Money Tips for College Students

How to find your financial footing before graduation.

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College often means independence, a packed social calendar, and wacky classes in art history and political science. It’s also when many people experience their first credit cards, budgets, and debt. That makes it a good time to make sure you’re starting off your financial life on the right track. Here are five money tips for college students:

1) Build your credit report. Recent college grads with little credit history can get penalized when they try to take out a mortgage or auto loan. Lenders often want to see that you have experience with taking on credit and paying your bills on time. Get practice by using a credit card, or asking your parents to add you as an authorized user onto one of their accounts. As Rod Griffin, public education director for Experian puts it, “You need to demonstrate over time that you handle your debts well.”

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Meanwhile, avoid big mistakes that could hurt your credit history, such as failing to pay bills or racking up too much debt. (See The Dangers of Avoiding Credit.)

2) Limit (but don’t avoid) debt. Student loans can be key to helping you graduate, which is why they are so often referred to as “good” debt. Even much-maligned credit card debt can be helpful, as long as it’s used sparingly, in emergencies or for purchases (such as an interview suit) that help you land your first job.

To find the best credit card for you, look most closely at the interest rate, which should be as low as possible in case you end up carrying any debt from month to month. Don’t get too distracted by rewards offerings, which typically only add up for bigger spenders. Sites such as IndexCreditCards.com and CardRatings.com can help you compare and find the lowest rates. You also want to make sure to find a card with no annual fee. Some cards, such as the Discover Student More Card, are aimed specifically at college students and offer low rates, no annual fees, and cashback. (See The Best Credit Cards for College Students)

3) Practice frugality. Splurging on the occasional $5 late-night pizza slice won’t break the bank, but now is the time to establish some frugal habits that will serve you well throughout early adulthood. Learning how to cook is a good start, along with establishing a budget (mint.com can get you started) and even savings goals.

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4) Get (a little) help from your parents. Not everyone is lucky enough to enjoy this perk, but many college students are able to wrangle a little assistance from their parents. In addition to financial help, parents can also offer career advice, a place to stay, and home-cooked meals. Research from the Network on Transitions to Adulthood suggests that 20-somethings who are able to lean on parents in this way often find it easier to establish solid financial footing.

5) Start earning money through hobbies. Whether it’s spending a few hours a week in the library or tutoring Spanish on the side, college is a great time to experiment with earning money through your skills or hobbies. Even if you plan to make your career something else entirely, this kind of freelancing can give your budget some flexibility, as well as establish a good method of earning side-income once you’re in the workforce full-time.

The bottom line: Amid Ultimate Frisbee practice and socializing, college is the perfect time to find your financial footing.

Kimberly Palmer is the author of the new book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back.