The New Freshman 15: Financial Tips for College Students

Forget the "freshman 15," the dreaded additional pounds freshmen frequently pack on when they settle into life on their own. More important are the 15 smart financial moves you need to know to get through freshman year and beyond without racking up unnecessary debt.

"Waiting until after college to take control of your finances could cost you," says Nick Certo, senior vice president in University Banking at PNC Bank.
"And like any good fitness regimen, getting started is half the battle."

Here's how to pass finance 101.

1. Be careful with credit

Free T-shirts are the late-night burritos of finances, Certo says. "They look good now, but you'll pay later. Think twice before signing up just to score some cool swag," he says.

It's not worth it to saddle yourself with a high-interest, annual-fee credit card that you don't need. Buy a T-shirt instead, and your bank account will thank you later, says Jackie Warrick, the chief savings officer at CouponCabin.com.

Remember that a credit card doesn't equal free money. If you can handle a credit card, start with a $1,000-limit card that offers points or other rewards and pay your balance monthly. "Don't look at your credit limit as a goal for spending," says Steve Weisman, a senior lecturer at Bentley University. "Carrying too high a balance on your card can hurt your credit and cost you more." Late fees can add up quickly.

Research which card makes the most sense given your spending habits and paying ability. Look at the annual percentage rate, annual fee, grace period and penalty fees, says Todd Mark, vice president of education for Consumer Credit Counseling Service of Greater Dallas.

Also, keep track of your credit score and your credit report.

2. Stick to a budget

Make a budget. You don't have to go crazy with the details. Just outline how much money you receive monthly and what you need to spend. "Include an allowance for walking around money, and don't just go to the ATM for more than you budgeted, or you will frequently run out of money before you run out of month," says Burton Speer, a certified public accountant with Mengel, Metzger, Barr & Co.

Then, track your spending to make sure you're sticking to your budget. "Unlike the federal government, you can't just print more money," Speer says. "Spending less is often easier than earning more."

Check out your bank's website budgeting tools, as well as software programs like Quicken, to help keep your budget on track.

And take extra care of your wallet when you're out partying. It's easy to get caught up in the moment and dish out more than you want to spend when you're having fun. "When going out with friends, decide ahead of time how much you can afford to spend, leave the rest behind," says Tahira Hira, professor of personal finance and consumer economics at Iowa State University.

3. Save early and often

In your 20s, you have a small window of opportunity to wield the power of compounded interest. Consider this: If you save $3,000 a year when you're between 20 and 30 years old, put the money into an IRA with a 7% average annualized rate of return and never save again, you'll have $442,000 by the time you're 65, calculates Nicole Rutledge, a certified financial planner with Resource Consulting Group.

However, if you wait to begin saving until you're 30 years old and put in $3,000 each year until you're 65, you'll end up with only $283,000 at the same rate of return. That's 35% less than if you had just saved the money in your 20s, even though you'd have put in more than three times the amount of money.

So save regularly now. Skip a pizza or a couple of pitchers of beer a week and save for emergencies and retirement. Just save.

4. Take advantage of student perks

Don't spend extra money on food if you have a cafeteria. Research college meal plans, which can be much cheaper than outside meals. "It might not be offering the meal you want, but that's another charge you won't have to make," Mark says.

And when you do go out, take advantage of any student discounts at businesses or venues you frequent.

5. Pay less for textbooks

The average student can pay $1,000 a year for books, an often unexpected high cost for college freshmen, says Michael Geller, vice president of marketing for BookRenter.com.

Don't buy new books at the campus bookstore. Campus prices are almost always higher than at online retailers like Amazon.com or eBay.com, says certified financial planner Derrick Kinney. Consider renting textbooks at your school's bookstore or from sites like Chegg.com. Renting books or buying them used can save you 50%.

If you're using an online site, sign up for a rebate program, such as Ebates.com, which gives money back on each purchase. And remember to sell used books back at the end of the semester.

6. Borrow as little as possible

The average college student leaves school with about $23,000 in debt. "Borrow just enough to pay for your legitimate college costs," Hira says. "Explore all options. A student loan should be your last resort."

If you do borrow money, make sure you fully understand the cost and other terms of the loan before signing on the dotted line. The cheapest loans come from the federal government, says Ruth Vedvik, principal at Hardwick-Day, an enrollment consulting firm. And because federal interest rates are set, you know how much debt you're taking on, she says.

