6 tips for managing your money when you go to college

Learning to manage your money can be the most important lesson of college

The new college year is fast approaching and a whole new generation of students will be beginning an exciting chapter of their lives.

No matter what your academic choices are, college is an excellent time to learn one of the most important lessons of your life – how to take control of your own finances.

While good grades in college may set you up for a prosperous and fulfilling career, learning about money as a young adult can make a big difference later in life. It can also help ease the next big transition down the line – from graduation to starting a career.

As daunting as this sounds, there are simple, straightforward steps you can take to put yourself on the right footing and become a master at managing your money.

Learn to budget and make savings where you can

“College is a great time to master budgeting and saving,” says certified financial planner Shannah Compton Game, host of the Millennial Money podcast. “Create a simple budget where you track your money inflows and outflows and set guidelines for your spending.”

This can be quite a learning curve for many young people, notes Mark Wernig, CFP and principal at Dowling & Yahnke Wealth Advisors: “A lot of young adults are surprised when they actually take the time to think about what expenses they will potentially incur on their own.”

He adds: “It may or may not be the first time they’ve actually thought hard about what ancillary expenses may surface beyond just tuition – there’s everything surrounding living independently to consider.”

This offers an excellent opportunity to really look at where your money is going and you will quickly start to see trends.

It’s also a great way to see where savings could be made. Make sure to explore offers and special rates for students where applicable, as these can lead to much-needed discounts.

Apps are your friend

Tracking your expenditure needn’t be a chore, when there are reputable apps available for download to your phone or tablet that automatically track and classify what you spend.

Most of them allow you to set budgets or specify spending limits and will warn you when you approach any restrictions that you set yourself.

Beyond tracking spending, they can also help you set goals for paying off debt, saving a certain amount per month as a nest egg, or putting money aside for a specific purchase.

The apps can automatically sync with all of your bank accounts and credit cards – once given permission – and can give you a dashboard view of all of your finances. You can also customise reports if you have specific areas on which you would like to focus.

Become credit card savvy

“One thing I would encourage new college students to do is get a credit card in your name,” advises Autumn Lax, a certified financial planner at Drucker Wealth. “Developing good credit and good spending habits is one of the most important lessons for young people to learn.”

“Having no credit is a big obstacle, just like bad credit and you don’t want either,” she notes. “Many banks have credit cards designed for those just starting out. They are issued with small limits, so you can’t get into too much trouble!”

To limit use, Ms Lax recommends using a credit card only for specific purchases where you know you have the money in the bank already. This way you are less likely to get yourself into debt.

“The card can then be used as a credit building tool rather than a crutch for something you can’t afford,” she adds.

“Credit card companies love to prey on college students because they assume you don’t know how to manage a credit card,” warns Akeiva Ellis, financial planner and educator with Ballentine Partners, and a CFP Board Ambassador. “So if you choose to get a credit card – which I don’t think is a bad idea – understanding how credit works and how to maintain a credit card properly is going to be essential.”

Another possibility is to get a secured credit card through a parent. Mr Wernig at Dowling & Yahnke advises: “I always recommend utilising a secured credit card because it allows the oversight of an adult allowing a young adult to learn how to use credit responsibly, and not take it for granted.”

“Prioritising the responsibilities of credit is a great thing to do,” he adds.

Ms Compton Game concurs, adding: “Be aware of your credit score by using mobile apps like Credit Karma or Credit Sesame. If you’re new to credit, consider becoming an authorised user on a parent’s credit card or a jointly owned car loan to begin to build your score.”

Form a debt repayment plan

It is never too early to start preparing to pay back tuition loans or any other debt that you accrue during your time at college.

“If you’re going to use debt to fund your college education, start forming a debt repayment plan from the outset,” advises Ms Ellis.

“A lot of times people start college and they know they might have some student loans, but they don’t really know how much they’re going to need to take out or how much they have taken out,” she adds. “It’s important to get a sense of where you are going to land when you’re done with your program and it comes time to repay.”

Start investing

If you do manage to put some money aside during college, then one possibility is to start investing. Even if it is just small amounts you are setting aside, they can still accrue over time into the beginnings of a nest egg.

“College is a great time to start investing, even a small amount. Compound interest over a long period of time will serve you well the younger you get started,” says Ms Compton Game. “You can even invest in fractional shares of a company with many mobile apps on the market.”

If you have earned income from working a job while in college, it is also never too early to open a retirement account to start putting money away for the future.

Learn about financial aid

Finally, make sure you understand what financial aid is available and the different kinds of aids, scholarships, and grants that you might be able to access if needed – your circumstances may change over the time you are studying.

College is an expensive proposition for anyone, so make sure that you are aware of all the ways in which you might be able to reduce the overall costs.