The benefits of saving money for students cannot be overstated – I’ve got 7 reasons why students should save money, as well as 10 benefits of doing so.
I felt, firsthand, the benefits of saving money for students back when I graduated college (about 15 years ago). I had saved up around $2,300 in a savings account from my federal, minimum-wage job at the library (and from a few other jobs).
Having that money meant that I could put down first month’s and last month’s rent on an apartment in my college town (plus the security deposit), which is where I scored my first post-college job. This was 1.5 hours from anyone else I knew, so I couldn’t have taken this job without that apartment (or if I had, the commute would have been 3 hours a day).
It also meant that I could cover my living costs until I received my first paycheck – that’s right, when you start a new job, you don’t receive the first paycheck for a few weeks to month out.
Having that small cushion meant that I could start my life right after college instead of couch-surf at my parent’s.
Let me give you even more specific reasons of why you need to save money as a student, and how much you should shoot for.
- Importance of Saving Money for Students
- 10 Benefits of Saving Money for the Future
- 7 Specific Reasons Why Students Should Save Money
- How to Save Money as a Student
Importance of Saving Money for Students
I cannot overstate the importance of saving money for students – it’s the difference between you being able to launch into your life after college, or having to live off of your parents/a friend/boyfriend/girlfriend/etc.
And if you don’t have any other person you can fall back on? Then you REALLY need to listen up about this.
Here’s what I was able to do with the money I had saved:
- Secure an apartment near my new job
- Pay for temporary health insurance, since at most jobs there’s a waiting period of between 30-90 days before you can get on the company’s health insurance plan
- Buy groceries, pay for utilities, pay my cell phone bill, and fill my tank up with gas
- Start my life
All really, really important things to do, amiright?
10 Benefits of Saving Money for the Future
Maybe you’re not convinced, yet, of how important saving money is for you. So, I’d like to talk about 10 benefits of saving money for your future.
Saving money for the future…
- Gets you into the savings habit early: If you establish a savings habit NOW when your paycheck is super small? You’ll only continue to save more and more money as you get your hands on a real paycheck from a job-job.
- Helps you build trust and confidence in your abilities: It’s hard to establish confidence in yourself in your early 20s. You are essentially taking over your life, and you need to know that you can trust yourself in doing so. There are many ways that you can build this trust, but having a buffer in savings? Well, that will go along way to trust that you can handle anything (especially after that first hiccup or emergency happens and you don’t have to call home for help).
- Helps you cover increased expenses: Right now, you’ve receiving lots of discounts because you are a student. It may not feel like it – especially if student loans are paying for some of those discounts – but you’re living a somewhat sheltered/nurturing life from the outside world. As soon as you graduate? You’re kind of thrust into the rest of society. No more student discounts. No more subsidized housing (though you can always still keep a roommate – I had one in my first two apartments after college), and no more parents to help you with your monthly bills.
- Lets your money work for you (grow): If you put money into your wallet, it just hangs out there until you spend it. If you put money into a savings account? Woah, Nelly! It actually grows money of its own. This is called compound interest – and it basically means that you earn interest not only on the money you put into the bank, but on the interest that your money has earned. It’s a compounding effect.
- Gives you options: Imagine if you got the dream job you were waiting for all senior year, about midway through your first year with the job you took in the meantime. How wonderful! But not so much, if you don’t actually have enough money to move yourself there. Or not so much if you don’t have any way to pay for a vehicle (since this dream job is located outside of a city). In other words, you need to keep money in savings just to keep your options open. Even if you don’t know what all your options are right now! Focus and strengthen your finances for when opportunity knocks.
- Live life on your terms: If you need to keep borrowing money from others or from your parents whenever you hit a snafu or want to do something…well, they have some sort of say over your life (even if it’s just “yes, you can do that because I’m funding you”). When you save your own money? You get to live life on YOUR terms.
- Sets yourself up for future success: The more you save, the brighter your future looks. I’m 36 years old now, and have prioritized saving money my entire life. And I can tell you, it has paid off in so many ways I never could have imagined while socking away $20 at a time in my 20s. For example, my retirement is completely on track. My husband and I were able to put a down payment on a home when the market tanked so we got a steal, and I was able to quit my full-time job to pursue my passion job (while it was not earning a full-time income) WHILE raising our son at home. That’s called lifestyle design, and it’s something I want for you one day!
