The fall semester is well underway, and it's an exciting time for college freshmen. Many are navigating a new campus environment, social circles and how to live independently for the first time. College is also synonymous with young people assuming a greater responsibility for managing their own money – away from the reliable security of mom and dad's wallet.
These six easy tips will help college students make the grade when it comes to forming a strong foundation for money management.
1. Create a budget. This is incredibly important. List monthly income sources, including savings, wages and parental allowances, and then write down estimated expenses for the month. It isn't easy to identify college living expenses in advance, but you should try. Take costs such as school supplies, food outside your meal plan, personal care items and laundry into account. Then, try managing your budget and tracking expenses using an online personal finance management tool like Mint.com, which helps you easily create and stick to a budget.
2. Separate wants from needs. Is $30 per week for gas a "need" or a "want?" How much should you budget for non-meal plan food? How much will laundry cost? After a few months on campus and tracking expenses, it becomes easier to distinguish wants from needs and put a plan into action. Some students give themselves a weekly cash allowance rather than carry a debit card, and when that week's allowance is gone, they wait until next week for more "wants."
3. Set up a checking account. Banks usually cater to college students by offering free checking and saving accounts, which allows students to avoid fees on withdrawals or fund transfers. Shop around to find a bank with convenient ATMs near campus to eliminate out-of-network charges. And keep in mind that when an out-of-state check arrives (say, from grandma), it may take a few days to clear, so keep an eye on the account balance before spending against it.
4. Use, don't abuse, credit cards. In 2012, 70 percent of undergraduate students had at least one credit card, according to the International Journal of Business and Social Science. College is a great time to start building credit (which is crucial for leasing an apartment, purchasing a vehicle and even landing a job post-graduation), but it's easy for many to amass a large amount of debt while in school. It's important to understand the difference between credit building and overextending. If you don't know, visit a business professor during office hours and ask!
5. Do your homework on loans and financial aid. College graduates tend to have a difficult time balancing ever-growing student loan payments against declining wages. Understand what the exact size of your student loan debt will be upon graduation, and come up with a plan for how you will pay it back. Even if it involves moving back home for a bit (to preserve your sanity, give yourself a specific timeline for when you plan on moving out), it will be worth it in the end.
6. Shop smart for textbooks. Textbooks are one of the biggest college expenses – a brand new edition of a biology book can cost upward of $300. Bypassing the campus bookstore at the start of each semester is an easy way for college students to save an abundant amount of money. Invest in a Kindle or iPad and download your books – they are less expensive that way. Or look for books in used bookstores or online. Even with shipping costs, the price can turn out to be significantly cheaper.
The bottom line: College can be expensive, but learning the basics when it comes to money management now means you don't have to graduate with massive debt. Laying the groundwork for smart budgeting and spending habits in college enables you to handle responsibility and learn the value of accountability – lessons that are just as important as knowing microeconomic theory.
Hitha Prabhakar is a consumer spending and retail analyst and Mint.com spokeswoman, the leading web and mobile money management tool that helps people understand and do more with their money.