There might be several things you wish you knew about money in college. Many young adults make financial mistakes and unfortunately, it can take years to undo the damage. But if you learn about personal finances at a young age, you can avoid many mishaps. Here are seven things you wish you knew about money in college.
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1. If You Can't Afford It, Don't Buy It
Such a simple concept, yet it might be one of the things you wish you knew about money in college. When you're young without a lot of responsibilities, you might shop without much regard for your budget. But unfortunately, buying items you can't afford can trigger a ton of debt. And as most people know, credit card debt isn't easy to eliminate.
2. The Miracle of Compounding
Starting a retirement account at an early age contributes to a comfortable retirement. But many young adults, especially those in college, don't fully appreciate the benefit of early preparation. Even if you're in school full-time and only working part-time, it's never too early to start an individual retirement account. You may be unable to contribute a lot at present, but with compounding interest you can earn interest off your savings and jumpstart retirement planning before you find full-time work.
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3. Start Saving before You Have Too Many Bills
Many college students aren't thinking about saving and emergency funds. They feel they have the rest of their life to save up. But if you wait until after graduation to start saving, it might be too late. After you buy a house, purchase a car and take on other responsibilities, you might have little disposable income to build your savings account. But if you start saving before you take on too many financial responsibilities, it'll be easier to build your safety net.
4. You Need a Large Safety Net
And while you're building your safety net, don't be satisfied with only $500 or $1,000 in the bank. Reaching either amount is an excellent milestone but for a comfortable safety net, money experts recommend saving at least 3 to 6 months' worth of income.
5. Student Debt is a Nagging Headache
Getting a student loan might be your only way to attend college, but make sure you're aware of ways to keep student debt to a minimum. For example, only take the classes you need to complete your degree and avoid switching majors, which can result in paying for classes you don't need to graduate. There's also the option of paying down student debt while you're still in school. This reduces how much you owe after graduating.
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6. Pay off Credit Card Debt in Full
Getting a credit card can help build your credit history, but it can also complicate your personal finances. If you use a credit card, only charge what you can afford, and pay off the balance in full every month.
7. You Don't Have to Spend Money to Have Fun
Recreation is important. You can relax after a long work week and recharge for Mondays. But if you think you have to spend money to have fun, you'll end up broke. There are several cheap ways to entertain yourself. And if you learn how to have fun on a budget at an early age, this good habit can carry into adulthood.
The college years are all about growing and learning. But while you're attending classes and getting a degree in your field, you owe it to yourself to learn good money management. What other money lessons do you wish you learned in college?
