The college years come with a new-found sense of freedom and excitement, but with this also comes responsibility. Unfortunately, many college students start their financial life off on the wrong foot which can have a long-term impact on their financial health. Needham Bank explores four of the biggest financial mistakes students in college make, and how to prevent them.
1. Never learning about credit card best practices
Credit cards are an extremely important part of adult life. Not only do they offer an obvious cashless payment option, but they are also instrumental to building up a credit history which is important when it’s time to rent an apartment, buy a car or even a house.
A recent research study found that more than 1/3 of college students have more than $1,000 in credit card debt. Credit cards are a crucial part of most people’s lives, starting from young adulthood, but things can quickly go sour if you don’t know how to use them. For instance, many credit cards have hidden terms and high interest rates. Credit card providers may entice college students to sign up for credit cards on campus, offering extras like free t-shirts. These companies know that many students will charge more they can afford, yielding interest charges and ultimately credit card company profit. This is a major problem for students in school today.
Many college students are never taught how to properly use their card, so how can you prevent credit cards from being your financial downfall? Let’s start with minimum payments. If you continuously rely on paying the minimum payment due, you will be racking up debt. Going along with that, missed payments may seem like a short-lived financial impact, but that is far from the truth. Missed payments will in fact have a negative impact on your credit score for several years. The bottom line? Never charge something that you won’t be able to pay off on the next credit card bill.
Credit card debt negatively impacts your credit score and having a bad credit score from the start can be very difficult to bounce back from. So, if you plan on getting a credit card, make it a habit to monitor your credit score regularly and work with Needham Bank on how to improve your credit score. Many credit card providers offer this as a built-in feature of their online card payment platform, but federal law also allows you to get a free copy of your credit report once a year through AnnualCreditReport.com.
Debit cards provide a reliable alternative to money management, without the risk of racking up debt. At Needham Bank, our NB Debit Card provides global access to your funds and can be used anywhere MasterCard is accepted.
2. Never setting up a budget (or sticking to one)
During the college years and beyond, it’s not only critical to set up a budget, it’s just as important to stick to it. Everyone benefits from having a budget, and the earlier you start, the more prepared you become for the remainder of your life. If you don’t already have a budget, you don’t have the ability to truly understand your financial life. Setting up a budget will allow you to understand how much money you have remaining, and where your money is actually going.
There are many online tools available, but college students can generally set up a simple budget spreadsheet on their own. The biggest thing to consider when creating your budget is how you are going to save money. It doesn’t matter the amount you’re able to save each week, what matters is that you save in a way that works with your budget. If you are only working part-time, save just $10 a week from your paycheck and work your budget around that number. By the time you graduate, your savings will add up, and you will be grateful you were able to save when it seemed most impossible to do so. For a breakdown of how to create and manage a budget, Needham Bank has you covered with NB Money Management, a tool available in online banking that you can use to establish a budget, monitor spending and track your progress.
3. Spending money unnecessarily
The college years are notorious for overspending. Students generally haven’t formed great spending habits, so learning some valuable money-saving tips and tricks can be helpful.
College textbooks are expensive! On most campuses, the student bookstore isn’t the best place to hunt down incredible deals, which is why it’s best to avoid shopping there unless you absolutely have to. There are always ways to get the book you need for cheaper. Look for your textbooks online at retailers like Amazon or Chegg, and compare those prices to your campus bookstore. Often, the difference can be hundreds of dollars for all your books.
Additionally, unless it’s a book you plan to use for years to come, considering a textbook rental. Renting a textbook is a fraction of the cost of buying and if you can manage to find a used book in good condition, you just hit the money-saving jackpot! If you did get stuck buying an expensive book from the bookstore, instead of selling it back to your school for a penny, go to those same retail sites and try to sell it back. You may not get it for the full price you paid, but even if you get half of what it’s worth, you will be in better shape.
Another money saving tactic in college is to research what free amenities your school offers and use those as much as you can. Instead of getting a gym membership, see what the gym at your school offers. It’s free and most likely will include all the equipment you need for a good workout.
4. Wasting money on ATM fees
Taking $20 out at the ATM shouldn’t cost you money. Many college students sign up for the bank with an ATM on campus when they get to college freshman year not thinking about the times you’re off campus and may need access to cash. Between the fee that’s often charged by the ATM and the fee your bank charges for not using their ATM network, you could end up spending an extra $4.00 – $5.00 just to access your own money.
With Needham Bank’s NB Checking account, you don’t need to worry about bank fees. and it’s the perfect account for students – and parents for that matter. You get all ATM fees reimbursed no matter what ATM you use on campus or off, in the US or traveling abroad. We offer an unbeatable combination of Free Checking without any fees, no minimum balance requirements to earn interest and free ATMs. Plus, the benefits don’t stop when you graduate—they last forever.
With 5-star rated mobile and online technology, banking with Needham Bank can be done online no matter where your college is located. You can even open your NB Checking account online in under 5 minutes.
Unnecessary bank fees are the last thing you need to think about, especially when there are options available without them. Make sure to pay close attention to the fees associated with your checking account before you sign up, especially those related to ATM’s. After all, an extra $4 could buy you a large coffee to help you get through that all-nighter.
The college years are a great time not only to prepare you for your career ahead, but also to formulate smart financial habits. Don’t get trapped making these mistakes and starting out on the wrong foot. For any further assistance, please feel free to contact us. We specialize in offering personalized services to our customers, including financial help for college students.