For new college students who don’t know financial basics, Money 101 classes are easy. The homework, though, can be a killer — a credit killer, that is — if you don’t practice your lessons.
Overspend, run up too much debt, and you’ll flunk. And it will go on your record — and stay there for a long time.
But mastering these lessons not only will get you through your college career, they’ll also help you long after you graduate.
Fortunately, most college students do manage their finances conscientiously, says a study from the student loan bank:
- More than 3 in 4 pay their bills on time.
- Six in 10 never spend more money than they have available.
- More than half save at least some money every month.
- One in 4 has an emergency fund.
Follow these lessons, and you’ll ace your own money course.
Lesson 1: Track your expenses
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“I spent how much?” asks any college student who runs out of money by the weekend.
“The first step to savings is understanding where your money is going,” says Todd Pietzsch, spokesman for , Washington state’s largest credit union. BECU offers an online and mobile app called Money Manager.
This tool, or other free aggregating apps such as , and , you can view all of your checking and savings accounts in one place. They let you set up budgets and track your spending by category. You’ll learn quickly that in the absence of home-cooked meals, a couple of pizzas and those Chipotle runs really do add up.
Lesson 2: Make a budget
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Once see you see where your money really goes, make a plan for your money before it’s deposited into your bank account. A budget will reduce the risk of money mismanagement.
Think about what you typically spend money on, your expenses:
- Gas/Uber/public transportation
- Car insurance
What’s it total in a week, or a month?
Think about where that money comes from, your income:
- Allowance from parents
- Drawing from savings
Which is higher? If your expenses are higher than your income, you’re heading for trouble. If your income is higher than expenses, you can put the balance into your savings account and use it for exceptional items and long-term goals.
Take control of your spending. Think about your what your spending buys you. Are you really going out with pals to Starbucks for the coffee or the company? If it’s the company, maybe you can host a potluck game night in your dorm instead.
Budgets and other tools will help you avoid spending sprees that you cannot afford.
Lesson 3: Pick the right bank
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Look for banks or credit unions that offer low fees or no fees for college-student account holders. Also, you may need a bank that has branches at home and at school — or at least one with free ATM service in both places.
Joining a credit union has many benefits. As member-owned, not-for-profit institutions, they may be more customer-oriented than the big banks. Unlike many banks, credit unions frequently offer free checking accounts with no minimum-balance requirement.
Credit union benefits may include:
- Higher return on a savings account.
- Lower interest rates on loans.
- Less stringent loan qualification criteria if you’re already a member.
Bank fees to avoid: Monthly service fees, ATM fees, ATM balance inquiry fees, overdraft fees, overdraft protection, online bill pay.
Lesson 4: Use free payment apps
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Cash is not extinct, says Sallie Mae, but some days it seems like it.
Nearly 9 in 10 college students carry cash and use it for in-store purchases of $20 or less, Sallie Mae says.
However, more than 3 out of 4 students have used mobile payments. And the use of mobile person-to-person (P2P) payments is growing. If you’re out with friends and one picks up the bill, the others often chip in their shares by using an app on their phones. Keep your money in an app account or in your bank. Remember, though, payments usually are not free when used with merchants.
While PayPal-owned is the most popular among college students, , and , which works with your own bank’s mobile app, are among growing payment platforms.
Lesson 5: Debt is not your friend
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Don’t borrow any more than you absolutely have to on student loans. College is expensive, even before you start paying interest on borrowed money.
The average price of attending a public undergraduate institution in the 2015-16 school year was $19,189; for a private school, $39,529, according to the .
In 2010, outstanding student loan debt surpassed credit card debt, and the gap continues to grow. Outstanding student loan balances totaled $1.3 trillion at the end of 2016, according to the .
While it’s important to establish credit by getting a credit card, think before you borrow. Don’t use a new credit card unless you can pay it off in full every month or if it is an absolute emergency (which does not include the urge for late-night pizza or lattes).
Credit card debt can lower your credit score, limiting your chances of obtaining loans or other lines of credit. A poor score can even get you rejected from an apartment rental.
Credit card fees to avoid: Balance transfers, cash advance, late payment, returned payment, over the limit, credit limit increase.
Lesson 6: Understand your credit score
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Your credit score, or , is derived from credit reports that detail your personal information, employment history and your open and closed credit accounts.
