Managing your money and attending university are two activities that don’t normally appear in the same sentence. But living away at school could be the first time you’re managing money in a serious way, so having a solid grasp of how to do it is more important than generally assumed.
While it is true that living on campus is something of a hybrid between childhood and adulthood when it comes to finances, this is also an important transition period where learning how to manage money is one of the most important lessons you’ll learn. In a very real way, managing your money while living in school on a tight budget is a dress rehearsal for what will come later.
There are various components to money management, and we’ll take a look at each individually.
Checking and Savings AccountsEven though you may not have a serious immediate need to have your own checking and savings accounts, university is an excellent time to begin getting your feet wet with both.
Even though you may not have regular bills to pay, a checking account is a valuable account to have if only for the transfer of funds from back home. But if you plan to work a part-time job while you’re in school, a checking account will become even more important.
Most employers today – even for part-time positions – pay by direct deposit. A checking account will function as your own personal clearing account for your paychecks. Your pay will go in, and the checking account will be the most liquid type of account to have it in. You can then write checks out of it, pay bills online, or access cash or make online purchases with your debit card.
While it may not seem that a savings account has a whole lot of relevance while you’re a student, it could represent a positive start to better things to come in your life. It’s never too early to begin saving money, even when you are in school. You may decide to save money from a part-time job, or even from gift money received for birthdays and holidays. The important thing is that you begin now to have some sort of a cash reserve where you can either build up money for future purchases or have it available for emergencies.
Credit and Debit Cards
If you have a checking account you’ll almost certainly be issued a debit card that will be attached to it. A debit card functions much like a credit card, except that your spending limit is the amount of money that is available in your checking account. It is an excellent type of card to have because it prevents you from spending more money than you have.
Credit cards are standalone accounts that allow you to charge up to your maximum credit limit. They have certain advantages over debit cards, including greater purchase protection, but they also hold the possibility of spending more money than you have. While that is most certainly a situation that can be avoided, having a small credit line as a student is an excellent way to begin learning to use credit responsibly at an early age.
Related: Student Credit Card Options
If you do want a credit card, you’ll probably need a cosigner if you’re under 18 (21 in the states), or don’t have an income to make the monthly payments. Just keep in mind that if you do have a cosigner, any late payments that you make on the account will result in a derogatory credit rating for the cosigner, as well as yourself. If your parents, or any other adult, is willing to take the risk of cosigning a credit line for you, it is critical that you make all payments on time.
Keeping Track Of Your Credit Scores
Credit scores are another issue that many students aren’t terribly concerned with. But since good credit will be important once you graduate, building a good credit score now will give you a solid running start.
Be sure to pay any credit obligations you have on time. This will include any recurring bills that you pay your self, such as your cell phone or any type of cable TV service that you use. Though utility type providers won’t give you a good credit rating with a good pay history, they are often quick to report derogatory information. Also important is that you do not overdraw your checking account. The bank may close an overdrawn checking account, and if there is an unpaid balance remaining on the account, they can report it as a collection.
Creating An Income – If You Need One
While you are at school you may be interested in taking a part-time job, or even starting your own online business (this is no longer uncommon for students!), as a way to pay some of your expenses. Not only will this provide you with a valuable source of income, but it may also help you after graduation when it comes time to look for a career position.
But you’ll also have to learn to manage the income that you receive from the job or the business, and that will take some practice. Try applying the following basic rules:
- Always anticipate a delay in receipt of your first paycheck – employers typically delay first paychecks by at least one pay period.
- Never spend money – or commit to spending money – before you actually receive it.
- Never spend more than you earn.
- Always put a little bit aside for a rainy day – this is where a savings account becomes important.
Not only will these steps keep you out of trouble right now, but they are all excellent practice for later on.
Use A Budget Software Template
Since you already have enough on your plate, juggling your courses, your studying and assignments, and possibly a part-time job or business, using budget software can help you keep track of your money with minimum effort.
We offer just such a budget software package on this site, called My Money University Money Interactive Student Budget, and it can streamline the money management process.
Managing money can be intimidating if you’re doing it for the first time, but it can be a lot easier just by having the right tools. A budgeting software package such as ours could make your student life – and you’re journey into money management – a lot less stressful. And more stress is the last thing you need right now!
How much time and attention do you give to money management as a student?