A Comprehensive Personal Finance Guide for College Students 

A student’s life is not an easy one. However, studies and grades are only one part of the picture. Aside from striking a healthy balance between your studies and, if applicable, a job, you’ll also need to consider how your money is spent. Even if you are fortunate enough to receive a scholarship that covers the entirety of your education, the college will still cost you money. You’re in luck because we’re here to help students understand every aspect of personal finance so they can manage their money effectively before, during, and after class.

College students must practice responsible financial management

As a student, understanding fundamental financial principles and being able to successfully plan for and manage your resources can make or break your future. A significant number of graduates lack a strategy for managing their finances or outstanding school debt.

They obtain a stable job and a regular paycheck, increasing their standard of living. As a result, it will be much more difficult to save money, make investments, and pay off debt.

On the other hand, if you start building a strong financial foundation while you are still a student, you can position yourself to deal with your finances more easily and successfully in the future. After all of that, let’s get to the most important things to remember when it comes to managing your finances as a student! (Don’t forget to read our student tips on navigating the challenges of college life and more!)

Budgeting

What should be the first thought of a student? Budgeting. After all, you don’t want to spend your senior year eating only the standard bowl of ramen for every meal. If you create a budget, you will be able to establish healthy financial habits and ensure that you have enough funds to pay for your life beyond the cost of your education. According to Hedgefund, if you want a better picture of where your money is going, a budgeting app can help you link all your accounts, keep tabs on your spending, and categorize your different expenses.

How to budget and keep track of your expenses

When you create a budget, the first thing you will do is keep track of your spending. Because there are several approaches to take, choosing the one that is most convenient for you is the most important consideration. Others may choose to make a list of their purchases, but the vast majority of people use spreadsheets to keep track of all of their financial transactions.

We strongly advise you to review your credit card account statements every month to keep track of what you’ve spent and where your money has gone. After you’ve calculated your fixed costs, you’ll have a better idea of how much money you have left over for discretionary spending each month (such as payments for tuition, rent, meal plans, and so on).

Granting them some discretionary spending authority

It is advantageous to be aware of the precise amount of money spent each month on fixed costs because this allows you to save some money for more frivolous purchases. After all, having fun is an important part of the college experience. Set aside some money from your paycheck to save for late-night pizza or drinks with friends. Just make sure it’s not too much; we’ll go over this further in the section on saving.

Look for ways to save money

You can make your finances more flexible and have more money on hand by lowering the prices of the items you buy. There are numerous methods for accomplishing this, and some of them may already be second nature to you. We also have some fantastic suggestions for students regarding passive income to help you bring in some extra cash.

Always buy used textbooks rather than new ones (and resell them when you’re done), skip the expensive on-campus food plan and cook for yourself instead, or shop at thrift stores to save money on new clothing. Also, don’t miss our essential advice on how to create a budget as a college student that you’ll stick to.

Provisions for unanticipated events

When making a financial plan, one of the most important things to remember is to set aside some money in case of an unexpected need. You may have to give up some of your spending freedom as a result of this, but it will be well worth it in the long run.

Why it is critical to have reserves for unexpected events

Only 41% of people in the United States have enough savings to cover a $1,000 emergency expense, which could put you in a dangerous situation. To put it another way, one never knows what kind of unexpected medical or repair bill will arise.

If you don’t have enough cash on hand right now, you may have to withdraw funds from your college savings account or use a credit card to pay for it. Doing so could have serious consequences for your future, such as lowering your credit score or putting you in debt.

Set aside a small amount of money each month

The question now is, how do you start saving for an emergency? We recommend putting aside a small amount of money at a time, perhaps 10% of each paycheck from your work-study program. You’ll be able to continue paying your bills and having fun this way, while also being better prepared for the future.

When you first start working, your top priority will be to save enough money to cover three to six months of expenses. Given that you are still a student, competing for a $1,000 prize is a good place to start. Another option is to look into programs that will round up all of your purchases and automatically put the extra money into savings for you.

Create a separate savings account with a high interesthigh-interest rate for emergencies

You must ensure that your money is kept in an easily accessible location with a high level of liquidity in case you ever find yourself in a situation where you require immediate access to it. As a result, a savings account with a high rate of interest may be a viable option to consider. As a result, the money you’ve set aside will earn interest for you.

What matters the most? Unless there is an actual emergency, you should never make any changes to this account. Also, avoid checking accounts because you may be tempted to use the debit card associated with them when times are tough.

Credit-granting cards

Let me ask you a question about credit cards: do you already have one? Unfortunately, research has revealed that 36% of college students in the United States have credit card debt that exceeds $1,000. Yikes! Credit cards, on the other hand, can be quite beneficial if used responsibly.

The Benefits of a Student Credit Card

Student credit cards are an excellent way to build a good credit history. Because you are a student who hasn’t shown much interest in creditors, your credit score will be either very low or non-existent. You can quickly improve your credit score by getting a credit card, making a few purchases with it, and then paying off the entire balance each month. Credit cards, in addition to assisting you in developing responsible spending habits, can facilitate the accumulation of cashback and other types of rewards.

What to look for in a student-oriented credit card

Do you believe in the concept of a credit card? Good! You should now know what qualities to look for in a card. Believe us when we say that no two cards are alike. You should look for student cards that are tailored to your specific circumstances because they differ from those of others.

