The top five money mistakes college students makeWednesday Jun 23, 2010
College students face many hard financial decisions. As a young adult they need to figure out how to pay for college, earn some spending money, and still receive a good education. This is a tall order for anyone, so it’s no wonder that many college students end up making some costly money mistakes.
Unfortunately, these mistakes can actually cause damage that lingers for decades, so making sure your finances are in order even as a college student can go a long way in helping you get a good start after school.
1. Credit card debt: Credit cards have become a part of everyday life in America (and for students with so many student credit cards to choose from). Companies boast great incentives and deals, but those amenities often overshadow the drawbacks. College students get in to trouble by taking out cards without knowing their interest rates and they usually end up spending more money than they actually have. Did you know paying the minimum payment on a card could take up to ten years to pay off? Students should be careful when opening cards; look at the interest rates and annual fees, and make sure they only spend what you can afford.
2. Ruining your credit score: College students are famous for trashing their credit scores. They pay bills late or not at all which leads to negative marks on their credit scores that stay there for seven years. Students should be careful when establishing their credit and remember that the decisions they make will follow them for a long time to come.
3. Lack of budgeting: Students don’t usually have mortgages or kids to feed, so they don’t see the importance of creating a budget. However, a budget could be a lifesaver to a new college student. It’s easy to make a simple budget with expenses and spending habits. Students can track where they are spending their money and what they could learn to live without in order to start a savings account. If they have savings and know what they should and should not be spending money on, they can avoid opening credit cards or taking out extra loans.
4. Blowing student loan money: Let’s face it, college is expensive. All too often parents cannot afford to pay their child’s tuition and so student loans compensate for most students’ education. Taking out student loans are a part of life, but taking out too much can be detrimental to their future. If students are using loan money to fund spring breaks or shopping sprees, they are digging themselves more into debt that might not be easy to pay off later. Loans should only be used for tuition and school-related expenses and if a student ends up with too much they should pay it back before they get the urge to spend it.
5. Going to an expensive college: Some students dream of going to prestigious schools, but their costs can be extremely high. Does the name on your diploma matter? In some cases, yes. However students need to take that question into consideration before spending thousands more than necessary on a degree. Another good idea is to head to an inexpensive school for the first two years and then transfer to a larger, more prestigious school after. The diploma will still have the better school’s name but at half the cost.
If you follow these five tips there’s no reason why you can’t leave college financially stable. Remember that the decisions you make during college affect you for years to come, so be smart about your money.
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