The first year of college is an exciting time for most students, but the lifestyle change can cause some anxiety and stress. Living away from home also means college freshmen need to manage their own budgets and make smart money decisions. Studies show that one of the reasons many students drop out of college is because they run out of money or find themselves too deep in debt too soon.
Here are five budgeting essentials every college freshman needs to know.
#1: The Importance of Sticking to a Budget
Having some basic budgeting skills is important for any college student, so make sure your college freshman is working with at least a basic budget spreadsheet or using a smart-phone app that makes money management that much easier.
Learning how to recognize needs and wants and prioritizing spending can help to keep a student’s budget on track.
#2: Budgeting for Food
Many college students struggle with managing a food budget. Without mom or dad to cook for them, plenty of students turn to fast-food restaurants and nightly pizza runs. So learning how to prepare low-cost meals is another skill every college freshman will need to acquire.
Don’t overlook the value of on-campus meal programs as well, as they can cut down the monthly cost of food.
#3: Savings Essentials
Even though it can be challenging to make savings a priority during those college years, make sure your college freshman is aware of the importance of saving and is making room in their budget for a savings contribution—no matter how modest it may be. Encourage your student to set savings targets and keep track of their progress on a spreadsheet.
Even stashing away $10 or $25 a month savings—or more if possible—helps a college student develop good financial discipline that will come in handy later in life.
#4: Credit Card Management
Sallie Mae, the student loan company, reports that the majority of undergraduates end up with at least one credit card. Having one or two credit cards—and using them responsibly— can help to build a good credit history and may bring other perks too.
For example, cash back rewards cards or certain student credit cards can be used to pay for college textbooks and other school-related expenses. However, your college student needs to exercise caution when it comes to credit card spending and avoid relying on credit cards just to take care of day-to-day expenses.
#5: Student Loan Savvy
Most college students leave school in debt and need to be prepared to start paying off their student loans shortly after graduation. Advise your college freshman to be conscientious about his or her future debt load and encourage him or her to start saving for loan payments in the near future. Alternatively, the student (or parent) should strive to at least make the interest payments on a student loan while the student is still in school.
You can use online calculators, like the one found at www.FinAid.org to estimate how much a future monthly student loan payment will be, and what type of salary a borrower would need to earn to meet his or her financial obligation.
Preparing your student for life after graduation can start as early as that first year of college. Make sure your college freshman is aware of these five budgeting essentials.