Managing Money in College

As part of the Board of SASS’s focus this year on helping OHS students with the transition to college, we bring you advice from the OHS Finance & Economics Society on managing money as a college student. For many students, going to college means more independence, and this independence includes learning to manage money on your own. We hope that this resource will help you feel more confident living on your own!

How can college students best manage a credit card?

One of the best ways for college students to manage a credit card is to treat it like a debit card and not like free money. Only spend what you already know you can pay off in full each month. Furthermore, paying your balance on time and in full avoids very sharp interest and contributes to a strong credit history early. A high credit score is important because it signals to banks and insurers that you are not a risky client, making it easier for you to qualify for loans, mortgages, and other kinds of credit, usually with better interest rates and conditions. It also helps to keep utilization low, meaning you should not regularly use most of your available credit. A simple habit like checking your balance once or twice a week can keep you from overspending and surprises at the end of the month.

Is it better to carry a credit card (i.e., in a wallet) or use a digital credit card through an app (e.g., apply pay, the wallet app, etc.)?

Whether it is better to carry a physical credit card or use a digital one really comes down to your own self control and convenience. Digital wallets can be safer as they lower the risk of losing your card and often need authentication like Face ID. However, they can also make spending feel too easy, and some students find that carrying a physical card makes them more mindful of purchases, while others prefer digital cards for their simplicity. The best option is whichever helps you spend intentionally and avoid being impulse in your spending.

What best practices can students do to save money for tuition?

Consistency of your savings is more important than large amounts. Setting aside small amounts regularly from your various sources of income add up over time, and reducing unnecessary expenses also helps more than people expect. Also, students can take advantage of scholarships, grants, and employer tuition assistance to significantly reduce their out of pocket costs. Even modest savings habits during the school year reduce their reliance on loans later.

What is a good approach to managing money for everyday expenses (e.g., food, housing, etc.) in particular?

I would definitely recommend having a clear budget in place for weekly/monthly expenses. You don’t need to have any fancy tools or apps - a simple spreadsheet or even a Google Doc for keeping track of routine expenses is great. This can help you have a clearer idea of what’s appropriate to spend on food, housing, recreational stuff, and how much you can set aside for investing/saving.

Do you recommend any tools or further resources that might help students be better prepared to manage their own money? What do you recommend for students seeking to develop financial literacy?

Reading books, watching YouTube videos, or following economic news can all be helpful. Nowadays, there is so much information online that there are more ways than one to gain a deep understanding of personal finance. All of these educational sources work, but the best thing to do is to start learning early. Through investing, your money will compound in the long run and there will likely be major financial benefits down the line if you start investing in college versus, say, your mid-30s. Essentially, the more time you give yourself, the better.

What are some common misconceptions students have about finance management? 

One common misconception is that investing profitably requires extensive experience. Simply investing in the S&P or the Nasdaq and holding those investments for the long run can produce great returns through compounding. Of course, there’s nothing wrong with wanting to do additional research and finding particular companies that you believe can produce better returns, but I wouldn’t say it’s essential for growing your assets over the long run. Furthermore, the amount of time spent researching individual companies, building a more complex portfolio, and actively managing it is oftentimes not worth it for most people. So, simpler can be better.

Do you have any other advice for our college-bound students?

Reiterating what I mentioned above, it really cannot be exaggerated how important it is to build responsible financial habits early on. Especially when starting, there is an enormous marginal benefit for every additional hour you spend learning, whether it be in budgeting, investing, or almost anything else when it comes to managing personal finances.