For most people, college is the first time to gain independence from your parents. But when college kids have this sort of freedom, they are prone to making many mistakes. And many of these mistakes involve money.
While many of these financial mistakes are made, they can certainly be avoided. In this article, we discuss the most common types of financial mistakes, and what you can do to avoid them.
Mistake #1: Not having a budget
The first mistake college students make is not capping how much money they spend each month. College students tend to rack up the bill on a lot of items, which can include food, coffee, and alcohol. And the solution to this problem is quite simple:
Solution: Create a budget
When college students create a budget, they can both track their expenses and see where their money is going. Having this in place will likely stop them from overspending. And it’s very easy to do. In fact, there are several different apps out there that can help college students create a budget and track what they buy.
Mistake #2: Impulse spending
The second mistake is when college students make purchases on a whim. This can happen when college students don’t track their expenses, or make impulse purchases with a credit card. When college students do this, they aren’t thinking of the long-term impact of their purchases. And this drains their funds very quickly.
Solution: Pay off the credit card in full
The best solution to a college student’s impulse spending is making sure that they pay off their credit card bill in full every month. Doing this will teach them a few things. First, it will teach them to use the card responsibly. When this happens, they won’t make as many bad purchases, and they may avoid any high-interest debt in the future. Second, it will teach them to live within their means. When college students live frugally, their monthly credit card bills will end up being much lower.
Mistake #3: Financial aid mistakes
Mistake #3 involves making mistakes with financial aid. One such mistake involves using the financial aid on nonessential items, including clothes and electronics. And once college students graduate, it is also common for them to ignore repaying their student loans.
Solution: Know the terms of the financial aid
In order to prevent the misuse of financial aid, college students must understand the aid they are receiving. This involves reading the terms of the aid they are receiving. Once college students do this, they will understand what they can and can’t use the aid for, what the interest rates are, and when they must pay off their loans. And when college students become aware of these things, they will likely spend their aid wisely. They may even start paying off their debts during college.
Mistake #4: Not setting aside money
The fourth mistake involves not setting aside money for the future. Unfortunately, colleges don’t teach financial education. Because of this, college students don’t fully understand the importance of investing and having an emergency fund.
Solution: Set up new accounts
To solve this problem, college students can set up new accounts. First, they can set up a savings account. If any unexpected expenses pop up, the funds from the savings account can cover them. Second, they can set up an investment portfolio. Every month, college students can transfer funds into the account. Over time, their portfolios will likely increase in value. When college students do these things, it will help them financially both in the present and in the future.
Mistake #5: Relying too heavily on their parents
The fifth and final mistake college students make is only relying on their parents for money. When this happens, college students have no independence because they only have one source of income.
Solution: Get a part-time job
One way to solve this issue would be for college students to get a part-time job. Once this happens, they will have a second stream of income. This can be used to cover other expenses like groceries, rent, and vacations.
College is the time for people to learn to be independent and functioning adults. If college students implement these solutions, they will be much more financially savvy both in college and in their adult life.
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