Building a Car Fund for College Students

by Broke Grad on September 1, 2009

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?

If you enjoyed this post, subscribe to my RSS feed or via email for free updates.

{ 2 trackbacks }

Review of the broke grad student blog | graduate school blog reviews
September 12, 2009 at 4:58 pm
Broke Grad Student Critique | graduate school blog reviews
October 2, 2009 at 2:12 am

{ 35 comments… read them below or add one }

1 Stephanie PTY September 1, 2009 at 8:28 am

I wish I had saved more money for a car in college. Actually, I wish I had saved more money during the early years of college, period! I wasted so much money during my summer job after freshman year, and I have no idea what happened to the money I made in my on-campus job sophomore year. It wasn’t until I started reading personal finance blogs my junior year that I got my act together. A word of advice to current college students: don’t be like me. Start today, so you don’t have to wonder what happened to the money from your first two years of school :-\

2 Dave - LifeExcursion September 20, 2009 at 6:48 pm

Couldn’t agree more with your point about car buying in college. I bought my truck from my dad. It was a year old and $10,000 still needed paid off. Horrible idea. Despite the reliability, I always hated paying that monthly payment all the way through college. I suggest any and all college students deal with the not-so-attractive car for now to have a more comfortable one later. Well worth the savings.

Dave
LifeExcursion

3 John September 24, 2009 at 1:14 pm

Thanks for the advice!

4 Financial Samurai October 4, 2009 at 9:31 pm

Stick with the Financial Samurai 1/10th Rule guys! The rule states that you should spend no more than 1/10th your yearly gross salary on your car.

The rich do this, should you?

Hang tough! Cars are the #1 personal finance killer for young folks!

Financial Samurai

5 Blake October 8, 2009 at 6:57 am

This is exactly what I do with ING. So far I’ve managed to avoid financing any of my vehicles, and I never want to. My Civic hopefully still as LOT of life left, but I’m contributing consistently to my ‘Car’ account on ING.

I never used to think and save this way, but now it seems like common sense. I now do the same thing for my next computer and trips as well.

6 redFred October 14, 2009 at 5:04 am

Great advice. You’re not going to be able to get that spiffy new Prius right out of college, or maybe even for the next couple of years if you’re paying your dues working in an industry you love. A car is first and foremost transportation and if you’re worried about what you’re going to look like driving it, it doesn’t matter.

7 Hannah October 14, 2009 at 6:56 pm

Another awesome thing about driving an old/beat up/not-so-great car is that the insurance costs are low. My car is worth about $600 on paper, so anything more than a ding, and it could be considered totaled. Instead, I opted out of the collision insurance and just have the required compulsory insurance for my state. If anything happens to my car, it’s not a huge loss if I lose it, and if it’s still drivable, I’ll keep driving it.

8 Shopaholic October 18, 2009 at 3:10 pm

Great Article!! I’m going to college soon so this really helps!

By the way, I’m now earning with a paid survey site & earned about $163 so far. There is a picture of my check that I’ve received. Feel free to take a look at http://i-am-shopaholic.blogspot.com=)

Seriously, I am a shopaholic! <3

9 used rv for sale November 2, 2009 at 7:02 am

I have some ideas already, for example busy schedule, lack of money, and stress. But I need more ideas because I need to write a three page essay on it also. I really would appreciate it if you can share some of your ideas.

10 Health Care Quotes November 3, 2009 at 6:51 pm

I think the best advice is that students should not be buying a car, and even after you don’t want to saddle yourself down with debt b/c you may not be staying with your first job out of school for a long time. Continue living car-poor until you can really afford it. A lot of people feel entitled and want to buy a car to reward themselves after graduation.

That is only getting your foot in the door. You have to repay student loans and save money first!

11 symptoms of epstein barr November 4, 2009 at 11:28 pm

For the summer vacation, unviersities in S.Korea starts mid or end of June until the end of August. Depending on each year and each university, sometimes it can end until the first week of September. So basically a little more than 2 months. `N unversity students get more vacations than the lower the lower education schools.

12 auto phi November 6, 2009 at 12:06 pm

A car for college is for the most part unnecessary especially if you are living on campus and your school offers transportation, but if essential it is a good idea to just get a beater car that will take you where you need to go. Saving is key in college as hard as that sounds. It’s nice to leave college knowing you don’t owe as much because of savings from excess financial aid or from part time work.

13 paranoidasteroid November 14, 2009 at 6:09 pm

I disagree with everyone saying a car isn’t necessary for college students. Some people have jobs or live off campus, and there’s not always public transportation.

I think yourBGS’s suggestion is great: get a cheap car without a loan. Ideally, the car will last throughout college and maybe a year or two beyond. I know my life would probably have been uch easier if I spent some of the money I wasted on beer on a cheap car & hadn’t had to buy one right after college, just as I was also paying for a cross-country move!

