Published March 16, 2012
Attention, college students: Want to save $60 every month? It’s easy, just cut out your daily latte purchase on your way to class.
While it doesn’t seem like much, $60--the cost of a daily $2 coffee habit--can make or break a college student’s budget.
Students often find themselves strapped for cash as many don’t work or work part-time at minimum-wage jobs. And as college tuition continues to rise during a time where many families are struggling to make ends meet and jobs are hard to find, college students are often left with empty wallets.
The class of 2011 graduated with the highest amount of student loan debt than any other class; total student loan debt is expected to reach $1 trillion for the first time this year.
According to the College Board, public four-year colleges charged, on average, $8,244 in tuition and fees for in-state students in the 2011-12 school year. For out-of-state students, the cost jumps to $12,526. But let’s face it: College students spend in other areas besides tuition—there’s supplies, transportation, food, clothing, and of course, entertainment.
“Some of those costs are unavoidable, but students also spend a lot of money on luxuries,” says, Beth Kobliner, author of the bestseller, Get a Financial Life: Personal Finance in Your Twenties and Thirties.
Paying attention to their budget and identifying unnecessary spending will not only give college students more spending money, but it will also make them better prepared to handle their finances after graduation.
Here are five purchases experts have identified as money-drainers that college students may be able to avoid.
Dump Daily Small Spending
Pulling an all-nighter might justify a trip to the local coffee shop, but Ellie Kay, author of The 60 Minute Money Work Out, says college students often don’t realize how much money they are wasting on coffee—particularly fancy drinks.
“Some students have at least one frappuccino or latte a day. This tends to be where they congregate, but they don’t see where that’s adding up at the end of the month.”
While there is an upfront cost, buying a coffee maker and brewing coffee will give students their required caffeine fix without giving their wallet a jolt.
By planning ahead and buying items like snacks, coffee, tea and soda in higher quantities at grocery stores, students can save a lot of money each month.
Nix the Credit Card
According to college-financing company Sallie Mae, in 2008 college seniors with at least one credit card graduated with an average of $4,138 in card debt, an increase of 44% from 2004. That balance is only expected to grow.
The idea of not having a credit card might seem scary to college students at first, but studies show consumers will spend less when paying in cash and maintain better control of their budget.
“The problem with always whipping out plastic is that you are missing the tangible feeling that you get with cash,” says Dayana Yochim, financial expert of Fool.com. “Think of credit cards as poker chips being used by people sitting at tables in Vegas. If they had to throw down cash instead, they’d be a lot more careful- the same thing applies to every day spending.”
Yochim suggests students calculate how much they can afford to spend each week and then visit an ATM once a week, take out the determined specific amount and divide it up on how each portion will be spent.
When using a credit card is unavoidable, students should strive to pay down the debt as quickly as possible. “At the very least, pay on time. Missing even a single payment can lower your credit score, which means you'll wind up paying more for things like car loans,” says Kobliner.
Do Away With a Fancy Car
Not only does transportation account for 17% of a college student’s budget, according to the College Board, their age group tends to pay the highest rates in car insurance.
Having a car on campus is expensive between the cost of a permit, steadily-rising gas prices, parking, and maintenance. College towns tend to have ample public transportation to get around, or off-campus students can coordinate with other students to get to classes or get around town.
If a car is necessary, Yochim suggests students drive a cheaper car to get a lower insurance rate and any monthly payments. She also suggests students drive “like a grandma for at least three years” to avoid the added costs of traffic tickets and accidents.
To reduce insurance costs, experts suggest students inform their insurer of any driving habit changing like parking in a garage over the street or only driving over holiday breaks.
Realize You Aren’t a Kardashian
Advertisers love the 18-25 age bracket because of their desire to fit in with peers as well as their poor financial experience, say experts. College-aged students tend to spend heavily on fashion and the latest trends, which often don’t come cheap.
“The entertainment, eating , and social factor digs into a budget before they realize it..alot of these things are insidious and start to deteriorate their budget,” says Kay.
College students should use the proliferation of daily deal sites to score discounts on purchases to enhance their wardrobes, and turn to friends to borrow or possibly swap clothes to keep their look modern.
College students should never hesitate to ask a retailer if they offer student discounts, most major movie theaters will cut students a break, and Amazon.com also offers college students a free Amazon Prime membership.
Don’t Pay Your Bank More Than You Have to
College students have limited funds, so they shouldn’t waste any spending money on avoidable fees. By monitoring their spending and accounts, students can avoid overdraft fees and other penalties.
“As a college student, you are not likely to have the high minimum average daily balance to get a no fee account so really shop around for banking deals,” says Yochim.
The key here is to really consider your financial habits. “If you know you are going to have to stop at a bank often, then don’t use other banks besides your own- that $5 could be used for a burrito instead.”