6 Money Tips for College Freshmen
Starting college often brings the excitement of making new friends, developing tools to excel in your professional career, and adapting to living on your own. There is an additional lesson to be had—learning how to manage your finances. The practices and habits you develop during your college years will help in the future when it’s time to make critical financial decisions, such as buying a car or a house. By examining the following money tips for college freshmen, you can help prepare yourself for smart financial decision-making.
Start Building Credit, Responsibly
Once you graduate, an important number in your life is your credit score. This three-digit number affects everything from your ability to qualify for auto financing to securing an apartment lease—and sometimes even your prospective employer will check it. Since the length of credit is a determining factor, it is important to demonstrate during your college years that you make payments on time. The easiest way to do this is to use a credit card (ideally with a low limit) and pay it in full every month.
Avoid Credit Card Debt
Another critical money tip for college freshmen is preventing yourself from sinking into credit card debt. This is common because as you adapt to living solo and making your own decisions, it is very easy to splurge on fun activities or frivolous purchases. Before you know it, the credit card bill is much higher than you planned, and you might not be able to pay off the full amount. That leads to interest compounding the remaining debt, which can quickly snowball into maxing out your credit card and harming your overall credit score.
Stick to a Budget
The most effective way to avoid falling into debt is to stick to a budget. Doing so requires responsible decision-making. The first step is to plan a budget detailed enough that you know exactly what your monthly expenses are. Second, you must determine the difference between a legitimate need and a want-to-have. For example, you may have a medication that you take for your health—that is a legitimate expense. Buying the latest popular video game is a want … and if it doesn’t fit into your budget, you need to delay or avoid that purchase.
Build a Small Emergency Fund
It is a fact of life that situations or events occur with little or no warning—and you must prepare for the unexpected. For instance, you might discover one morning your car won’t start and you need a new battery. This doesn’t happen often and likely isn’t factored into your monthly budget. Therefore, having a small amount of money set aside as an “emergency fund” will help you handle that expense.
Learn How to Save and Invest
Another critical money tip for college freshmen is to educate yourself on how to save and invest. Since you are not yet in the workforce, this may seem premature but learning the ins and outs of investment strategies (such as a Roth IRA) in advance of your professional career can only help once you start earning income. This will also help prepare you for larger purchases and expenses, like buying a house, paying for children’s tuitions, and enjoying retirement.
Have Regular Financial Check-Ins
An often-overlooked money tip for college freshmen is to conduct regular financial check-ins. Depending on your expenses, you will need to analyze whether your budget needs adjusting. You can also benefit from keeping an eye on your credit score. Many online resources are available and free to use for this purpose.
As with most financial planning efforts, the key is preparation and developing smart, responsible habits. By following these money tips as a college freshmen, you can gain knowledge and wisdom that will last the rest of your life. For more information on how to prepare your financial future, visit the Managing Money On Your Own section of PlainsCapital Bank’s website.