14 Blake November 18, 2009 at 2:29 pm

I have been trying to get a car loan for a year now and keep getting rejected because my debt to asset ratio from college is so high. It is frustrating. However, I love the BGS suggestion and went that route. I now have a functional car that is not great but gets me from A to B. I have set a goal on SmartyPig.com and am getting close to getting the car I actually want. :)

15 used rv for sale December 3, 2009 at 6:49 am

Toyotas and Hondas last a long time and are fairly easy to find parts and service as long as you don’t buy one that’s been wrecked and rebuilt. That is what car fax reports will tell you. Forget the Pontiac, they don’t age well.

16 Textbook Rental December 4, 2009 at 7:51 am

yes but you need to watch the foreign cars when over heating, Mine just over heated at thanksgiving and I am praying that its OK. Aluminum engines vs cast Iron, it makes a big difference when they get hot. But my brother just picked up a mazda for $1500

17 GPT December 17, 2009 at 8:25 am

I freelance :)

18 GPT December 17, 2009 at 8:26 am

Sorry should have specified freelance writing ;)

19 Expense Report December 24, 2009 at 12:19 am

In my case, I just minimize my daily expenses. Track them properly and of course the first and foremost is to set my target fund and sync my action on this.

20 Lisa Erin Brown January 10, 2010 at 3:19 pm

I’m in the second semester of my freshman year of the University of Wisconsin – Milwaukee and I have it entirely paid up. I have taken no loans, got no help from my parents, and have received no grants. I started working when I was fourteen and was never a careless spender. I may be living paycheck to paycheck now between rent and student payments and books, but it’s been feeling so good to have no loans taken out.

I’m doing very well in school as well, in case you were wondering my work/school circumstance.

21 handmade holiday gift ideas January 12, 2010 at 4:38 am

I am 19. I graduated with good grades A and B’s. I was going to go to college when my family foreclosed on a house I lost my college fund. I am paying off a new car to build my credit so I can get my own student loans. I don’t even know what I want to go for so im not going to rush anything. Im the manager of a small publishing company. great with computers. Should I go to school next year or find a good job somewhere doing entry level? I just don’t want to be someone who is paying off a marine biology degree and working sales and part time at star bucks ya know?

22 Dallas Dollars February 11, 2010 at 2:56 pm

I’m definitely going to use this advice. I just graduated and was looking into going to grad school. I wanted to upgrade my ride but my car I have now is dependable. I think I will take these tips into consideration as i’m preparing to make my first big purchase. I planned on purchasing a bicycle and ride it when the weather breaks.

23 GPT February 13, 2010 at 3:52 am

I still remember my college car; it cost me $400 and wasn’t half bad. :D

24 GPT February 13, 2010 at 3:52 am

Oh I forgot to mention, it was a really old, really beat up, Beatle <3

25 ParisGirl111 February 15, 2010 at 9:33 am

I set up 7 different savings account at ING under my log in. I deposit a small amount into each account each month based on the goal of that account. I have one for a car, Christmas, vacation, emergency fund, house down payment, and medical expenses. It’s great to see my savings goals in this way. It motivates me to want to save more.

26 business data management February 24, 2010 at 1:27 am

Students always find it difficult to get first time car buyer student car loans since they do not have enough money to make a big down payment which can reduce the interest rate, nor do they have high credit ratings which can make the loan process easy.

27 4x4 Pickup Trucks February 24, 2010 at 10:03 pm

Thanks for the share this good idea. Buying a car is very difficult for students now they can afford for their dream car.

28 handmade holiday gift ideas March 2, 2010 at 3:21 am

I am wondering if there is a program/organization for college students to apply for donated cars?

29 GPT March 2, 2010 at 1:38 pm

Not that I know of, if there were I’d be straight on that!

30 business data management March 3, 2010 at 3:19 am

“We thought it would be a fitting tribute to him to start this memorial fund with the goal of helping other creative individuals,” said his father, Doug Studebaker, in a written statement.

31 TheDebtDarling March 3, 2010 at 9:25 pm

I have a savings account with ING as well. I set up sub accounts as you mentioned in this post for car, vacation, Christmas, emergencies, and wedding. I love how I can see my savings goals and how much is in each account at a glance.

32 used tires March 9, 2010 at 6:21 am

A car fund for students would definitely be a good thing. As a student, luxuries like cars are always a bit difficult. I bought a very old secondhand Suzuki when I was a student and was very judicial with my spendings. :(

Till then,

Jean

33 fathers day gift ideas March 13, 2010 at 6:32 am

O sorry i don’t understand how to a collage student make a care and how help for college student., I always hated paying that monthly payment all the way through college. I suggest any and all college students deal with the not-so-attractive car for now to have a more comfortable one later. Well worth the savings.

34 business data management March 15, 2010 at 2:47 am

This has been a challenge for me. I have recently been starting to reduce expenses by couponing–it really has made a bigger difference than I ever thought possible. I actually feel like a fool for spending full price without coupons before!!

35 handmade holiday gift ideas March 15, 2010 at 4:25 am

This is the best site I have never seen it tells about the best colleges and helps us to find the best…

Leave a Comment