- Helps you weather bouts of unemployment: In my 20s, I was laid off twice. Completely unexpectedly. And guess what? My husband was laid off twice as well. That’s four times between the two of us. Yes, you can generally get unemployment insurance if you’re laid off. But it is a fraction of what you typically earn – so you need a savings buffer to pull you through. And when you’re in the beginning of your career? You’re more vulnerable to layoffs.
- Live it up in your twenties: We decided to not have children until our 30s. And because I had saved money in my late teens/early 20s, I was able to really live it up before our little guy came along. This meant doing things like buy a home in our late 20s, travel to Japan several times, take a cruise in Alaska, go on a honeymoon in Austria…really, the sky’s the limit.
- Lessen your financial stress: This one’s a biggie. You don’t have to go through financial stress – though on some level, we all do (even billionaires!). Cut down on your financial stress by saving money. Seriously – it’s a gift to yourself to not have to worry about where next month’s rent payment is coming from, or how you’re going to get enough food for the week.
You see the benefits, you’re hungry to saving money…but what exactly should you be saving money FOR? Let me help.
7 Specific Reasons Why Students Should Save Money
Aside from all of that, I want to lay out for you 7 reasons why students should save money.
- To pay for your student loans: There’s a grace period from when you graduate college to when you have to actually start paying back your loans (though it’s better to start paying them early, and even paying the interest on unsubsidized loans while you’re in college). But what if you haven’t found a job before that 3-6 months’ grace period is up/ You need to have enough money in savings to be able to cover your monthly student loan payments. Here’s a student loan payment calculator that will estimate for you how much your payments will be each month.
- To pay off your student loans early: I got out of my $36,000 in student loans within 5 years of graduating (declaring debt freedom from them on September 1, 2010). I would love for you to do it EVEN SOONER. It’s liberating. It opens up all kinds of cash flow for you to use for other things, like the next stage in your life (saving for a down payment on a home, starting a business, having a baby, getting married, travelling the world…whatever it is that you gives you your kicks).
- To get you into an apartment: You’ll likely need first month’s rent, last month’s rent, and a security deposit (that is typically equal to one month’s rent payment) in order to secure an apartment. That’s a decent chunk of change!
- To pay for your relocation expenses: Some companies pay to relocate their employees; however, many companies will only do this if you’re a little higher up on the totem pole. It’s very likely you’ll have to cover your own relocation expenses at your first job out of college. Try to negotiate for this when you’re in the hiring process, but be prepared (with savings) to cover the costs for your new opportunity.
- To go on a Gap Year: Have you ever heard of a gap year? It’s taking a year off between graduating college and starting your first job so that you can travel, pursue a passion/hobby, and find out more about yourself. It’s a luxury, and one you can’t afford unless you save for it.
- To buy a car: Whether or not you’ll need a car depends on where your first job out of college is going to be located. Will it be in a city where you can easily take the bus/metro? Or will transportation be up to you to provide?
- To buy a work wardrobe: Chances are very high that wherever you work next, you won’t be able to show up in your college clothes. You’ll need a few hundred dollars to get a work wardrobe (though I think you can stretch $100 in the beginning, then build on your wardrobe as you get more and more paychecks).
How to Save Money as a Student
Have I nailed into you how IMPORTANT saving money as a student is? Now, I want to give you some awesome ways for you to actually do so.
There are two types of “saving money” that you can do.
- Save money off of your expenses and bills to widen the gap between your income and your expenses
- Actually put money in a savings account
They’re not the same thing. Because even if you take action on the tons of tips I’m about to share with you and save money off of your expenses/bills but you DON’T set aside that money into a savings account (untouched)? Then you haven’t actually saved money.
Think about it – it’s like when you see on the bottom of a grocery store receipt that you saved $3.42 using coupons. But you don’t actually have $3.42 more in your savings account, right? You only would if you physically move that “savings” from your checking to your savings account.
I’ve got loads of tips for how to save money for students in this article – here are two of my favorites:
- Continue Applying for Scholarships while IN college: I wish I had known I could do this. Most college students apply for scholarships only in high school; but there are loads of scholarship opportunities for current college students. I’ll show you how to find them.
- Sign Yourself up for your OWN UPromise account: Most people only sign up kids for UPromise accounts. But did you know that you can get free money to put towards your school/textbooks from businesses while you’re in college, as well?
You’ll also want to check out my guide on 250 money saving tips.