Most new college students enter into higher education with their eyes wide open. It’s a milestone in life and for most, it’s the first time to really set out on their own. Unfortunately, there isn’t much financial education to go along with this transition into adulthood and that can spell trouble. There are a lot of firsts associated with college such as living away from home, being responsible for your own maintenance (laundry, clothing repairs and replacement, etc.) and managing your time wisely or striking a work/life balance.
Another one of the firsts you run into in college is your first experiences in being responsible for your own finances. College presents each person with a unique opportunity to establish their own financial identity and break free of their parents’ pocketbook. As you head into college, make sure that you take some good financial advice with you.
Save As Much As You Can
By the time college rolls around, a college student is familiar with the idea of having a savings account and compounding interest, but may not have the experience of actually having an account and saving money. As a college student you’re bound to feel strapped for cash, but that’s no excuse to skip out on saving money. If you’re working a part-time job while in school, or during the summers, make it a point to set at least something aside from each paycheck. Even if it’s just twenty dollars, it will help you create the habit of saving that will pay off big time later in life.
If you don’t currently have a savings account, opening one is simple. And with online banks making it as easy as opening an account with a few clicks of the mouse, there’s no excuse. Here are some of my online savings account recommendations.
One of the biggest misconceptions that people have about college students and credit cards is that college students should stay as far away from credit as possible. If you do not have confidence in your ability to control your spending, then avoiding credit is a good idea. Many college students take on tens of thousands of dollars of credit card debt in college and spend years trying to pay it off.
But if you feel confident that you can stick to a spending plan, then college is an excellent chance for you to establish a strong credit history and build a solid credit score. There are many banks that offer college students credit cards, and the easiest might be your university credit union. When you get a credit card it’s important to use it properly and not treat it as free money. Your goal is to establish credit and show lenders that you can manage your money wisely, so get the card and use it just occasionally for regular purchases and then pay off the balance each month. This will start the clock on your credit history and keep you from racking up unnecessary debt.
Live Within Your Means
Most college students have no idea how much money they will have from week to week. Some work part-time jobs with inconsistent hours, while others rely on grants, loans or their parents for spending money.
If you have an inconsistent stream of income, avoid spending money as much as possible. Going out to eat frequently, partying every weekend, or going on a big spring break vacation can do a number on your finances. There is usually plenty to do on a college campus or in the dorms that does not cost a great deal of money. Live within your means and you can have something to set aside for your future. It’s perfectly fine to go out and have fun, but everything in moderation.
College students are known for ignoring advice from parents and others that may know better. When it comes to saving money and managing finances, chances are you know someone who is good at it. As you are developing your own spending habits, you need to ask for advice from people you trust who have a proven track record of financial stability. It’s easy to get caught up in feeling like you know everything you need to know about money, but there are people out there who truly do want to help so that you can avoid some of the pitfalls that many college students have made before you. And most importantly, if you find yourself in financial trouble, don’t be afraid to ask for help. Let your parents know, work with a debt counselor, or get free advice from campus services. There’s nothing wrong with asking for help and if you can catch the problem early it could make all the difference in the world after graduation.
Monitor Your Credit Reports
Criminals are always on the watch for college students that open new bank accounts or take on new credit cards. The last thing you need is to become the victim of identity theft just as you are trying to establish your good credit score.
Federal law states that every American consumer is entitled to one free credit report from each of the three major credit reporting agencies every 12 months. Check your credit report to make sure there are no strange accounts attached to your name. If you want to be even more vigilant, join a credit monitoring service and then sign up for it and utilize the warning systems those services offer. I really like using Credit Karma to check my credit report, for more details be sure to check out my Credit Karma Review.
Develop Good Financial Habits
Protect your social security number and all of your personal information from prying eyes. Invest in a paper shredder and shred all of your bills and statements. When you buy products on the Internet, always use secure transaction pages. Keep good records. You don’t need an elaborate filing cabinet or anything, but keep track of major purchases, keep receipts, maintain tax returns, and all of your financial aid paperwork.
The good financial habits you develop now will stay with you for your entire life. There is no such thing as being too careful when it comes to your finances or your personal information.
College is an exciting time and the beginning of a new stage in a person’s life. As you prepare to set out on your own, you should take advantage of the financial opportunities that college offers you. The good financial decisions you make in college can benefit you for the rest of your life.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.