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Money Management

For many students, college provides an opportunity to begin to become independent from their parents. This can be both an exhilarating and a frightening experience. Even though they may be receiving money from home, scholarships or financial aid, many students find themselves in the often new position of having to manage their own money. This brochure will provide information to help you get started on the road to effective money management while in college.

Since many of you are full time students, it's likely that your income is modest and that your financial life is fairly simple. You may be trying to make decisions about spending or saving your limited resources or wondering how to get rid of the debt you've already acquired.


A budget is simply a personal money plan, which persons develop on the basis of their income and expenses. The first step in planning a budget is to determine the amount of money available during each month or other specified period of time. The next step is other specified period of time. The next step is to list all expenses-rent, utilities, car payment, and/or insurance, phone bill, credit cards, clothing, etc.- which must be paid.

When listing expenses, take into account all of those expenditures which are not necessarily large but which add up-lunch, movies, shampoo, gas, laundry, etc. After looking at your expenses and available income, decide how much money you can afford to spend in each area, with necessities taking priority over entertainment or luxuries. It is also a wise idea to set some money aside on a regular basis to meet the demands of unexpected expenses such as a trip to the dentist or a car repair. This can be a small an amount as 10.00 but the concept of saving regularly is a crucial one to learn and value early.

Financial Institutions

The first step for most people in establishing financial independence is to open an account at a financial institution. Whether you open a checking or savings account, or both, will depend upon your specific needs. When choosing a financial services provider you may want to ask the following questions:

  • What is the institution's reputation regarding customer service?
  • What is a checking account? Is there a minimum monthly balance required to get free checking?
  • Can deposits, withdrawals or other services be made through automatic teller machines (ATMs)? Are there fees associated with these services?
  • Is there a minimum balance required to maintain a savings account? Does the Federal Deposit Insurance Company (FDIC) or another insurer insure your account?

Credit Cards

Some people will argue that college students should not have credit cards. If you are the type of person who makes decisions impulsively or finds yourself using money irresponsibly, then you may not be a good candidate for a credit card. If you are financially responsible, you may choose to apply for a credit card to help you establish a positive credit history. Your credit history is based upon how you have managed your financial obligations over time. If you always pay your credit cards and other bills on time, you will be creating a good credit history; if you skip payments or make late payments, you will damage your credit history.

Your credit history may be reviewed by landlords and potential employers and will certainly be reviewed when you apply for a loan to purchase a car or house or to apply for other forms of credit. Even if you obtain a good job with a high salary after you graduate, a poor credit history can hurt your chances in obtaining further credit. This credit history will follows you for up to seven years so responsible habits are crucial to establish early and maintain.

Don't forget, a credit card charge is a personal loan for which you are responsible. There are a variety of costs which may be associated with a credit card: interest, annual fee, late fee, cash advance fee, etc. Read the credit agreement which accompanies your credit card and make sure that you understand the terms before you start charging. Always shop around for the credit card with the best rates and terms for your needs.

Credit cards can be very tempting for students who are on a limited budget, but they can cause financial problems, which can last long after graduation. According to the American Express Company, if you have an 18.5% interest rate card, it will take you more that 11 years to pay off a debt of 2000 if you only pay the minimum, balance due each month. During this time, you will pay interest charges of $1,934. almost doubling the cost of your purchase.

Financial Problems

If you find yourself getting into debt because of credit cards or you find that your bills are piling up and you are unable to meet all payments, help is available. Don't wait for your financial situation to become totally unmanageable before seeking advice. There are credit counselors available at the Consumer Credit Counseling Service to help solve your financial problems through budget counseling, debt management planning and housing counseling.

By remembering that sound financial management is an important learned behavior which is crucial as a life skill, a person can hopefully work hard to avoid the unpleasant and damaging effects of poor financial choices.