How to Save Money in College

How to save money in college?! The title of this post might seem laughable to you. Especially since you’re probably praying that your holey underwear will last till Christmas. (Thank goodness for your mama’s yearly Hanes stocking stuffer.)

But you can save money in college, and there are smart ways to do it. And those savings can even benefit you beyond your college years. Let’s explore how you can save money in college.

Step 1: Understand your goals.

First of all, what are you saving for? Maybe you’d like to propose to your girlfriend at the end of senior year or purchase a car once you graduate. Know what you’re saving for and why.

Zoom in on your immediate short-term goals. These might be anything you want to accomplish in the next week or over the next three months (or more), like:

• Pay your brother back the $50 you owe him.
• Save for textbooks for next semester.
• Have $1,000 in the bank for the next time your car’s alternator decides to crap out.

You may also want to identify some long-term savings goals, which could be six months away or up to retirement. These could be:

• Pay off student loans and credit card debt.
• Save for a down payment for a small condo after graduation if you’re really opposed to renting.
• Plan a special vacation after you graduate.

Be sure to write it down! There’s huge power in writing down your goals. Do a thorough exercise in jotting down your goals and be very specific. It can look something like this:

• Goal: Save $5,000 for a spring break trip by March 2020.  
• Goal: Pay off $30,000 in student loans by December 2025.

Finally, post those goals somewhere where you’ll see them every single day — on your bathroom mirror, on the refrigerator — wherever you can see it.

Step 2: Seek scholarships and grants.

Scholarships and grants are an excellent way to save money because you don’t have to pay them back. This is less money you’ll have to funnel toward college tuition. That might equal fewer loans to repay later, too.

Scholarships and grants are more accessible than you think. Visit your school’s financial aid office and talk to a financial aid professional in person. They are good resources to help you investigate available and upcoming opportunities. You’ll also learn more about your school’s application requirements and deadlines.  

Step 3: Set a budget.

Budgeting can be a groan-worthy endeavor… spreadsheets and subtraction… blech! But mapping out your goals will help you set a budget so you can get to the gold. In fact, track your spending to see where you’re spending your money.

Don’t alter your spending habits for one week. If you normally buy a latte and croissant from the coffee shop every morning, do it. Then decide which part of your budget you really can give up. Is that delicious breakfast costing you too much money? You could be eating yogurt and brewing your own coffee for $1 in your dorm room.

Set your budget so you know where you should be spending. And you can schedule that occasional professional brew as a reward for saving.

Can’t stand putting pen to paper? If that’s not your thing, it’s time to join the 21st century and use a budgeting tool. You can plan a budget and track your spending from the comfort of your smartphone. You can even increase your accountability by budgeting with a friend.

Step 4: Make money — and save it

You have so many resources at your fingertips. There are a gazillion ways to make money in college and save it.  

Internet money-making opportunities are plentiful. Do you have a knack for marketing? Social media managing? Photography? Blogging? Some other undiscovered skill you can hone? Use the internet to your advantage. 

You might even want to save more than you spend so that with the excess money you’ve banked, you can pay your tuition down. Why not start early? Let’s say you land an incredible sales job between classes and make extra in commissions. Why not apply that toward your tuition?

Invest while in college

So, that money you save has to go somewhere. Why not invest it? Stuffing your money under your mattress won’t benefit you.  Your money can (and should) be making money. A penny saved truly can be two pennies earned.

There are lots of different ways you can invest when you have some serious savings built up — or even if your savings only fills a backpack pocket.

Sometimes it’s a good idea to look for a reputable financial advisor or broker near campus who can help with your investment plans. They can introduce you to options, explain terms and guide you through selecting the best path for your savings goals. If you are more familiar with investing, you can find online brokers that offer services as well. Do your research carefully and ask financial advisors how much they charge.

Investment Options

Have you determined how much you have left over at the end of the month? Great! Put that money to work for you into an investment account. The amount you can invest per month might vary but at least you’ll have an idea of a general amount you’re able to contribute.

Do you have a short-term investing goal? You could always sling your money into a savings account. However, you might not be too into a savings account’s lackluster return. In that case, here are a few more options for short-term savings vehicles.

Short-Term Bond Funds

Short-term bond funds are safer investments because they usually mature in one to three years. They’re less volatile and invest in high-quality bond holdings across various issuers and industries. They’re a great option if you don’t want to risk your money.

Money Market Accounts

A money market account is like the hybrid cousin of a checking and savings account. You can make debit purchases and write checks. Best of all, you’ll earn a higher interest rate than you would through a checking or savings account.

Certificates of deposit (CDs)

CDs are fixed income investments that pay a set interest rate over a specific (fixed) time period. For example, you may be able to put money into a CD and take it out after three months and earn 1.75 percent interest on it. Typically, the longer you keep your CD in the bank or with your broker, the higher your interest rate will be.

Thinking way, way ahead? In that case, here are some great opportunities.

Roth or Traditional IRAs

Roth and Traditional IRAs are both good choices if you want to earmark money for retirement — even if it’s 40 or more years away! A Roth IRA offers excellent tax-free advantages, which means you don’t have to pay taxes on the money during retirement. For 2020, your total contribution to all traditional and Roth IRAs cannot be more than $6,000.

Index Funds

ndex funds can offer more risk, which is what you want when you have a longer time horizon. Index funds offer you a hands-off, diversified, low-cost method of long-term investing.

Exchange-Traded Funds (ETFs)

An ETF is a basket of securities you buy or sell through a brokerage firm on a stock exchange. Exchange-traded funds (ETFs) track an index and usually offer low expense ratios. This means you’ll get plenty of diversification. In other words, your money will be spread out instead of exposed to risk like you would be when your money is invested in a single stock. ETFs trade like a stock and cover all asset classes, ranging from traditional investments to alternative assets like commodities or currencies.

Mutual Funds

A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds also offer diversification. A disadvantage of mutual funds is that they’re typically more expensive to invest in because they’re professionally managed. You can end up paying a fund manager a lot of money to manage those mutual funds over a number of years!

Stocks

Stocks are securities that represent an ownership share in a company. They’re much riskier than funds that are bundled together.

Parent tip: Consider offering match your student’s money in an investment account if you want to motivate your college-aged kiddo! 

Save Money in College Like a Pro 

Being successful in college is about more than getting the grades you need for graduate school. We’ve given you some ways for how to save money in college. Obviously, you need a way to start your savings. Whether you get a part-time job, an internship, search for a work-study job, dive into a creative side gig or sell some of your stuff online, there are lots of ways to make it happen.

Learn to be smart with your choices and multiply your resources. You can be financially savvy starting now.  With a little know-how and determination — and planning ahead! — you can make saving money in college happen. You can even set your sights on post-college financial success. Your 60-year-old self will thank you!