5 Financial Tips for College Students to Manage Money Better
By Nurul Khairiah Mohamed Yusof
Personal finances should start from a young age. The independent life of a college student provides a good opportunity to experience, develop, and grow good money habits.
Congratulations, you’re a college student!
As a young adult, you are likely to have moved out of home (Merdeka!) to pursue your education. For those who are still living at home while doing so, you will likely be living a more independent life compared to your secondary schooling life. Among some of the new skills you will need to master will be, of course, financial savvy-ness.
Whether you are paying your own way, receiving parent’s help, using financial aid, or a little of all three, college is an expensive experience that becomes pricier with poor spending practices. College students often collect debts quickly. As with any adult, if debt is not managed well, you will face a lot of hardship trying to settle your debts instead of having a fulfilling young adulthood.
What causes some college student debts to rack up more quickly than others? Generally, it falls to lack of financial awareness and poor money management. However, these are easily overcome if you take the effort to learn about your current financial situation and instill practical yet reasonable money management habits. With this in mind, we provide you with a few financial tips to survive in college years.
#1. Create a detailed budget
Carefree high school students frequently spend whatever is in their bank account, living off their parents’ generosity or the spoils of a part-time job. Once that student moves away to college, a budget becomes crucial.
Whether or not you have been exposed to a budget, it’s important that you sit down to look at finances. Map out your various streams of income, including money from parents, income from a part-time job, and money coming from student loans, grants, and other types of financial aid. Then, categorize your expenses you know where it’s all going. Maybe, in the beginning, you can’t force yourself to stick to a budget but you can feel confident because now, you have a clear picture of what is and isn’t affordable.
You can use a smartphone app that makes money management easy and convenient. Some apps, like Spendee (Google Play, App Store) and Mint (Google Play, App Store), can help you track your online spending by connecting to your bank account as well as providing a platform for you to fill your spending daily. By the end of the month, these apps provide you with a summary of your monthly spending.
Or, you can opt for a more traditional way of keeping track of your budget by using Microsoft Excel spreadsheets. This will require more discipline from you to put your financial activities but can give you a better look at your current spending and saving.
As stated, the trick with any budget is sticking to it. Have some talk with your parents about how to make smart money choices that fall within the budget. Try to reduce unnecessary spending and always track your recurring expenses.
#2. Build a Small Emergency Fund
An emergency fund is a pot of money you keep to the side for a rainy day. When you have a little extra money, put it towards an emergency fund. This fund protects you if you ever have to deal with an immediate or urgent financial emergency.
While you’re in college, these emergencies will be minor. As you get older, get more responsibilities, the number of potential emergencies increases.
For example, if you own a car, you will rely on it to get you to and from work. What if you go to drive it one morning and discover it won’t start? Or your tire hits a nail on your drive home the night before? While minor, these are emergencies that you won’t have accounted for in your budget.
This is when the emergency fund can prove useful. With a fund, you can avoid putting those charges on a credit card. You can now make decisions from a position of financial safety rather than one of panic.
#3. Minimize Student Debt
There are several ways to minimize student debt. One of them is to spend financial aid on the right things. Even if loans look like “free money” now, they do come back to bite you. Tuition, books, housing, food should be your upmost priorities instead of weekly social outings or loads of new outfits.
Consult with your parents if you want a credit card and they can help you choose the best one together. Freshmen should never sign up for a student credit card on a whim. Instead, you can discuss the pros and cons of different cards, set a reasonably low spending limit, and look for cards with points or cashback rewards.
You may also want to use a debit card while in college. While it sounds foolproof, make sure your bank doesn’t allow a large overdraft. Turn off overdraft protection so you can only spend what is in the bank and won’t get slammed with overdraft fees.
#4. Earn extra money with a part-time job
If you want to fund other needs and/or your social life, it should be done with income from a part-time job, rather than with money taken out of your student loans. Work-study positions on campus like research assistants usually offer the flexibility a student needs with the convenience of location, while off-campus positions usually pay more. Either way, it is better to pay now for non-essential purchases so that you don’t really need to pay for them later.
But, keep in mind that your part-time job shouldn’t interfere with your main purpose as a student – to study. Good time management is crucial when you are balancing between studying and working part-time.
#5. Set Financial Limit
One way to help your spending is to implement financial limits for unnecessary items. Setting a spending limit doesn’t necessarily prevent you from making impulse purchases, but it should give you a pause to assess whether or not the new iPhone is really necessary. By setting a fairly low limit – say, RM400 – RM800 per month – you will have some restriction when it comes to spending power. Add the non-essential money into your proposed budget or emergency fund, separate from essential expenses such as gas and food.
Managing personal finances is a good way to instill discipline and preservation in our life. When you went to college, you’re not just going to a new era but you are also will be getting hands-on practice on how to manage your finances better. But, don’t forget to have fun and enjoy your university life as well because it is once in a lifetime experience.
What financial advice or tips would you give to a student during college years? Share with us in the comments section below.