Guide to managing money as a college student

College students develop many life skills during their time in school. From time management to financial responsibility, the learning curve is steep. Even for students receiving financial aid to pay for tuition, day-to-day money management is an important skill that can be developed while in school and carried forward for the rest of adulthood. From school-related expenses to grocery bills, travel, and future goals, money management for college students can be a balancing act. The key to success for many lies in planning and spending mindfully.

Tuition and housing costs

College is far more expensive than it used to be. According to College Board, the average undergraduate student pays $10,940 for in-state tuition and fees at a public university. Out-of-state undergraduates pay an average of $28,240 in tuition and fees, while private school students pay an average of $39,400. Room and board adds another $12,310 for public school students and $14,030 for private school students.

Tuition and housing is typically billed every semester or every quarter, depending on your college’s schedule. In most cases, these bills are due before classes start. If you can’t afford to pay these expenses at once, talk to your school’s financial aid office. You may be able to break down these expenses into a payment plan over the course of the semester.

If you can’t afford these costs out of pocket, you can turn to college grants, scholarships and student loans for help, all of which can reduce your payment obligation significantly. Some schools may offer work-study programs that could be helpful as well, especially if you’re able to go onto a tuition payment plan.

School supply costs

School supplies are another type of expense for which college students need to budget. College Board found that most students at four-year colleges spend $1,240 per year on books and supplies.

If possible, save or set aside money from financial aid to cover school supplies. You may want to estimate your costs at the higher end of the spectrum. But you can work toward saving money in this area by:

• Renting or buying used textbooks.
• Buying digital textbooks through an e-reader or tablet.
• Checking with local charities or religious organizations that distribute free school supplies for students.
• Buying general school supplies (e.g., paper, binders, pens, etc.) in bulk and splitting the supplies and the cost with friends.

Everyday costs

From food and toiletries to gas and transportation expenses, everyday costs can easily sneak up on students who fail to plan. These extra living expenses average around $4,690 per year for public school students and $4,140 for private school students. Therefore, it’s important to include inevitable expenses in your budget.

One strategy to try is zero-based budgeting for those learning how to manage money in college. With this approach, you determine how much money you can spend (from a paycheck, financial aid, work-study, gifts from family, etc.). Then you set aside a specific amount for the everyday costs you anticipate. You can also consider making a “miscellaneous” spending category for expenses that aren’t easily predictable.

Knowing how much money is available within each spending category can help you avoid going overboard in one area of your budget. It can also be a motivating way to save because if you spend less than what you allotted for everyday costs, you’ll have extra money to use in another area — like an emergency fund or even something fun.

Some spending categories a college student might consider include:

A few money-saving ideas for those learning how to manage money as a college student include:

• Utilizing public transportation instead of a car.
• Signing up for cash-back apps.
• Using coupons and seeking out student discounts.
• Applying for rewards or cash-back credit cards (while avoiding debt).
• Finding free or low-cost entertainment.

Student loans

With many types of student loans (such as federal student loans), you won’t have to worry about making monthly payments while still in school. However, there are some exceptions to this rule.

The student loan repayment schedule for any private student loan, for example, would be based on the terms of your agreement with a lender. Most private student loans come with a grace period that defers payments until some time after you graduate (e.g., six months, nine months, etc.). Review your loan agreement and talk to your lender if you have payment-related questions.

Even if you don’t have to pay on your student loans while in school, you might want to consider doing so. Paying down your loan balances early could help you avoid some interest costs in the future. Fitting in payments of as little as $25 per month might make a meaningful difference in the overall interest you pay. And if you can afford to pay more, the potential savings could be even more pronounced. Many private lenders have repayment options allowing you to make flat monthly payments or interest-only payments while in school, which not only helps you avoid interest capitalization but could also get you lower rates or a discount from that lender.

Future finances

Your college years may seem to drag on for an eternity — especially when you’re in the middle of cramming for tests or rushing to complete research papers. Yet before you know it, you’ll leave school and take on a whole new set of responsibilities. Start planning early if you want to set yourself up for success after graduation.

For one, it’s important to start building good credit as soon as possible. The condition of your credit can help or hurt you financially in many ways. Good credit can make it easier to lease an apartment, buy a car or open a credit card or loan. Bad credit, however, could make it harder to qualify for the things you need and might make you pay more for insurance, financing, deposits and more.

To start building good credit, consider opening a student credit card. By using the card to make small purchases and paying off the balance in full every month, you’ll build a history of timely payments and start lengthening the average age of your credit accounts, contributing to a good credit score. Just remember to avoid overspending to keep your credit utilization low.

College can also be a great time to start saving and investing. Even if you can only afford to stash away a small amount of cash each month, your savings could grow over time. Plus, you can establish a habit of saving money that can serve you well in the future.

The bottom line

Learning to manage money while still in school can help students live within their means, avoid consumer debt, and line up for future financial success. By keeping an eye on day-to-day expenses and developing an understanding of inflow versus spending, students can prepare for life after graduation, when their earnings will need to meet competing priorities.