When it comes to student finances, reining in spending deservedly gets the majority of the attention in relation to saving. If a student gets out of school “at zero” or debt-free these days that is usually considered a major victory; therefore the whole idea of saving sort of gets swept under the carpet. The other major consideration for most parents and/or teachers is that students sort of have a bad habit of spending lots of money that isn’t theirs, so that is priority number one in terms of setting good personal-finance habits. The interesting thing I’ve noticed though, is that successful people often manage to save money as they go through school.
Saving money doesn’t have to refer solely to graduating with a positive balance in your bank account, it can mean something as simple as saving up all summer in order to fully pay your tuition and textbooks, or making sure you have enough in your account to cover a car repair if you depend on a vehicle to get you around. Ideally of course these savings habits would begin to much earlier in a person’s life. I remember as a kid I had to save my weekly allowances for like six weeks in order to get the newest video game. It may sound ridiculous to compare such small scale stuff like that to thought processes as an adult, but I’m convinced that there is some connection there. I’m pretty certain that those sort of things taught me the value of delayed gratification, and often that can be half the battle of personal finance right there. If you learned good savings habits as a child, and then began to put away some money for post-secondary education in high school, chances are you will be just fine in university and then on into adulthood. If you haven’t had any experience with savings yet, and you sleepwalk through your post-secondary journey depending on student loans, lines of credit, and credit cards, then in my opinion this doesn’t set you up too well for the working world. Not only are you behind the debt eight ball as you start your working life, but you’ve already trained yourself to live beyond your means.
Making a Lot of Money Is Possible – Just Not Usually Fun
It is worth noting that it is actually possible to graduate with money in the bank. My little brother will graduate later this year (hopefully!) and he reckons that on graduation day he will have $10K or so in the bank. How did he manage this? He got a summer job that is pretty unpopular and relatively tough to do. He jumps into forest fires and fights them for a few weeks at a time. He works sixteen-hour days, and sleeps in the bush for several nights on end. He makes around $25K each summer, but only gets about 5-6 days off. The interesting thing is that my brother isn’t particularly good with money, nor is he an all-star student that grabs tons of scholarships. Heck, he doesn’t even work a part-time job during the school year. He just found a path that works for him. That $10K will give him a huge boost as he starts his career no matter which direction he goes (which he’ll probably need as an Arts grad).
Time – The Most Precious Asset of All
The magic of compound savings works best when you give it time to work. Warren Buffett’s savings story is well-documented. The Oracle of Omaha realized at a young age that the key to this whole capitalism thing was getting capital and then using it wisely. If you have the discipline to save for major purchases while in school, that will save you a ton of interest on borrowed money, and probably several financial headaches. If you have the discipline and ambition to actual save money as you go through your education, then you’re opening up a whole new world of options such as paying down a house early and efficiently, or even early retirement. I definitely wasn’t able to do this (I was one of those “graduate at zero” types) so I guess this is one of those, “Do as I say, not as I do pieces,” but I think it’s an interesting goal to think about, if slightly out of reach for most people.
Was there anyone out there who was in the black when they got out of school? I know this is getting harder and harder to do. Do you ever run across those people from our parents’ generation tell stories like, “Back in my day I worked through the summer and saved the money, then worked a little during the school year to pay for my education. When I got out I already had a 20% down payment all lined up to buy house with.” Gee thanks pops. Maybe worth mentioning that your tuition was like three dollars and a bag of potatoes, and your house cost as much as a kitchen table and chairs do today?