College life is much more than embracing a transition in your academic life. While cherishing your newfound independence and larger social circle, it’s easy to overlook your financial preparedness. Well, this would be the first time you are planning to live away from your parents. How about creating a budget and managing your expenses as you get the first opportunity to handle your finances?
Money management defines the key to your long-term financial health. Why not start early, right from your college days, to cultivate healthy financial habits? Your college life brings you the opportunity to be responsible with your work, studies, meals, and expenses. Financially literate college students demonstrate greater resilience against student loan debts.
Most importantly, you would be living on limited money. So, how do you plan to stretch your funds and make the most of it? As a high schooler, explore the ultimate checklist that will help you financially prepare for college.
Why does financial literacy matter for college students?
Before we take you through the guidelines, have a look at these statistics. The figures largely demonstrate the financial vulnerability of college students.
- The federal student loan debt in 2022 was $37,574 on average.
- Compared to bachelor’s degree holders, first-generation college students are three times more likely to fall behind in student loan repayments.
- In 2020, 26% of students in the US aged under 40 who attended private colleges were lagging behind while repaying student loans.
- Just 52% of US citizens received personal finance education at their college or K-12 levels.
- 86% of Americans feel that authorities should make it mandatory to receive financial education at the K-12 levels.
Now that you know why financial experts recommend that high schoolers be financially literate, let’s start.
Checklist for students: How to manage your funds like a pro?
Right from budgeting to living on limited funds to avoiding student loan debts, we’ve got you covered through this ultimate checklist to manage your finances.
Create a realistic budget
In the first place, create a realistic budget before leaving for your college life. Identify your needs and observe your spending habits. However, it’s tough to be realistic with your plan unless you get started and start spending. As for the estimates, try to come as close as possible to reality. After a week into your college life, you would be better poised to evaluate your expenses.
While budgeting, break down your finances under these categories.
Your monthly cash inflow: Think of all your scholarships, loans, grants, income from part-time jobs, savings, and contributions for your parents. Do the math and find out how much money remains at your disposal at the beginning of each month.
Needs and fixed expenses: Consider your tuition cost, living expenses, and other fixed heads where you would be spending money every month. Don’t overlook your room charges, books, cell phone charges, rent, prescriptions, and laundry.
Optional expenses or luxury: Lastly, determine your optional expenses, such as visiting concerts or movies, eating out, purchasing gifts, gaming, and traveling.
Rather than being extravagant, it’s wise to prioritize your needs and choose a few optional expenses. Create a student bank account or open a high-yielding account to put aside the rest. Download a budgeting app that will help you live within your means.
Setting up your bank account
If this happens to be your first bank account, make sure to turn the overdraft feature off. This would force you to live within your budget and avoid additional fees. Also, set up alerts for low balance and learn to manage your checkbook. Download the banking app to keep track of your expenses.
While enabling mobile banking, make sure to use a secure PIN and configure multi-factor authentication. Also, maintain information hygiene, using a different password from other accounts.
Set up direct deposit accounts
Now that you are fairly three months into your college life, consider having a few more bank accounts. Dedicate one for bills and another for your expenses. Make sure to open a high-yielding savings account, where you stack up whatever you save. With this approach, you won’t end up tapping into other accounts while spending.
Start building your credit
Now that you are in the first years of your adulthood, you may get your first credit card. It’s wise to get started with a student credit card and make timely repayments. Make sure to capitalize on your rewards on purchasing food, grocery, stationaries, and other necessities.
It’s wise to start building a healthy credit early on. Using a credit card responsibly goes a long way in credit building. Your credit health largely shapes your eligibility for home loans or other financial privileges in the long run.
Avoid credit card debt
It pays to be vigilant about repaying your bills to avoid your credit score taking a hit. Remember, credit card loans come with the highest interest rates. While it’s tempting to take advantage of your credit while you enjoy pizza nights, being irresponsible with credit use can quickly choke you.
While using your credit card to make a purchase, make sure you can repay the bill in one month. This way, you can clear your liabilities in the immediate billing cycle. Take guard against making impulse purchases. – one of the easiest ways to land up in credit card debt!
Besides, delayed payments invite a host of penalties and financial wastage. Once these liabilities start mounting, you’ll land up in a financial mess.
Adopt the aggressive repayment approach
Well, student loans aren’t free money! You need to repay the money, so it’s wise to start early.
A prudent approach while handling your savings will help you clear off your debt. Repaying your student loan early takes off the load of interest significantly. Besides, reserve your student loan to manage tuition fees if you can afford your living expenses through part-time employment.
