Managing Finances in College

Going off to college is one of the life experiences that brings both excitement and trepidation. New college students spend the whole summer preparing for college life, which will prepare them for real life. Many students look forward to the challenge of managing their own finances, yet few are truly equipped to handle the demands of both school and money.

While many students eventually acquire the discipline and habits through trial and error, those who enter the college environment well-equipped tend to perform much better throughout their tenure. One thing is for sure: students who use the college experience to learn the essential mechanics of managing finances are generally much better prepared to navigate life after college.

Effective financial management in college begins with establishing a solid banking infrastructure. Prospective college students need to spend the summer before college entry putting the pieces of financial management together and learning the basic mechanics.

Choosing a Bank

Most banks are incredibly aggressive in marketing to college students because most relationships established early in life tend to blossom into more profitable relationships later in life. That means college students can and should be somewhat selective when choosing a bank. It’s essential to cut through the marketing glitz and consider those factors that will make it easier to manage finances.

Location: College students need access to money through an ATM machine (with no fees) or a transfer of money from Mom and Dad. Your bank should have a presence in both your hometown and your college town. Ideally, you should bank at the same bank as your parents.

ATMs: College students tend to use ATMs often, which is why most colleges have dozens of them located throughout the campus. It should be essential to establish an account with a bank with ATMs on your campus or, at the very least, a bank offering fee rebates for out-of-network ATM transactions.

Internet banking: Your bank should have a robust online offering for managing your finances, including real-time activity tracking, making transfers, bill pay, and even remote check deposits. Even better, the bank should also offer mobile banking.

Banking Products

Many banks offer products specifically designed for student banking featuring low or no fees, low or no minimum balances, and low overdraft fees. Your checking account should be linked to a savings account where most of your money should remain until it needs to be transferred to checking. A savings account can also provide overdraft protection.

Many banks also offer student credit cards. It’s recommended that they only be used for emergencies as it is very easy to start accumulating debt. It’s common for college students to amass credit card debt only to have the monthly payments eaten into the cash flow needed for school and living expenses. If you can’t qualify for a credit card, you can have a parent co-sign or join your parents’ credit card account as an authorized user.

Stick to a Budget

With a banking infrastructure and essential cash management tools, the next step is establishing a strict budget to manage your finances from day one. There is no other time in life when you will be able to begin managing your finances from a blank slate. Setting a strict budget and consciously managing it daily will quickly catch on as the discipline and proper habits you’ll need after college. It’s strongly recommended that you utilize an online budgeting tool, such as Mint.com, also available as a smartphone app.