Money Mistakes College Students Make

September 16, 2022
September 16, 2022
Money Mistakes College Students Make

Many people believe college is a time of freedom and exploration – a time to figure out who you are and what you want. While this is partially true, it's also a time when you must start making important decisions that will impact your upcoming life. How you handle your money is one of them.

If you're a college student, you know that money can be tight. Between room and board, tuition, and entertainment, it's easy to run out of cash fast. Unfortunately, while there are plenty of ways to save money in college, there are also a few costly mistakes that many students make.

We've highlighted a few common money mistakes students make and shared tips for avoiding them.

No Budgeting

Budgeting is the straw that stirs the drink when it comes to financial success. You have to know where your money is going if you want to make ends meet.

It's simple: if you don't budget, you will overspend.

Unless you want to eat eggs and ramen noodles for the rest of your life, sit down to figure out where your money is going each month.

There are several ways to budget your money. For instance, you can use the tried-and-true envelope method or go digital with an app like Mint. No matter your chosen method, ensure every dollar has a purpose.

Excessive Use of Credit Card

Credit cards are helpful when used correctly, but they can also be a quick way to rack up debt. If you're not careful, it's easy to overspend with a credit card. Before you know it, you're buried in debt and struggling to make monthly payments.

One of the tips for getting out of debt is to avoid using your credit card unless it's an emergency. You must also be sure to pay off your balance in full each month. If you can't do this, you're probably spending too much.

It's also important to shop around for a credit card with terms that are favorable to you. There are multiple options, so find one that charges low interest and has no annual fees.

Impulsive Buying

Younger people have a higher tendency to make impulsive purchases than older people. Of course, there will always be times when you want to splurge on something you don't need. But if you're constantly buying things on a whim, you can soon get into debt. One way to avoid this is to give yourself a 24-hour waiting period before making any big purchases. It will give you time to consider whether or not you need the item and help you avoid buyer's remorse.

Not Saving for the Future

When you're in college, thinking about the future can seem boring. After all, there's so much going on in the present. But if you don't start saving for the future, you'll regret it later.

One of the most practical ways to save for the future is to invest in a 401k or IRA. If your employer offers a 401k match, take advantage of it. You can also set up a direct deposit from your paycheck so that you're automatically saving each month.

Another way to save is to open a savings account and make regular deposits. You can also set up a budget to automatically transfer a certain amount of money into your savings account each month.

Bad Investment Choices

Students usually make the mistake of putting all of their financial eggs in one basket. Since you do not yet have the freedom to generate your income, you must exercise even more caution with your investments! Otherwise, you run the risk of losing it all.

Some common investments that students make are:

  • Paying for tuition with student loans
  • Investing in penny stocks
  • Trading cryptocurrency

If you want to eliminate the risk of making this mistake, then spread your investments across different asset classes. For example, you can invest in stocks, bonds, and cash. Then, if one investment goes bad, you will still have others doing well.

Not Having an Emergency Fund

An emergency fund is your knight in shining armor for unexpected expenses. It could be anything from a car repair to a medical bill. 

Without an emergency fund, you will fall back on credit cards or loans to cover unexpected costs. It can be difficult to save money when you're in college, but it's essential to start as soon as possible. 

Ideally, you should have enough dough in your emergency fund to cover at least three months of expenses. If you can't save that much, aim for $500 to start. Once you have that, you can gradually increase your savings until you reach your goal.

Opting for an Expensive College

Global ranking, fancy buildings, and a good reputation come at a price. While there are some benefits to attending an expensive college, it's not always the best choice financially. There are plenty of great educational institutions that cost a fraction of the price. So, choose the right school for you, not the one that's the most popular or has the highest price tag.

And if you're worried about getting a job after graduation, don't be. The most important thing is getting a degree from an accredited institution. Employers care more about that than where you went to school.

Not Working While in College

Many students have it in their minds that they should focus all their attention on studies and forego working while in college. It's a cookbook recipe for disaster!

Working while in college has many benefits.

  • It offers you a chance to earn some money to help pay for tuition and other expenses
  • It helps you gain work experience in your field of interest
  • It gives you an opportunity to network with professionals in your field

All these things will give you a leg up when you enter the job market after graduation. So, if you can swing it, working while in college is a good idea.

Ending Note

Making these money mistakes in college can set you back financially and make it difficult to get ahead after graduation. However, if you value the opportunities that show up while you're still in school, you can make the most of your experience in college without putting your future at risk. Value your scholarships and bursaries, work while you study, and be extra careful where you put your money. If you start accumulating debt as early as college, it will be difficult to get out of it. So save up! And have a fantastic time in college! Cheers!

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