The rising cost of living in the United States is causing many to watch their spending and leaving many college students with empty pockets at the gas pumps and in grocery stores.
Chris Harris, an associate professor of finance and the chair of the finance department, shares ways college students can save money. He has a passion for helping individuals understand finances and take advantage of the resources they have. Harris is also the director of the Center for Financial Literacy and has promoted financial literacy around campus years before the official center was established in September 2020.
Harris hosts workshops for different student groups, staff members and organizations across campus. Harris says the goal of the Center for Financial Literacy is “to help people feel informed about financial decision making.”
This interview has been edited for clarity.
Why should students care about inflation and be aware of it?
“Inflation can be a nasty thing to all of us because essentially what will happen is, if you put money in a bank account right now or a savings account … they might say, ‘Oh, it's .01%, which is basically zero, nothing, right?’ You're earning nothing. But at the same time when you hear the inflation is maybe 8%. ... Essentially that means that the value of that money when you go to spend it a year later, will be 8% less than it is now.
If you've had money in that savings account, you're hoping that it can be growing and maybe offset some of that inflation, but right now, it’s not. So whatever $1 will buy you right now, you're only going to be able to buy maybe 92 cents worth next year. You tried to be responsible. You put it in savings, it's been sitting there, but it's almost like you're losing your ability to buy things.
Inflation can be a really destructive thing because it disrupts people's ability to plan effectively because if prices of everything are going up, and somebody thought, ‘Well, I'm going to make this purchase, whatever it is, next year,’ especially if it's a large purchase, a car or even just a computer or whatever it is. … If you're trying to set aside money to save, it's going to end up being a greater amount that's needed then maybe you initially thought and so it can affect you on the big things. But it also can affect the little things because anybody who goes to a grocery store or to a restaurant right now, or whatever is learning that lesson.”
What kind of items are seeing the biggest price increase?
“Gas is up a lot, but, interestingly, what a lot of people don't realize is we're probably just at the beginning of seeing a lot of inflation on things like food products. An example, the price of wheat is 70% higher than what it was one year ago. So if wheat is a primary ingredient in anything, then the cost of that thing will go up. … I fully expect the price of bread to be going up considerably.
Throughout the United States, we use really high amounts of fertilizer, and some of the primary fertilizers that are used in the U.S. the price of that right now is up almost 300% in the last year, year and a half. If any farmer is going to make any money, they're going to have to charge higher prices on their crops because the price of fertilizer is so much more.
The other thing that's going to be interesting is corn. Corn is one of the products that requires a lot of fertilizer, and so there are a lot of corn farmers who have said, ‘Well 300% increase in fertilizers is too much so I'm just not going to grow corn this year.’ And so they wanted to plant something else that might require less fertilizer like soybean, and now there's actually a shortage of soybean seeds because so many people are choosing to do that. … Long term, like maybe in the fall, we might have a big increase in corn prices because people are going to plant less corn, so the ripple effects of what's going on here. …
We're probably going to see it for maybe a couple years or a few years, especially the longer the conflict goes on in Ukraine. Ukraine and Russia produce about 30% of all the wheat in the world, and a lot of the materials that go into the fertilizer that's used here in the United States is primarily mined in Russia. We’re probably going to see the longer the conflict goes on, the longer we're going to see the lingering impacts of higher prices.”
When can we see relief for items we import from Ukraine and Russia?
“In the U.S. we don't really buy a lot of our wheat from Ukraine or Russia. But the thing that happens is that the countries that normally would get it from them might not be able to get it from them this year. So then they're going to turn around and say, ‘Well, where else can we get it?’ Maybe even in the United States if we grow enough on our own, we hear the people in another country willing to pay more than that just means the prices go up for everybody, which is what we're seeing.”
What should students do if they feel overwhelmed?
“The biggest thing to say is ‘Do I have any control over how I spend my money in these biggest areas,’ because that's where it will have the most impact. I feel like I've been meeting more students lately who are saying ‘Yeah, I'm learning how to cook more at home,’ and people are doing that. They're trying recipes. One of the reasons people start to look at that is because it can be more cost effective. If you're really feeling like ‘man, I just feel like I can't control the spending,’ or its seems like things are getting really out of hand, a reasonable alternative is to say, ‘Are there some meals I can prepare at home or there's some things that I can do that maybe will help cost a little bit less?’”
How can students spend money wisely right now?
“I'm a big advocate of shopping smart all the time, actually. Most of us have big financial goals and that's how we usually think about our goals. It's this big thing like ‘I want to retire early,’ ‘I want to have a paid off home’ ‘I want to do this or whatever’ and a lot of the classes and events I do see the responses that students give when they kind of talk about their goals. And these are very common. It's hard for everybody to stay focused on that big picture thing. So a lot of times it just helps to break it down a little bit smaller and to be able to say OK, when I'm 19 years old, it's really hard for me to discipline all my decision making on what's going to happen when I'm 65. So maybe that can't be my motivator. But maybe what could be the motivator is saying, ‘Can I save $5,000 this year?’
The idea is that you just want to be able to think in a more critical way; how my decisions that I'm making today or right now are going to impact maybe some of the future things that I want to do.”
What is the first thing students can do to start spending money wisely?
“One of the most helpful things any student could do is to actually think about, 'What are my financial goals? What am I trying to accomplish or what am I trying to do?’ And once we determine that, we can just start thinking about our decisions now because all of a sudden it might make us a little more uncomfortable.”
What should students do if they feel overwhelmed about their finances right now?
“We hope this doesn't last forever, and we want it to be as short as possible. If I was commuting I would absolutely be looking at, is there someone I can carpool with? Can we split days so we're each only paying for gas half the time or something? I absolutely would be looking to see if that is a possibility. Or is there a shuttle you can use to get around?
When prices are a little lower and we're not being forced to have to make proactive plans — it's easier to ignore that. But as the budget starts to come a little tighter and a little bit of pressure every time you fill up gas and people start to go, ‘Oh my goodness, it's $60 to fill up gas or whatever,’ those thoughts creep in. Then it's a good time to eat food that you can prepare at home.
You'd be surprised how much small adjustments to whatever somebody's daily thing is can make over a period of time. … I don't think life is meant for us to deprive ourselves of all these things, so I don't think that personal finance is depriving ourselves. It's finding ways to get what we want.”