Before starting or returning to college, it’s important to prepare yourself for the year financially.
This year, however, you may be faced with a much different situation than you anticipated due to the coronavirus pandemic. Instead of packing up, you may be rearranging your childhood room to transform into a productive learning space.
Whether you’re attending school remotely or in-person, it’s important to get your finances in order ahead of the busy semester.
Here are a few tips that will help you succeed financially this school year.
1. Research your banking options before school starts
You’ll have enough distractions with class, your social life and potentially work — the last thing you’ll want to think about is opening a bank account. It’s something you’ll need, but won’t want to worry about when things get busy. Here are some things to look at when choosing a bank:
- Location: Is it convenient for you at school? What about home?
- ATMs: Are there any in the bank’s network nearby?
- Minimum balance: Does the bank have a minimum balance requirement on its accounts?
- Transfer options: Are there easy ways for people to transfer you money or vice versa?
- Mobile app: Are reviews of the bank’s mobile app positive?
If you’re going away to school, opening a bank account before leaving home is a good idea. That is unless you are considering a credit union affiliated with your school that you won’t be near until classes start.
The ideal game plan might be to open an account at a bank that is the best of both worlds: close to your hometown and close to school.
Research direct banks, which are online only, and look for a bank that features ATM fee waivers and mobile check deposit. You might not need a physical branch if your account has these convenient features. You should also be able to find a bank that won’t require you to keep a minimum balance.
2. Decide whether a parent on the account is beneficial
Having one — or possibly both — of your parents on a bank account has pros and cons. It might be beneficial if you need money or need their help with the account. Depending on your relationship, a parent might be able to pass along valuable banking advice to you.
Only choose this option if you’re OK with your parents possibly questioning your spending.
Even if your parents aren’t on your account, they should be able to send you money in a pinch through platforms like Zelle and Venmo — the latter of which offers a handy and moderately rewarding debit card of its own.
3. Create a budget and set up account alerts
College tuition is pricey enough on its own, but then add in additional costs such as food, extracurricular activities and potentially housing and it really starts to add up. You may not have a ton of money to budget, but starting the habit early on will help you build a foundation for a more stable financial future.
Bankrate’s student budget calculator allows you to build a budget of your own, with categories like school expenses, groceries, savings and loan payments. If you’re interested in mobile budgeting options, try a free budget tracker app like Mint.
Mint connects to your bank account and allows you to build a personalized budget based on your spending habits and necessary payments. You can also track your bills and credit card balances.
It’s also a good idea to set up notifications, so that you can stay on top of your accounts and balances. Mint, for example, will send you notifications if you’re close to going over budget or if something seems off on one of your accounts.
Overall, budgeting apps make it easy to keep track of everything.
4. Learn about overdrafts
Overdraft charges can make a cup of coffee, meal or any purchase more expensive.
“Don’t opt in to overdraft on debit and ATM transactions,” says Greg McBride, CFA, Bankrate chief financial analyst. “That will at least put a ring around those small-dollar transactions, so that if you don’t have sufficient money in the account, the transaction will be declined. You won’t be incurring a $35 overdraft for a $5 cup of coffee.”
5. Explore credit cards
When it comes to credit cards, each student is going to be different.
“Credit cards, whether you’re 19 or 49, they’re a lot like steak knives – either a great tool or something very dangerous in the wrong hands,” McBride says.
Students with no established credit history may have trouble getting their first credit card. Here are some strategies:
- Explore secured credit cards: Secured credit cards are perfect for students looking to build credit. If approved, you will have to put a certain amount of money down. This deposit is kept in a savings account that can’t be touched until the card is closed, or in some cases, if you graduate to the unsecured card.
- Look into becoming an authorized user: If a parent is fine with adding you as an authorized user on their card, this may help you establish credit – assuming this is reported to the three credit bureaus. Check your credit reports after a few months to confirm you’re building credit as an authorized user.
- See if your bank has the joint credit card option: It’s not easy to find banks that offer a joint credit card, but this could also be a solution. A parent or relative would likely be the best option.
- Compare student credit cards: Research whether a student credit card is the right fit for them. These cards may have less-stringent income and credit requirements.
- Give Experian Boost a try: This is a great option for those with a limited credit history, but a track record of on-time bill payments.
The number one rule every credit cardholder should follow is to always pay the balance in-full and on-time. That means you should only spend what you can pay back.
Not following this best practice can lead to a bad credit score as payment history makes up for 35 percent of your FICO Score, the highest-scoring category.
Signing up for text, email or app alerts to remind you before your credit card payment is due can be a helpful tactic.
There’s no rush to get a credit card if you don’t feel ready for one. Using a debit card responsibly can be a great first step. However, you won’t build credit with a debit card, and you usually don’t earn rewards or cash back.
6. Start building your savings
As a student, it might be tough to save as much as you would like. But there are steps you can take to boost your savings.
“If you’re now able to continue living at home instead of packing up and moving off to college, this could defray your housing and meal expenses, resulting in fewer student loans,” McBride says. “You also might be able to put money aside from your part-time work to build up a savings cushion that you’ll need later.”
If you’re working while in school, set up a split deposit to automatically transfer a portion of your paycheck to savings or a recurring transfer from checking to savings. You may be able to set up the latter transfer with your bank.
Search for a savings account with a low or no minimum balance requirement.
There are a number of high-yields savings accounts with a minimum balance requirement of $100 or less.
7. Leverage all the student discounts
It pays to be a savvy shopper — especially when you’re a college student on a lean budget. Retailers are pretty aware of this predicament and many offer a student discount of some sort. It’s just a matter of asking or looking for them.
Some of the top student discounts you don’t want to miss out on include:
- Spotify Premium with access to Hulu and Showtime for just $4.99 a month (saves about $22 a month)
- Amazon Prime offers a free 6-month subscription (50 percent off annual subscription)
- Apple offers a discount to students and educators with savings up to 15 percent off on select products. Students can currently get a free pair of AirPods, a free year of Apple TV+ and six months free of Apple Music with a purchase of a new Mac.
There are also websites out there like UNiDAYS, Honey and Rakuten that will do the discount searching for you.
Featured image by Haizhan Zheng of Getty Images.