How does that appear? With a good student card, you may be able to earn prizes for maintaining a certain grade point average. Furthermore, there will be no annual cost associated with using it (because, let’s be honest, who has room in their budget for that?).

If you need to buy a large amount of computer equipment but can’t afford to pay for it all at once, the introductory annual percentage rate (APR) may be zero percent. And will reward you with points for your regular purchases (1X point for every dollar spent is common, but more than that is great).

Advice on using a credit card to make purchases

There are several approaches to using a credit card responsibly, including not spending more money than you have, always paying off your balance in full, and only using a portion of the credit available to you. If you do not follow these suggestions, you will not only have a lower credit score, but you will also be in a lot of debt.

Remember that your credit card’s annual percentage rate (APR) will be applied to any amounts that remain unpaid at the end of each billing cycle. This means that a $100 charge could easily balloon to hundreds of dollars over a few months. Check out our suggestions for reducing the credit card debt that comes with college.

Loans for students

Student loans, eh? You’re probably conflicted about how to interact with them. You can’t enroll in classes unless you have them, but you dread the day when you have to start paying for them. We will go over the details in greater depth so that you have a better understanding of how they work.

Student loans can come in a variety of shapes and sizes

The two most common types of student loans are federal and private

Private student loans are less common, but they frequently offer better terms than federal student loans (which come from a bank and are provided to you based on your credit score). Direct subsidized loans, direct unsubsidized loans, and direct PLUS loans are the most common types of federal student loans.

Direct unsubsidized loans are made available to students who demonstrate a significant financial need; however, interest does not begin to accrue on these loans until six months after the student has graduated. Anyone can apply for a direct subsidized loan; however, interest will begin to accrue on the balance the moment you borrow money. Finally, a direct PLUS loan is a loan obtained by your parents to assist you financially.

Are you willing to cosign?

Even if your parents are unable to obtain a Direct PLUS loan, they can still assist you by cosigning for a loan on your behalf. Cosigning is the process of getting a second person to sign off on a loan as a guarantor. What are the benefits? If you apply in this manner, you will be able to obtain a much larger loan.

On the other hand, the disadvantages can be quite severe at times. To begin, if you fail to repay the loan as agreed, you will not be held solely responsible; the cosigner will also be held accountable. This can have a serious impact on their credit score and put them in a difficult financial situation. Cosigning is an option that, at the end of the day, you should thoroughly discuss with everyone involved before proceeding.

Paying off your outstanding student loans

You are not the only one in the United States looking for help with student loan repayment; as of the end of 2020, students across the country owed a total of $1.704 trillion in student loans. One thing we recommend is negotiating a payment schedule that meets your needs. The standard repayment period for federal loans is ten years; however, if your income is sufficient, income-driven repayment programs with longer terms are available.

Making additional payments on your student debt is, without a doubt, the most effective strategy for dealing with your debt. Even if you only make an extra $100 per month on a $10,000 loan with a 4.5 percent interest rate, you will finish paying off the loan five years sooner than expected. If all other options have been exhausted, refinancing may be considered.

When you get to this point, it means you’ve decided to pay off an existing loan with a new loan, hopefully with better terms. If you’ve been working to improve your credit score since taking out your first loans, this could be a wise decision. This post will provide you with more specific advice on student loans.

Investing

Investing in the stock market may not appear to be the easiest thing to do, especially if you have a significant amount of student loan debt waiting for you once you graduate. However, there are numerous ways you can put your money to good use while earning your degree.

Student savings plans

Student savings accounts are an excellent place to put your money while earning some interest. What should you look for? Make certain that any account you open does not have a minimum balance requirement or fees.

Because you’ll be away from home for the majority of the semester, online functions may come in handy. Furthermore, internet banks frequently have higher interest rates, providing you with more passive cash.

Bonds or CDs

CDs or bonds are useful for money that you don’t need to touch for a few years if you can get a good rate. A CD stands for a certificate of deposit, and it is a type of investment that provides you with a fixed interest rate for a set period (usually between three months and five years). At the end of the period, you will receive your money back plus interest.

Bonds are similar, but they aren’t issued by banks. They are instead issued by the government or other companies seeking to raise capital. They, like certificates of deposit (CDs), have fixed maturities and interest rates.

Brokers who are free or low-cost

Free and low-cost brokers can be useful for purchasing stocks that you believe will rise in value in the future. Just keep in mind that stocks are not FDIC-insured, which means you could lose all of your money if the company you’re investing in fails. Still, if you’re eager to experiment, try Acorns or Fidelity Investments, which allow you to get started with no additional fees.

Insurance

Insurance is one aspect of student financing that is frequently overlooked. That’s because it’s typically used only in worst-case scenarios, which none of us want to consider. However, it is best to be prepared for the unexpected.

Health insurance for students

Before enrolling in college, you will almost certainly be required to obtain health insurance. Even so, up to 9.2% of college students lack health insurance. Fortunately, current US regulations allow you to remain on your parent’s healthcare plan until you reach the age of 26.

If your parents do not have insurance or you do not qualify for their plan, you should look into the Healthcare Marketplace. You’ll be able to browse a variety of options and select a plan that fits your budget.