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Scrimping and saving is a familiar experience for many college students. From sharing dorms to eating Ramen noodles, they make ends meet. However, there are ways to be financially smart, expand your diet, and move beyond Ramen. Managing money independently for the first time may leave you unaware of the strategies and tools that can help stretch your money and even save some along the way!
Importance of Saving Money
As a student, it can be difficult to save money, especially if you are not earning an income. Savings, (no matter how small) can help when you find yourself in a financial jam. Gathering enough money to create an emergency fund can be helpful when unforeseen circumstances arise.
No one plans to have their car break down. It’s always heartbreaking when your school laptop gets soaked by a spilled coffee. You might need money to buy professional clothes to wear to interviews for an internship. Squirrelling away some extra cash for emergencies can be comforting when unplanned events try to derail you. An emergency fund allows you to not have to go into debt when unexpected events occur.
Create a Savings Plan (Pay Yourself First)
If your savings plan goal seems small, don’t fret, you are investing in yourself and that’s important. You are showing yourself that you are committed to your future self. As a student, it may not be a realistic goal to set aside $100 each month, but you may be able to save up $25 or even $50 a month. When you begin to make more money down the road, you will want to up the amount of money you save each month.
Most banks have an online app, which may allow to you automate your savings effort by automatically pulling some money into your savings account each month.
As a college student, you may be stretching every dollar to the max, but if there is a little cash left over by the end of the month, put this extra money towards your savings goal. You may have an idea of what these goals look like to you, but if not, here’s a few ideas:
Short-Term Goals
- Drive a paid off car—you’re in college, so this is probably going to be the cheapest and most reliable vehicle you can find. Depending on your circumstances, you may want to look at selling your car if it has a high or unaffordable monthly payment and find a cheaper car you can pay off in full, or start using a moped, bike, e-bike or public transportation to get around instead.
- Invest—using your money to make you money. This may be through an investment app, a CD, a high-yield savings account, or some other way to make your money go farther in the long run.
- Reduce debt—while you may have had no other option but to take out some loans to pay for college, you may also have other smaller debts, such as credit card debt or a car loan. Working to pay down or off credit card debt or even paying more than the minimum on any loan will help to pay off the loan sooner—just confirm your debt doesn’t have any pre-payment penalties. If you have an interest accruing student loan, you can make interest payments while in school, so that when you graduate your loan hasn’t grown from accumulated interest.
- Build an emergency fund—even just an extra $10 a month will add up over time. When you inevitably get hit with a parking ticket (or count yourself lucky if you graduate without one), you’ll have some money to pay the unexpected expense. Then you won’t have to cut back on something really important, such as groceries!
Long-Term Goals
- Pay off student loans—while it may be nice to graduate with no student loan debt, it’s not always possible. If you can work towards paying any accruing interest or even pay down your principal while you’re in school, you’ll be in a better position to pay your loan off faster and with less overall interest!
- Save for a down payment—you may not be planning to buy a house immediately after graduation but it’s a good idea to start saving for a down payment for your first home as soon as you can. It’s going to take a while. If you want to put 20% down on a condo that costs $150,000 you’re going to need $30,000.
- Work for yourself—you may want to start a business and be your own boss. Depending on your goals and business plan, saving up for a business can be a smart financial move, as well as an investment that continues to pay you back.
- Fund a retirement savings account—as soon as you can, you will want to start saving for retirement or for a future child’s college fund. A 401K or a Roth IRA are great options for retirement, and a 529 account is money specifically set aside for education. These types of accounts not only save your money for you, but they can grow it too depending on how you elect to invest your money within these accounts.
Create a Budget
Before you can begin saving money, you should understand where your money is coming from and where it is going. If you have a part time job, a side hustle, or simply received birthday money from Grandma, you should record it. You may want to start a budget spreadsheet, or download a budgeting app, such as one of the following to help you stay organized:
- Intuit Mint: offers a free version and you may be able to connect your banking information directly in the app. You can create a personalized budget with 21 categories and unlimited subcategories. By categorizing your money, you can more easily see where your income is being spent. You can create push notifications and/or emails to remind you about upcoming bills.
- Rocket Money: formerly known as Truebill, this app available in the Apple Store and on Google Play helps you stay on top of your spending by breaking down your finances. By linking your bank account to the app, it analyzes your spending habits to help you save a set amount while helping you avoid overdraft fees . You can create a budget, manage your subscriptions and bills, track your spending, budget, see your credit card due date, and identify bills that can be lowered for free. The app also has a service that helps you renegotiate your bills, such as cable or cell phone. However, you will be charged a percentage of whatever savings are secured. Other features such as concierge services that can cancel recurring payments on your behalf, premium chat, unlimited budgets, custom categories, real-time balance syncing, and access to a full credit report are available to you with a paid premium membership.
