Budgeting Dining Dollars and the Deeper Story of Financial Literacy
By Robert Posillico | May 5, 2022
We are at the time of the semester when there are two types of people on campus when it comes to dining dollars, those who spent barely half with over $200 remaining… and those who have been out since Easter break avoiding Kimball at all cost. So how do you make 425 dining dollars last an entire semester? While I am sure almost no one actually does the math to figure this out, it comes down to roughly 30 dollars per week meaning you have a budget of slightly over four dollars per day. Considering the average trip to Crossroads will cost about ten dollars in addition to the hyperinflated prices at the lobby shop, those 30 dollars a week can go much faster than expected.
While this micro dining dollars issue is interesting, this understanding of budgeting and saving can be extrapolated out to our personal finances in the real world. There is a serious lack of financial literacy in America resulting in low confidence and little involvement in personal finances. While I presume many readers are college students trying to get by on summer job money, there is a serious importance to saving and investing. I am not going to pretend to be some expert in this field but I want to offer a quick theoretical example. Let's say we invested 200 dollars per year into the market using the nominal annualized return of the S&P 500 over the last 10 years which is 13.6%. Running a quick future value function in excel, at the end of 50 years, you will have a shocking $1,097,068.99. If you were to simply save 200 dollars a year in cash for the next 50 years you would only have $10,000 in nominal terms before adjusting for the erosion of inflation, which has become a serious concern as of late. For instance, saving money as cash will have less purchasing power, and a lower real value, in the future seen through the rate of inflation which is currently over 8% according to the latest CPI data. Therefore, my 100 dollars today may only be able to purchase 92 dollars worth of goods next year.
This understanding of the power of compounding interest and saving is crucial to long-term wealth development. A recent Wall Street Journal article highlighted another dimension to this issue in that many times employees are “offered stock options and don't understand their value in relation to their compensation, they can lose out.” While Holy Cross is an excellent educational institution, financial literacy is not something that we are receiving in our core requirements. Even if you are not interested in a career in finance, I urge you to better understand this space through many of the clubs, programs, and resources available on and off-campus. In fact, there was a great article in the last issue of CSJ titled “Investing in Stock: A Beginner’s Guide” that can be found on our website as well as an article in this issue titled “An Introduction to ETFs, Mutual Funds, and Index Mutual Funds” that can offer great introductory knowledge to new investors.
While you can’t roll over those unused dining dollars into a brokerage account and we will expect to see bare shelves as students raid the lobby shop this week, being cognisant of personal finances even at our age can make a big difference in the future.
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Edited by Rachel Kunka and Maggie Reddington