Money Management 101: 3 Things I Wish I Knew Before I Went to College

money management for college students

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Going to college is exciting, and for many teenagers, it’s their first foray into adulthood. This sudden surge of freedom can cause problems for the impulse-challenged, which can lead to typical college-student problems like binge drinking, failing classes and a whole range of bacchanalia.

One way to set yourself up for success before you pack up and leave this fall is to learn about money management for college students.

Student Loan Debt

A pitfall for many college students is getting into debt. One of the biggest debts you’ll get into as part of becoming a college student is simply agreeing to attend school and showing up. Debt.org says the total U.S. student debt is $1.4 trillion, and the average student loan debt for 2017 is $37,172. That’s a lot of money to owe before you even get a job.

According to the National Center for Education Statistics, the cost of some colleges today is five times what it was in the 1980s. With the price of an education skyrocketing, many students are being warned against incurring crippling student loan debt.

Many people associate a diploma from expensive, private, Ivy League schools with worth. A Wall Street Journal report, however, says that a fancy education leads to a higher salary more often in the business and liberal arts fields, but it means bupkis in STEM fields. This might seem surprising when you consider the achievement levels of some STEM students fighting for the opportunity to get into MIT where “the estimated price for 2018 – 19 for undergraduates is $70,240“.

Young woman holding a stack of books in one hand and cash in the other.
Student loan debt is huge in the United States.

High Debt, Low Salary

These are broad generalizations, but you can make some more specific determinations if you have some idea about the type of career you want to pursue. If your heart is set on becoming an elementary school teacher or a social worker, do not accept an offer to attend Princeton, no matter how good your ACTs are. Don’t even apply.

Not only will you likely be able to get a decent job with a diploma from any school, but you will never make enough money to pay those Ivy League debts back. It might be possible if you live at home with your parents until you are 50 and shop consistently at Walmart. But it isn’t necessary.

Take a look at this Bureau of Labor Statistics study on projected salary per profession. See what your chosen profession pays and figure out how much money you’ll have to pay student loans each month after paying bills and expenses. You could be setting yourself up for years of financial struggle. And student loans never go away — they aren’t dischargeable in a bankruptcy.

Student Credit Card Debt

Another place students run into financial trouble is with credit cards. As a college student, I watched my peers delightedly sign on the dotted line when the pre-approved credit card came in the mail. One of my friends used his to go DisneyWorld. Years later, creditors were still calling him.

I was recently talking to a mortgage loan officer, and I asked him if he thought my daughter would be able to get an unsecured credit card when she turns 18 next year, even though she doesn’t have a job, and he said, “Sure!”

Getting credit so easily — without even a way to pay it back — is a little like trying heroin or drinking and driving or getting into an open relationship or playing with matches. It’s dangerous and can have dire consequences.

An Experian survey says college students have a lot of credit card debt, they’re mad about it and they don’t think it’s their fault. Of those surveyed, 31 percent have maxed-out credit cards and 20 percent said their college didn’t teach them how credit works. Nearly 40 percent admitted accepting the credit card offered to them without reading the terms.

Need to Learn? Teach Yourself.

Lots of people complain that schools don’t teach kids life skills. It’s true, mostly. As much as some people push for this to change, others push back, saying schools have their hands full teaching academics, and that life skills are the responsibility of the parents.

Whether your parents were absent, busy, or they just didn’t have their own life skills so they couldn’t pass them on, nothing is standing in the way of you learning them yourself. It can be hard though. One former college student talked about how he didn’t contribute to his 401(k) at his first job because he didn’t know what it was and no one told him. If you don’t know how to sew on a button, you can watch a YouTube video, but if you are unaware of the existence of a 401(k), you won’t be able to look up how they work.

Life is a series of experiences and it is not possible to be ready for everything, but some minimal preparation will help. Take a money management class for college students. Check out this list of 13 free financial courses you can take.

Get a Job

While it’s important to concentrate on your studies and get the most out of your education, focusing on it to the exclusion of all else is a mistake, according to the College Board. No, you probably shouldn’t go to more keg parties, instead, maybe you should get a part-time job.

The College Board says studies show that students who work a part-time job have more confidence and higher success rates than those who don’t. After all, most students think of college the way adults think of their full-time jobs, and it’s hard to be successful if you work 24/7. Everyone needs balance. That can be hard with an education, because outside of classes, there are no real, set hours for studying. You could conceivably study every hour of the day.

Young man washing dishes with a blue apron.
A part-time job can improve your bank account and your grades.

Plus, studying is a nebulous activity. Your mind can wander, you can fall asleep, you can get caught up binge-watching your favorite series or texting with friends; even when you try, you may not absorb the material you are studying. It’s easier to focus when you have a set time to study, and it’s easier to set a time if some of your other hours are already blocked out with other activities. Like work. That earns money.

Further, hiring managers are often more impressed with students who hold down jobs while going to school. They believe it shows maturity and responsibility.

That being said, working too many hours can backfire. More than 20 hours a week while carrying a full course load can cause your grades to suffer. You have to find the right balance.

You can’t be 100 percent prepared for college — or any experience for that matter. But you can be aware of the pitfalls and plan on how best to avoid them. Learning how to manage money as a college student will set you up for an easier financial future. You will have more practice at making good financial decisions, managing your time and you won’t be saddled with lots of debt.

It’s smart to get a college education, but it’s even smarter to learn money management skills for college students before embarking on your journey. Semper paratus.

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