- YNAB: the budgeting strategy app YNAB identifies where each dollar you earn is put in your assigned categories. If you overspend in one category, it will affect your spending in another category. This app is solely a budgeting app without any extra features. You can sign up for a free 34-day trial. If after the trial period the service fits your needs, you can then sign up for a yearly subscription. College and graduate students can also access a free trial subscription for a year.
There are different budgeting plans depending on your goals, but you should anticipate the following categories:
Income—the money you expect to receive from a job, family contribution, and/or grants/scholarships/loans (reminder—grants, scholarships and student loans are to be specifically applied to school tuition and other qualified education expenses
Fixed expenses—reoccurring bills you can expect each month, such as a loan payment
Variable expenses—things you pay for where the cost can vary from month to month, such as groceries
Emergency fund—money placed in your bank or credit union savings account that is meant to be left alone unless an unexpected expense occurs
Sample Budget Categories
As a college student, you can expect to have some of the following categories to organize your budget:
Fixed Expenses
- Tuition
- Housing/rent
- Meal plan/groceries
- Laundry
- Utilities-internet,
- Books/supplies
- Car payment/insurance/registration
- Gas/transportation
- Cell phone bill
- Student loan payment (depending on the terms and conditions of your student loan)
Variable Expenses
- Entertainment
- Subscriptions
- Clothes
- Gym membership
- Barber/salon visits
- Fun money
- Travel (Spring break in Cabo)
Record Your Cash Flow
Begin by writing down how much income you plan to bring in on a monthly basis. As a student, you may have income or bills that occur based per semester, per month, and per academic school year. This breakdown can help you understand how your cash moves in and out of your account (also known as cash flow).
Once you have decided on your budget categories, look at past statements, receipts, or make an estimate of how much you typically spend in each category. If this is your first time with a budget, you may have to make some modifications to your anticipated amounts over time to help you get a clear idea of where your money is actually going.
Review Monthly Charges
After recording a month’s worth of spending, look how it lines up with your monthly income. Are there places where you think you can spend less? Are there categories where you need to spend more money than you estimated? Take this initial information and use it to create a budget to hold yourself accountable for the next month.
Find Ways to Save Money
Student Discounts
Your student ID can get you more than just a meal at the cafeteria! Many national brand name stores offer student discounts when you show your student ID. From mattresses to Microsoft, shoes to spring break stays, your student ID and/or valid student email address can help you get some pretty sweet deals. Local restaurants and stores may also have student pricing. Speak up and ask if a place offers a student discount—you may be surprised what is available to you!
Free or low-cost activities
Share subscription streaming services
Food costs
- Learn to cook and plan out your meals. There are many apps, websites, and videos online that can help you plan and cook on a tight budget.
- If you live with roommates, you may want to each choose a night to cook. Cooking for one can be difficult and four or more people trying to cook dinner at once can be overwhelming too. If you plan, you can have a hot meal multiple times a week and you only have to focus on cooking once or twice a week!
- Check out the local grocery store’s weekly ads and see what deals you can plan meals around. Many stores these days have mobile apps that allow you to “clip coupons” and the discount will be applied at check out once you input your rewards account number. If you base some of your meals around what you can buy on sale or with a coupon, it can save you a decent amount of cash. Prepare for your shopping trip by making a list and eating before your shop—it will help you stick your list and help you from overspending! Invest in a crock pot or InstantPot. These gadgets allow you to easily toss in ingredients in the morning and come home in the afternoon or evening to a fully cooked meal!
- If you make an extra serving or two, you can use leftover food throughout the week for other meals.
- Learn to repurpose leftovers. Use pasta, rice, or salad as bases for your leftovers.
- Pack a lunch. If you don’t have time during your day to get back to your residence, a brown bagged lunch can be eaten wherever you are. Many colleges have lounges with microwaves around campus if you need to warm up your food.
Living on your own and working toward financial independence is a skill, one that needs to be learned and practiced. Beginning with crafting a budget and learning to live within your means is one of the many lessons you can begin practicing in college and continually use throughout your life. You may not always need to budget like a college student, but having the ability to know how to manage your finances can help you reach your financial goals and keep the stress of debt at bay.