Remember to start looking into funding early and to submit applications before the deadlines. Search online for scholarships, grants and other financial aid based on gender, religion, race, ethnicity, the type of degree you want or other relevant criteria, suggests Ornella Grosz, author of Moneylicious: A Financial Clue for Generation Y.

Also consider working part time, which can decrease the amount you have to borrow.

7. Get organized

Little things can chip away at your budget. Avoid parking fines or late fees for library books or videos and CDs rentals, for example, says Cheryl Smith, financial adviser with JHS Capital Advisors.

Also, nail down your schedule early. "Many students wander into each semester and don't meet with their adviser and figure out which classes to take," says Rachel Cruze, host of the Graduate Survival Guide. "This can be costly when it comes time to register. If a class fills up before you can get in, you may have to take it during summer school or even stay an extra semester."

8. Avoid unnecessary fees

Avoid paying extra ATM fees by researching your bank's ATM availability on campus. These small fees can add up. After all, if both your bank and the bank hosting the ATM charges a $1 fee for each $10 withdrawal, that amounts to a cost of 20%, says Kathryn Mullaney, vice president for finance at St. Lawrence University.

If your bank doesn't have a branch in your college town, it might be smart to open an account at a different bank so you can get cash without paying those fees.

Overdraft fees range from $35 to $50, so consider getting overdraft protection to avoid those charges, even if it means asking a parent to sign up for the account with you, Mullaney says.

9. Use technology wisely

Set up text and email alerts for your bank accounts and credit cards to help you keep tabs on your spending and avoid missing payment dates. "It's an easy way to stay in-the-know about your own finances," says Justine Rivero, credit adviser at CreditKarma.com. "Plus you can make sure you don't ruin your credit by missing a payment or maxing out your credit card."

10. Protect yourself from fraud

Research conducted by Javelin Strategy & Research found that it takes 18- to 24-year-olds nearly twice as long to detect fraud compared to other age groups, making them fraud victims for longer periods of time. Young adults are also more likely to fall victim to fraud and identity theft by people they know. Living in a dorm, where other students or strangers might easily access a student's room, also ups the need for vigilance.

Take advantage of services that allow you to monitor your accounts regularly, such as by reviewing statements online or using mobile banking to see a snapshot of your account information, suggests Secil Watson, senior vice president at Wells Fargo Internet Services Group. Students can also forward sensitive mail, like financial information, to their parents' homes.

11. "Insure" success

Parents can help you save money through insurance. June Walbert, a certified financial planner with USAA, advises parents to re-evaluate their insurance when a child heads to college. "The increased liability of a child away at school potentially opens the door to a number of financially catastrophic events," she says. "Re-examining your family's insurance needs in the wake of a college-bound child can not only safeguard your finances, but even lead you to insurance savings."

Homeowner's policies provide limited coverage of children's personal property, and usually come with a large deductible. Opting for a renter's insurance policy provides better coverage with lower deductibles, Walbert says.

If your child is taking a car with them, update the usage. If school is 100 miles away or further, some insurers will offer a discount. Insurers also usually provide discounts for students with B averages or better.

12. Capitalize on coupons

It's no longer geeky to clip coupons. "Don't think your friends will mock you and call you a coupon-clipping grandma if you use coupons or deals," Warrick says. "They'll probably be jealous of the additional money you'll have to spend for next week's party."

Daily deal sites like Groupon offer deals on dining out and other services that can help you maintain your budget. And if you have unused gift cards you don't want, you can trade them for cash on sites like CardCash.com and CouponTrade.com.

13. Master relationships

Personal relationships that you make now can turn into business relationships in the future, says Dan Greenshields, president of ING (ING) Direct Investing. Make friends and also find a mentor in your desired field to get career advice. Being social now could boost your prospects in the future.

14. Invest in your future self

Seek out internships and volunteer. Learn skills that will help you land a job later. Employers are increasingly expecting more from candidates. Investing in yourself as a freshman will pay you back for years to come, Greenshields says.

15. Set limits

If you're going to spend more than $50 on something, figure out if you really need it. The $50 dollar limit, Cruze says, is a good point to stop and ask yourself if you can do without it. "Is the restaurant too expensive?" she says. "Do you really need that video game now, or will it drop down 30% in three months? Ask yourself what you can do without."