5 Smart Money Moves for College Students

Check out credit unions, build a credit history, and get work experience.

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Last week, I wrote about why college students need a Roth IRA and one of the biggest reasons was that they have one of the most valuable commodities on the planet—time. There are many smart money moves college students can make, regardless of where they are in their careers, and many of these moves are important because of the time factor.

The earlier you can do many of these things, the more of an impact it can have on your financial life. Just as it's valuable to open a Roth IRA in your 20s, many of these tips will make you smile when you hit thirty, forty, or fifty years of age.

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Build a Credit History

Building a strong credit report and credit score is one of the most financially valuable things you can do for yourself and it's best to start as early as possible. As a student, it will be difficult for you to an unsecured credit card because you'll have little income and no credit history. Your best option is to apply for a student credit card or try a department store retail credit card. Both of those cards have low credit limits, which you can increase over time, and favorable approval requirements for people with little or no credit history.

By having and using a credit card responsibly, you can build credit that will prove invaluable when you go to apply for a mortgage or car loan. One word of caution—it's important to use it responsibly and to pay it off each month. Buy on the necessities and don't pay a dime in interest. Paying interest doesn't benefit you in any way, credit score or otherwise. It's better to have no credit and no debt than a weak credit history and thousands of dollars of credit card debt.

Work for Experience

College is always a difficult time for students because they have the freedom to do whatever they want, for the most part, but lack the finances to actually do whatever they want. I, like many students, took on part time jobs, work study programs, and internships to help fund all the fun things I wanted to do. The internships and jobs I found most valuable were the ones I took not for the paycheck, but for the experience I would have and the knowledge I would gain. You have your entire life to work for a paycheck, use the time in college to explore the things you enjoy doing and use it as a learning experience, not as a way to pay for that six pack.

Learn Investing on Paper

Very few college students have money to invest in the stock market but that's no reason why they shouldn't learn about the market. One exercise that I find very interesting is to open two paper trading accounts (try Marketwatch's Virtual Stock Exchange) and fund them with the same amount of money. For one account, just put it into an index fund. In the other, trade like you're a broker on Wall Street. After each quarter, or year, check the performance of each account. By doing this you can learn about the market, how much interest you personally have in investing, and the benefits of index investing.

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Open an Online Savings Account

Learning to save some of your money is crucial, even if you don't earn a lot. The best way is to make the savings automatic and invisible. The best way to do that is to open a high-yield savings account at an online bank and make regular, automatic deposits. Banks like ING Direct let you schedule automatic deposits each month, which is crucial in getting you to save without knowing it (and you get a great interest rate!).

Join a Credit Union

Credit Unions are fantastic because they are a lot like banks without that nagging demand, by shareholders, to make as much money as possible. Credit Unions are setup in a way that the depositors are the shareholders. Interest rates on loans are lower and interest rates on deposits are higher because the credit union is beholden to its shareholders, like you! There are a few more rules involved (for example, credit unions have to restrict membership on some level) but the relationship is very valuable because you actually build a relationship with the credit union.

When it comes time to get a loan, you'll get better rates, a trusted banker to talk you through the complicated issues, and an overall better experience. If you're a college student and do just one of the five (six if you count opening a Roth IRA) money moves mentioned in this article, you'll be much better off than many of your peers.

Jim Wang writes about personal finance at Bargaineering.com. When he's not tackling money issues, he's usually looking forward to his next vacation and writing about it at Wanderlust Journey.