You can get a free copy of your credit reports annually, one each from TransUnion, Equifax and Experian credit reporting agencies, at .
Your FICO score is mostly based on payment history and available balances, but also length of credit history, new credit and types of credit.
Many banks and credit card companies let you check your FICO score for free, or at least at no extra cost beyond whatever fees you’re already paying. Discover Card lets you check for free even if you don’t hold one of its cards. Credit Karma lets you check your , a credit score derived from TransUnion and Equifax.
The higher your FICO score, which can range from 300 to 850, the easier it generally is for you to obtain credit, and possibly at lower interest rates. Score below 579, and you may be denied credit, .
Lesson 7: Find freebies and bargains
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When you shop, look for stores, theaters and concert venues that offer student discounts, which may require your student ID.
Plenty of deals are out there for college students ― all you have to do is look. Ask at restaurants, museums and concerts if there’s a student discount. Computer and electronics companies often offer special deals to college students. And look for books online, where it’s easy to compare prices, before heading to the campus bookstore. For more ideas, check out “11 Ways to Save Big on College Textbooks.”
Campuses are rife with free and low-cost entertainment including concerts, dances, parties, art galleries and comedy shows. Or go to a free lecture or reading.
Many campuses also offer free or low-price health clinics and prescription medicines.
Get apps for places you frequent anyway. For example, with the , every seventh Big Gulp, Slurpee or other drink is free; at through Sept. 30, get a free breakfast with its app.
lists offers for free food, drinks, toiletries and more.
Lesson 8: If money is tight, get a job
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If you work a part-time gig while going to school, not only will you make money, but you’ll also have less time to spend it.
If possible, pick up a part-time gig, work-study job or internship in a field that interests you so you can explore it while making a little cash. A low-level job in the accounting department may pay peanuts, but it could enable you to shadow professors and get a feel for the industry.
A job or work-study gig can help you focus on your goals for what will happen after graduation.
Lesson 9: Keep an emergency cash stash
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Even if it’s just a little bit, an emergency fund will give you a cushion when things go wrong — and they will. A cash stash may be all that separates you from debt.
Among the unanticipated situations you may face:
Delayed financial aid payments: Mistakes occur, and they can hold up the process.
Auto repairs: If your car breaks down and you rely on it for transportation to school, you’ll need a way to get it back up and running.
Medical expenses: Unless your insurance coverage comes with a low deductible and small co-pays, expect to fork over a nice chunk of change if you need medical care.
Check out: “9 Ways to Build an Emergency Fund When Money Is Tight.”
Lesson 10: File your taxes
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Did you earn money? Even if you are a student, you aren’t exempt from filing a tax return if you had income, . If you’re a dependent on someone else’s tax return, you must file a separate return if you earned more than $6,300. But even if you didn’t earn that much you’ll likely want to file a return if taxes were withheld from your pay at any job. You may be due a refund.
The IRS has a handy to help you determine whether you must or should file a tax return.
Also, if you were self-employed and earned more than $400 by, say, tutoring, lawn mowing, baby sitting or Uber driving, you will have to file a federal tax return and pay self-employment tax (Social Security and Medicare), the IRS says.
If you’re a student claimed as a dependent on your parents’ return, you cannot claim a personal exemption for yourself on your tax return.
The IRS has a on how to file as a dependent.
Students do get some breaks, as well as . Tax deductions reduce your taxable income. Tax credits reduce the amount of income tax you owe and might boost your refund.
The IRS notes two types of you can claim: the refundable (formerly known as the Hope Credit) and the . Deductions for interest paid on student loans are available but are being phased out.
Both and have certain qualifications and conditions.
You might have nontaxable income. which includes scholarship and grant money used for tuition, fees or other qualified educational expenses (books, supplies, equipment and other required course materials, but not rent and food).
Lesson 11: Don’t be stupid
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“Keeping up with the Joneses, trashing your credit, spending money you don’t have. It only takes a few seconds to blow it, and it takes years to fix it,” advises Stacy Johnson, Localpizzadeliverywalledlakemi.info financial expert.
Invest in your education, instead of accumulating stuff.
And stay with us at Localpizzadeliverywalledlakemi.info for more critical information about handling your money.
What tips do you have for college students managing on a budget? Share in comments below or on our .
Jim Gold contributed to this post.