Seventeen years ago I was nervous about what was about to transpire. At this time, although I had been away from home for extended periods of time, I was about to leave for college. Honestly, I thought I might not have been able to handle the responsibilities and the new social environment. Rather than living at home and attending a local college like a number of my high school classmates, I was preparing to live on the campus of a major university in another state.
I should have known that I had little to worry about. But there are a few things I wish I had known — or at least thought about — before entering college.
Pay attention to your expenses. For me, my expenses were fairly controlled. On campus, I had a meal plan. My breakfasts, lunches and dinners were paid for in advance and rolled into my tuition and board expenses. In order to eat in one of the many dining halls, all I had to do was flash my student identification card. This meal plan entitled me to a certain number of meals per week in addition to an allotment of “points” which could be used to purchase snacks at other times.
The meals and points expired at the end of each semester, and the college reminded students that “it is [their] responsibility to budget [their] points over the course of the semester/session.” I don’t recall doing any budgeting. I may have known at the time how many meals and points were available to me, but I didn’t do any planning. I ate when I felt like it and bought snacks and other things at the university’s shops when I desired. There was an option to add points to the account, and I’m sure I did this as needed.
Who is paying for college? My undergraduate education was paid for by my parents, a partial scholarship, and loans in my name. While you should not waste your time by failing any courses, this is even more important if your parents or other parties are paying for your education. Wasting your money is a problem, but wasting other people’s money is disrespectful. If you fail a class required for your degree, you will have to take that class again, paying for it twice. It’s not worth it, particularly since it’s usually difficult to outright fail a class. Paying for college yourself supposedly gives you ownership of your academic decisions while in school, but if you’re in a situation where you don’t have to worry about affording your own tuition, then consider yourself lucky.
Work shouldn’t interfere with studies. I am quite grateful I didn’t have to pay for most of my undergraduate education. It allowed me to focus on my education and extracurricular resume-building activities in my field rather than focusing on earning income to afford tuition. I did find a few jobs, however. I stayed on campus for winter and summer sessions to take more classes, but with a lighter load during these in-between semesters, I worked in the department library to earn some extra money. I also served as a web consultant in my department, designing their first departmental web site and teaching professors how to publish their own sites for a measly ten dollars an hour.
These jobs provided me with a little extra cash. I probably spent it just as fast as I was earning it, however.
Have the right bank accounts. It’s essential to establish bank accounts in your name. Free student checking accounts can help you access your money whether at home or at school, and an account that has branches nearby to both locations is one way to ensure your parents can add to your account easily if they are willing to do so. College is a great opportunity to get into positive financial habits early, like moving extra money from your checking account to a high-yield online savings account at regular intervals. This is a great destination for any extra cash you earn from odd jobs, though in college there will always be the temptation to spend money on enhancing the social aspect of the college experience.
Open a Roth IRA. I wish I had known about Roth IRAs when I started college. It would have been impossible for me to do so without a crystal ball or some other form of premonition. These retirement accounts were brought into existence while I was enrolled in the university, but I did not hear of it until a few years after I had graduated. If I had known that I could put money away for retirement in a tax-advantaged account while I was in such a low tax bracket, I might have taken advantage of the opportunity. Then again, I might not have. It’s hard to imagine retirement before you’ve officially begun a career, but it’s harder to argue with long-term investing in the stock market. If I had invested $1,000 in the S&P 500 index on October 11, 1996, it would be worth $1,825 now (not including reinvested dividends) and much more by the time I retire.
Like many, I played the “stock market game” in elementary school, learning how investing works in some respects by using fake accounts to trade. Of course, trading was a different worls when I was young, in which stock market information like prices were only available in newspaper listings. By the time I entered college, I probably knew only a little more about investing, but my interests lay elsewhere. I did not concern myself with the idea of having a secure financial future.
Avoid credit cards. The credit card companies are vultures on college campuses. I remember when I first arrived on campus as a freshman for orientation, one week before the upperclassmen. The companies set tables outside the dorms with applications and free tee-shirts, enticing subfashionable freshmen like myself to sign up. Although I escaped relatively unscathed, having a credit card without a job is asking for trouble. The Credit CARD Act limits card issuers’ abilities to market to students, but the sharks are still out there.
One particularly sneaky aspect of college-geared credit cards is the introductory offer. The 0% APR on purchases deal sounds great, but what they don’t explain is that you must pay off your entire balance on the card before the promotional period ends, otherwise you could owe back interest as if the 0% APR promotion never existed. It’s always explained in the fine print, but if you have an appointment for orientation, chances are you just want to sign the form and grab the tee-shirt.
Forbes offers these thirteen financial tips for students entering college for the first time.
- Use credit cards sparingly
- Pay all credit card balances in full
- Get the best deal on a checking account
- Start saving
- Keep track of your spending
- Set a limit on entertainment
- Shop at second-hand stores
- Keep an eye out for free money
- Get a part-time job with tips
- Walk or ride a bike — don’t drive
- Avoid the tax on stupidity
- Look for student discounts
- Don’t eat out all the time
Tavis Smiley has a number of similar suggestions. He suggests making a budget, shopping smart, and learning to cook.
Had I known what I know now about compounding interest and the tendency for the stock market to increase over time, not just theoretically but from experience, I’d be in a better financial position right now. And it’s not about having more money, it’s about having more options for doing the things I like to do.
From a psychological standpoint, it’s unlikely that college students, even after receiving information about making healthy financial choices, will change behavior. That’s just a nature of age. When I was entering college, while I felt like an adult, perhaps subconsciously I knew that I had a few years remaining before I needed to concern myself with adult issues. I wasn’t concerned with retirement because I figured there would be enough time after earning my degree to worry about the future. In many respects, this is true. In college, it’s good to hang on to the last few years of childhood and limited responsibilities. While my finances would have been in better shape earlier on, it’s hard to look back at my life and wish I had taken a different approach.
After all, my financial failings in and after college led to my interest in personal finance, and not much later, the start of this website.
Photo credit: Éamon
Forbes, Tavis Smiley
[00:00] Introduction from Tom Dziubek
