Smart Starts: Four Financial Habits for College Students
Many of us reflect on our college experience as a key part of our lives filled with fun memories and lots of growth. We also may remember it as an important, formative period that set the stage for healthy life habits impacting our long-term physical health, financial health, and so much more. When it comes to our financial lives in college, the cost of tuition, books, school supplies, and basic living expenses add up quickly, and can force us to develop a deeper understanding of the money we spend and earn.
With this in mind, we explore four financial habits for college students to keep in mind as they begin their journey into adulthood.
First-Hand Recent Experience
Before we dive into the four habits, we thought we’d share some insights from our Financial Planning Interns, River Galland, a recent graduate from California Polytechnic University – San Luis Obispo, and Grant Barlow, a rising senior at Virginia Tech, on habits they practiced that have paid off.
When asked, “What would you tell your younger self about spending and saving money in college?”, we received the following answers . . .
“I would be sure to tell myself that there can be a healthy balance achieved between spending money on fun things, while still being able to set money aside for savings and budgeting. Building up money in my savings account for emergency expenses and reaching some of my investment goals, like contributing money each month to my Roth IRA, were achieved through this, which I can now thank my past self for.” – River Galland
“Get a part-time job while you’re in school. When I first began college, I realized that I didn’t enjoy depleting my savings from working in high school on my college expenses. Learning that I could balance a job on campus, that was flexible with my school schedule and allowed me to make extra income, has really been a huge help for me. There are often lots of opportunities that colleges will provide you, whether it be a work-study job, working in a dining hall, or enrolling as a teaching assistant, that pay well.” – Grant Barlow
Four Financial Habits for College Students
Now, let’s build off of River and Grant’s personal insights and ensure you’re getting a smart start on developing healthy financial habits for success in college and beyond.
#1 Establish Financial Planning Policies
There are lots of apps, spreadsheets, and rules of thumb available when it comes to budgeting. We’ve even written articles on the topic (see Financial Planning Policies for Young Adults, for example). But when it comes to starting a budget for the first time, it can often feel overwhelming.
When first starting out, it may be helpful to follow the 50/30/20 rule as a basic framework. After you have determined your monthly income, you allow 50% of that for needs, 30% for wants, and 20% to savings. Having somewhere to start at allows you to adjust as necessary and as situations change.
#2 Save Money Where You Can
Take advantage of all the student deals out there while you can! Here are a few ideas of where you can save extra cash:
- Renting textbooks versus buying them
- Eating at home versus going out to dinner (ramen noodles are only $0.35 at the grocery store!)
- Free and/or discounted services from tons of restaurants and shops
- Selling used clothing at consignment stores
- Discounted student sports tickets
- If health insurance is needed (i.e., not being covered by your parents’ plan), universities can offer student health plans at very affordable prices
- Utilize the fun (and free) activities provided by your school
- Apply for scholarships
These are just a few of many, but these options can be a tremendous source of support when it comes down to saving money.
#3 Start Building Your Credit Score Early
At first glance, this may sound counterintuitive. However, establishing a credit history early can be highly beneficial. In fact, the length of your credit history is an important factor in achieving a good credit score, which offers you advantages like qualifying for loans and potentially lowering your auto and home insurance rates down the road.
Lauren Stansell, Chief Planning Officer at Yeske Buie, recommends using a credit card to pay for basic expenses that you’re certain you can pay off every month. If those expenses aren’t paid off, you can easily fall into the trap of owing your credit card company that cash plus the interest they charge, which is often a very high rate (read our article titled Advice to an Incoming College Freshman to learn more about the traps you can fall into when it comes to owning a credit card).
#4 Be Cognizant of Your Student Loans, If You Have Them
According to The Washington Post, 1 in every 5 Americans hold student loans. You will have interest accruing daily on your loans, meaning you’ll owe more than the amount you borrowed. That accrued amount will then be added to the total amount you owe when repayment begins.
Additionally, be aware of who your loan servicer is before repayment starts. If your loan is money borrowed from the government, that would be classified as a federal student loan. On the other hand, a private student loan would be money borrowed from a private institution, like a bank. Once graduated, students generally have a six-month grace period before the payment comes due on federal loans, while private loans may have different rules depending on the lender. Check out this post on our website for more on the basics of student loans.
College is the perfect time to start building habits that will set you up for a financially secure future. By making these ‘smart starts’ now, you’re setting yourself up for financial success not just as a student, but into and throughout adulthood, as well. If you or a special college student in your life would benefit from talking with us further about healthy financial habits in college, our team would be more than happy to connect with you.