How to Manage Your Money as a College Student

Five habits that will shape your financial future

If you are a college student, then you have a great opportunity to set yourself up for financial success later. It is important to take these times seriously because the mistakes you make in college can follow you for a very long time—even the rest of your life.

Too many students are graduating in the red and facing difficult financial choices when they are just starting out. Take steps to avoid this by focusing your attention on five areas that have the potential to influence your financial future.

01 of 05

Create a Budget

College student
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Your first step is to create a budget for college. Even if your parents are paying for everything, you should still create a budget for your anticipated expenses and then stick to it. It will keep your spending on track and get you into the habit of planning your purchases. And if you're paying for your schooling yourself, whether with the use of student loans or by working, it's even more important to create a spending plan for your money.

As long as your essentials are covered—rent or room and board, food, tuition, books, supplies—you can still enjoy your college years. Putting off some of your wants until you've got your first real job (and real paycheck) may be necessary in order to abide by your budget. Still, if you can make a little room in your budget for fun, do so! When you've made a plan for the money you have, you can rest easy knowing your priorities are covered.

It's not always easy to live on a college student's budget, especially if you're paying your own way. But by setting realistic limits on your spending categories and then sticking to them, you're setting yourself up for good spending habits.

02 of 05

Save Money

Saving money in college should be a priority. It will help keep you from overspending and you'll ideally be able to put some aside for future expenses if you pay yourself first.

Start by saving for your tuition each semester or quarter. You may be working primarily summer jobs, or just part-time, but paying toward your tuition now can really make a difference in the amount you may end up borrowing, which will help you later when the payments and interest come due.

Work on saving up an emergency fund as well. This will help you cover unexpected expenses or medical bills, should they arise. Depending only on credit to get you through an emergency will cost you in interest and fees.

While you are an undergraduate, you may want to buy a car; consult your budget and your other transportation options to see if that makes sense for you. And while you may be tempted, you should likely hold off on purchasing a home or condo. You may have to move as you start your career. Consider choosing more affordable college housing options to help save cash as well.

03 of 05

Take Care With Student Loans

How much money do you really need to borrow? Consider all the ways that you can lower your education costs. If you're enrolled or considering private school, you may be paying for the prestige; don't count on the name on your diploma giving you a pay bump when you start your career. You might want to opt instead for a school that offers you a scholarship, or a lower-priced or state school.

Another option is to spend your first two years locally at a community college to complete your core curriculum courses, and then transfer to the school of your dreams to complete your degree in the major you've selected. While probably not the ideal solution if you're longing to be on your own, this option could save you and your parents a bundle. However, be sure to check with the school you plan on transferring to so as to make sure that all of the credits you complete during your first two years will be accepted.

Remember that you will have to pay back every penny you borrow plus interest. Not only that, but interest capitalization increases the amount you owe. Furthermore, you can't get out of student loans easily, and they will not be automatically forgiven or discharged, in a bankruptcy. This is debt that will follow you around, so borrow carefully.

04 of 05

Use Credit Carefully

Considering a credit card? Make sure that you are choosing the right type of card for a college student: one with a low rate and a low credit limit.

Credit card debt is one area where many college students make a mistake. That's because using cards can be tough to navigate when you're just starting out—and you don't want to learn about fees and interest the hard way.

Credit card companies work hard to get college students to sign up for a card while they're still in school because they know it's common for students to run up balances quickly before they really understand all that a credit card entails.

To use a credit card responsibly, make sure your purchases are accounted for in your budget before you put them on your card, and pay the balance in full each month before the due date whenever possible. This will help you to avoid late fees and interest, which will quickly eat into your budget.

05 of 05

Make the Most of Work

There are many advantages to working while you are in college. It looks great when you begin to apply for jobs, especially if you can find work in your field. Finding a good college job will make it easier to manage your money and gain work experience while in school. You might even benefit from tuition assistance and other employee benefits offered by your company. Plus, the more money you put toward tuition, the less you have to borrow, which will save you in the long run.

If you choose to work only during summers, make the most of your summer job. Consider picking up extra shifts in order to stash a little extra away. You might also take an internship—if it's a paid one, you'll combine an income with real-world experience.

You might opt to work full-time and go to school part-time to avoid going into debt. While it makes for a very full schedule, this work experience can help you as you plan your transition from school to the workplace

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Federal Student Aid. "Budgeting."

  2. Federal Student Aid. "Budgeting Tips."

  3. Consumer Financial Protection Bureau. "Choosing a loan that's right for you."

  4. Consumer Financial Protection Bureau. "Student Loans: Choosing a Loan That's Right for You."

  5. Federal Student Aid. "What Is Interest Capitalization on a Student Loan?"

  6. Federal Student Aid. "Discharge in Bankruptcy."

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