College is great. For most people, it’s the first time away from home. That means no more curfews, no more sneaking out, and no more lectures after getting caught. Freedom at last!
Well, not so fast. Along with all of this freedom comes responsibility, which is a skill we all have to learn on our own. Unfortunately, it usually takes a few mistakes before we finally start to realize what our parents meant when they said, “Money doesn’t grow on trees”. Here are 6 common mistakes college students make with money.
1. Getting into credit card debt
A lot of students celebrate their freedom from their parents by getting a credit card. While there’s nothing wrong with that, the problem is when students start using the credit card to buy things they want, but don’t really need. The bad news is that credit card debt is one of the worst types of debt because of the ridiculously high interest rates. While the freedom to splurge may feel liberating at the moment, what you’re really doing is tying yourself to a chain that becomes exponentially harder to escape as you spend more money that you don’t have.
2. Spending leftover student loan money
This is probably the biggest mistake I made while I was in grad school. Each semester, I always had some leftover student loan money. The smart thing to do would have been to use the leftover money to pay back the student loans — basically returning the extra money. Instead, I spent it. My guess is that most other students do the same thing.
3. Lending money to your friends
It’s almost inevitable that one of your friends will ask to borrow some money from you. Here’s some advice — don’t do it. Of course, we’re talking about large amounts of money here. If, for some reason, you do decide to lend a friend some money, then don’t expect to see it again. Relationships get more complicated when money gets involved, even between the best of friends. The problem happens when you start wanting your money back, and they still don’t have it. “Best” case scenario — you just lose your money. Worst case scenario — you lose your money and your friend.
4. Going to an expensive college
There’s no reason to go to an expensive college that you can’t afford when you can get the same education at one that you can afford. For some people this could mean going to a community college for two years and then transferring to a four year university. For others it may mean going to a public university instead of a private university.
5. Failing your classes
What’s the point of paying for college if you don’t even pass your classes? Failing a class is like throwing away something you just bought without opening it and buying another one to replace it. It’s a waste of time and money. You’re paying for an education, so you should put some effort into learning something from it.
6. Not learning about how to manage money
College is supposed to a learning experience, but you’d be surprised how many college students never learn how to manage their money. Avoid setting yourself up for years of stress after graduation by making an effort to develop good money management skills while you’re still in school. While going into debt to pay for college is a necessity for many of us, we should do as much as we can to minimize the amount of debt we have when we finally enter the real world.
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David Carter 06.16.08 at 8:02 am
So far I have managed not to do all 6. I only have 2 more years to go, lets see if I can keep it up!
Megan 06.16.08 at 11:27 am
I couldn’t disagree more about #4. One of the best pieces of advice I ever got going into college was “do not, under any circumstances, let money be a limiting factor.” I’m graduating with a ton of debt, but could not be more glad that I made the decision I did in choosing a college. Students should prioritize colleges that fit them best– there are hundreds of ways to pay for loans or finance education, but you do only get a few years for your undergrad education. If your learning style is more compatible with small class sizes and professors who will take initiative to cater to your needs, it is a MUCH better investment to pay more for education than to try to make things work at a huge research university.
Good tips, all the rest!
Broke Grad Student 06.17.08 at 1:16 am
Megan: If you read about my best and worst financial decisions so far, you’ll see that I actually went to a private university over a public university for college. While I don’t regret it at all, it was definitely not the smart thing to do from a financial perspective. For grad school, I did the opposite and chose a public school, where I still got a great education for a fraction of the cost. To top it off, I landed a job with the top company on my list. Of course, these are all very personal decisions, and I think each person has to make their own decision on whether or not the extra cost is actually worth it.