Back to school: Learning how to budget in college
Dean Marchessault, President and CEO of American Eagle Financial Credit Union stopped by the Fox CT Morning Extra to talk about how college students can help learn to budget and build up their credit score.
Maintaining a budget will help students learn financially responsibility – it’s a lifelong skill we all should have. A budget should estimate income, estimate expenses and establish a savings goal.
Students should consider giving themselves a weekly cash allowance limiting the amount withdrawn from their bank accounts. This will help students rethink purchases before spending their money and help them avoid impulses.
Students should open a bank account to begin establishing financial independence. Begin by looking for a “student-friendly bank” to save and manage the money they’ve earned all summer.
Look for checking accounts that:
- Do not have service fees.
- Do not have minimum balances.
- Do not have ATM charges.
- Have free overdraft protection
If the student has credit cards, use them responsibly. Don’t charge more than you can afford to pay off each month.
You begin establishing credit as soon as you sign up for your first credit card.
Establishing good credit is really the first step in your financial future, as it will help you achieve major life milestones like purchasing a new car, renting an apartment and purchasing a home. Also, credit card fees add up and it’s an avoidable expense if you live within your means.
Students should select the right credit card provider. Open a credit card that has no annual fee, has low rates, and has manageable credit lines. Some credit cards, even allow students to earn bonus reward points with their purchases.
Students should look out for ways to save throughout the school year.
- Rent, buy used, and sell them back.
- Eat at home; make big meals with lots of leftovers. When shopping for groceries, clip coupons, shop for bargains, join free discount clubs, buy in bulk.
- Cell Phone: Get on a family plan instead of paying for separate service; get a group of friends together to share minutes.
- Utilities: Being eco-friendly can save you money
- Turn lights off when you leave the room, use fluorescent bulbs, shut off electronics.
- Internet: Share wireless with your housemates and split the cost.
- Always pay bills on time to avoid late fees!
- Bike, walk, carpool or use public transportation.
- Student discounts: Your student ID can get you discounts on movies, music, museums, live theatres, and at coffee shops/bars.
- Campus events
- Outdoor activities
- Live with others so you can split the cost of rent and utilities.
- Consider becoming a resident advisor – many get free room/board.
- Institutional grants are like loans that you don’t have to pay back based on merit and need. Students should fill out FAFSA in order to qualify.
- Scholarships: Institutional, government, and third-party scholarships
- Federal loans: have lower interest rates and better repayment terms and many (such as Subsidized Stafford Loans) don’t accumulate interest as long as you’re enrolled.
It is easier to save and control your expenses if you track how much you are spending and regularly monitor your bank accounts and credit card statements so that you are living within your means. It’s never too early to establish good budgeting habits so that you can enjoy the security of being a financially responsible adult.