Start applying for scholarships
Talking about student debt repayments, have you applied for your scholarships and grants? Securing yourself from student loan debt requires you to avoid such liabilities in the first place. Being a high schooler, it’s wise to be the early bird while applying for scholarships.
In a survey, just 33% of senior students recounted applying for scholarships. However, the authorities sanction more than 1.7 million scholarships every year. Then you also have the facility of grants from the government that could significantly absorb your financial stress.
The good thing is there’s no upper capping on the number of scholarships or grants for each student. Why not take your chances and find the rewarding money? Maybe your involvement in extracurricular activities, athletics, academic strengths, or creativity can make you the right match for free money!
With these additional cash inflows, college students can minimize their dependency on loans. Apply for CSS and FAFSA with your profile to check out what you qualify for.
Earn while you learn
While more than 40% of undergraduate students work full-time in the US, you’d meet even more part-timers. Working on-campus or off-campus would be a good idea, and many high schoolers are taking up side hustles.
Earning during your college life requires a delicate balance between your professional commitments and academics. As you stream more income, you can clear your student loan fast and start saving for your future. Channel your time-management skills to balance work and learning so that you remain financially better poised.
While most students prefer working in cafes and coffee shops on campus, you may also consider tutoring or freelancing. As you look around, you will find plenty of part-time jobs to engage in. Try to engage in a profession aligned with your academics. This way, you can make your experience count on your resume.
Capitalize on student discounts
Do you know that college students enjoy financial privileges such as discounts at departmental stores, online stores, theatres, and restaurants? Explore all these options as you step into a broader social ambit in college. Why not stretch the value of your money by banking on these discounts? Besides, take advantage of your gift cards and make sure not to overlook those credit card offers and discounts.
Try not to overspend just because you’re getting them cheap! Rather, try to save on everything possible and prioritize your resources. Stack off your savings in your bank and try to pay off your loans fast!
Get adequate insurance
Did you get sufficient coverage for your car and health? While you take your baby steps toward financial resilience, make sure to buy adequate insurance to secure your savings.
If you plan to rent a room or share one with your batchmates outside the campus, you might also need a renter’s insurance policy. This would secure your finances in case you accidentally end up damaging the property.
Contribute to your retirement account
Well, you have just started at your college. It’s natural to be inquisitive about the sheer need of saving for your retirement.
When you think of retirement planning, it’s wise to start early. This way, you can capitalize on the compounding power of interest.
If you are already earning money through your side hustles or part-time work, open a custodial IRA. Besides, full-time employees would also qualify for their employers’ 401(k) plan. The sooner you embark on your mission to save for retirement, the higher would be your long-term savings.
Start your financial literacy early!
Stepping into your college life marks your preparedness to be smart with handling money. As you brace up to transcend in your academic life, take care of your financial literacy too. Inculcating sound financial habits and following good examples would keep you on track to establish a secure foundation.
Remember, creating a realistic budget and sticking to it is just the beginning. How you use your savings and invest them in the next few years defines your path to financial freedom.
FAQ
Why is financial planning important for college students?
Considering the rising cost of education, attending college itself happens to be a crucial financial decision. Costs add up fast, considering your tuition fees, living costs, recreational expenses, and, most importantly, your student loan liabilities. Unless college students manage their finances meticulously, it’s easy to accumulate a debt burden. The lack of financial planning can have serious consequences for both parents and students.
How can college students save money for retirement?
While custodian and Roth IRAs are popular, you also have other instruments to stack away funds for retirement while attending college. Unless you turn 18, you can’t open a brokerage or bank account. So, look out for other custodial accounts such as a Minors Act (UTMA) account or a Uniform Transfers account. Your parents or an adult can serve as a custodian in all these accounts.
What is the best way to manage my financial expenses as a college student?
Once you start living on a budget, use a money-tracking tool to understand where you are spending. Accordingly, you can adjust your lifestyle and stick to your budget after covering the essential expenses. Besides, tracking your expenses will help you prioritize where to spend. Accordingly, you can put aside a fund to manage essential overheads while curtailing expenses on the non-essential ones.
How can students earn money while in college?
There’s a plethora of money-making ideas for college students. Consider joining a paid internship related to your academic field or engaging in a part-time job. Some college students also sell their notes to make money, while others engage in tutoring or freelancing. If you are academically strong, consider preparing online courses to sell them and make money.
Can a college student invest in the money market?
Once you are 18, you can invest in the money market, regardless of whether or not you are a college student. It’s wise to put a part of your savings into quality stocks and bonds. You might also consider exploring alternative investment avenues such as REITs and mutual funds.
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