing with unexpected costs can be more difficult.

Starting an emergency fund today can help you build over time. Similar to a savings account, an emergency fund can be started with just a few dollars. Consider setting a goal to eventually save at least six months’ worth of expenses. Start small, with perhaps $10 a week, and then increase as your income and financial situation improves. “Your emergency fund is your safety net in the event you ever run out of money,” Maizes said. “An emergency fund is an excellent lifetime goal whether you are a student or not.”

Apply for Financial Aid to Reduce Student Loan Debt

Student loan debt can feel like a millstone when you graduate. Maizes suggests investigating scholarships and grants to reduce what you borrow.

“Consider applying for scholarships and grants that do not mandate you to pay back any money,” Maizes said. “These opportunities are open to students to apply for within and outside your school throughout your educational journey.”

If you go to a higher education institution, consult with your financial aid office and your academic department head to find out what’s available. Fill out your Free Application for Federal Student Aid (FAFSA) each year to determine what aid you might qualify for.

You can also look for opportunities through federal work-study programs to earn money for expenses, rather than using student loan debt.

Start Building Credit

As a student and young adult, building credit as soon as you can is recommended.

“You’ll need a loan to buy a new car or house,” DeMaso said. “Your credit score will impact the interest rate you have to pay for those loans. So start building a good credit history now.”

One of the easiest ways to build credit is by getting and using a credit card. Choose one or two items to pay for with your credit card, and pay off the balance each month. Use your credit card as part of your regular spending plan, and make sure you only buy what you can afford.

DeMaso warns that the high interest rate charged by a credit card can hold you back. Use your card strategically so that you aren’t losing ground to debt.

Use Debt as Little as Possible

Finally, even if you need some debt to accomplish your education goals, try to use as little as possible. “Finding another way to make money towards your expenses can also go a long way, from tutoring, internships, dog walking, babysitting, and retail,” Maizes said.

Once you finish school, Maizes recommends putting together a debt repayment plan that can help you tackle any debt you have as quickly as possible. The most efficient approach is to order your debts from highest interest rate to lowest and put extra money toward the first debt while maintaining minimum payments on others. As you pay off each debt, you can add that extra payment to the next item on your list.

This might be a medium- to long-term goal, depending on how much debt you have and your ability to put extra money toward reducing your debt when you get your first job after graduation. However, you can still put some money toward other goals, even as you attempt to reduce your debt.

The Bottom Line

It’s never too early to have a plan for your money. In fact, establishing good financial habits now and learning how to set financial goals can help set you up for a better financial future. However, while it's important to set financial goals, creating a financial path for oneself does not guarantee a successful financial future, rather it's a stepping stone in the right direction.

As you set financial goals and work toward success, Maizes suggests celebrating your milestones and recognizing how far you’ve come. “Whether you have extra money each month or not, celebrate being mindful of your money,” Maizes said. “This is a huge accomplishment. These steps will always serve you well and help you make better decisions with your money.”