Building a Car Fund for College Students

The following article is a guest post from Laura of Green Panda Treehouse. It’s also the first article in the College Money Network’s “Back To School Shuffle” series, where we will be sharing articles on a variety of back to school topics and giving away an iPod Shuffle and other prizes.

After graduating college, many people plan on starting work in a career they love, handle their finance responsibly, and build a fulfilling life. I want to show you how you can get your finances together with transportation. I’d like for you to be a college graduate without a car payment tied around your neck.

Lower Transportation Costs Now as a College Student

First off, do not spend a lot of money if you’re buying car in college. I recommend getting a car that can get you to class, work, and home. If that car is $1,000 or less, than go for it. I had a reliable car that was $500 and lasted 3 1/2 years. You can get a nicer car later, but you’re a college student and your income will be be lower than normal. Once your income increases after graduation when you are working full time, you can slowly increase your spending.

If you live in a city with decent public transportation, take advantage of it. It’s a great chance to free up some cash for later and you’ll be helping the environment.

Build an Automated System

Open a savings account specifically for purchasing a car. I use ING Direct for my savings and one advantage is you can open a sub-savings account very easily.

Every paycheck you receive, automate at least 5-10% of it to go towards your car fund. Have it deducted from your checking account into your savings account. You should be getting some income while in college because you want to build your resume up with practical work experience. Find an FDIC bank or CUNA credit union that offers high interest rates for savings and watch it grow faster.

I worked as a beer-tender occasionally to earn some cash and tips. I helped out during concert seasons, so I was usually out of school for most of the nights and it put some money into my pocket.

Use your tuition refund. Some savvy college students will be getting some money in the form of tuition refund. This is a great chance for you to sock away money. After setting aside money for your emergency fund, put 20-30% of your refund into your car fund account. As long as you don’t have any credit card debt, have fun with the rest of the money.

What kind of financial aid is available?

• Federal Pell Grants
• Federal Supplemental Educational Opportunity Grants
• State Grants

Fill out your FAFSA early. Besides getting qualified for federal grants, filing easrly can also open up oppurunties to get state grants. You’ll cut down on having to rely on student loans.

Hunt for more scholarships. FastWeb is a popular site that searches applicable scholarships for you.

By taking advantage of automatic transfers, you can painlessly build a car fund that you can use after your graduation instead of getting a car loan and being in debt.

Your Take
How have you saved money for your goals?

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