It’s back to school time, and that means that many students are heading to college for the first time. This is an exciting time, but it is also one that requires some serious thought and planning. Even if you are living at home to save a little money, the fact of the matter is that your freshman year of college represents a time in your life when you become your own person, financially. The decisions you make now can profoundly impact you for the rest of your life. If you want to get a good start down the road to financial freedom, here are 4 money moves to make your freshman year in college:
Money Tips For College Students
1. Get a Job
It doesn’t need to be a full time job, but having a job can be a good way to practice good money management skills. Look on campus for work study jobs (if you qualify), and look for other student friendly jobs. Many jobs in college towns will work with your student schedule. I worked part time in the college cafeteria my freshman year, earning a little extra money — and getting one free meal a day. During the summer I waited tables, saving money up for the next year. A part time job will provide you with some “fun” money, and can help you get started on a habit of saving.
2. Start a Retirement Fund
You can open an IRA when you are under 18, but it has to be a custodial account opened with your parents. Now that you are an “adult” you can open your own retirement fund. Get started so that the power of compound interest can begin working in your favor. You don’t have to put in a whole lot each month; just put a set percentage of your income into the retirement fund each month. When you graduate and move on to a better job, you will be able to put more money in your retirement account, and you’ll already be in the habit. Here are some great places to open an IRA.
3. Track Your Cash Flow
Set a system to track the way money moves through your personal economy. Keep track of your income, and track your expenses. Create a budget, or a spending plan, and stick with it. Use the money from your part time job as a laboratory for learning about the way money works, and how you can budget it so it works for you. Personal finance software and online financial applications are available for free, and can help you keep tabs on your cash flow. Here are some free online money management tools you can use to help manage your finances.
4. Begin Building Good Credit
Now is the time to begin building good credit. This can be a little tricky, since the Credit CARD Act makes a little more difficult for those under the age of 21 to get a credit card. However, if you have a part time job, you may be able to qualify for a student credit card, on your own, with a low limit (probably no more than $500), since your job proves that you should be able to handle a small credit obligation. A secured credit card — one that reports your payment history to credit bureaus — is another option. You can also get a car loan or a small personal loan with someone as co-signer to help you establish a credit history. Here are some credit card options students:
- Featured Student Credit Cards (and tips for wise credit card use).
- Secured Credit Cards (Pros and Cons of secured cards).
In order to make this work, though, you will have to make payments on time and in full. On top of this, you will need to make sure you pay off your credit card balance quickly. The key is to build good credit so that you qualify for good interest rates, lower insurance premiums and can get approved for home and car loans down the road.
Bottom line: Your freshman year in college is a perfect time to begin practice good money habits that will benefit you for the rest of your life, building you a foundation for financial freedom.