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College students tend not to be the most money-savvy folks. So The Daily Utah Chronicle sat down with Ann House, a financial counselor with the U’s Personal Money Management Center, to determine the top five most common money mishaps that students make and how to avoid them.
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1. Students Don’t Budget
House said the No. 1 mistake college students make is not budgeting. Budgets can be as simple or as detailed as a student wants — simple budgets are better than no budget at all.
The basic function of budgeting is to know how much money you have by determining how much you spend and how much you earn.
“The students who don’t create a budget are, more often than not, the students who become adults that live paycheck to paycheck,” House said. “These people have no emergency funds and live in survival mode.”
She said budgets help students understand the flow of money, taxes and other financial matters, and they can also help people avoid financial scams.
Margaret Carlson, a senior in biology, said she wishes she became familiar with the Personal Money Management Center earlier in her college career.
“I made a lot of mistakes when I first started college,” Carlson said. “I ate out with my friends quite a bit, I bought new outfits on a pretty regular basis and I didn’t really understand what it meant to save. The [Personal] Money Management Center is really a hidden treasure for students wanting to make the best of their situations now and in the future as well.”
2. Students Don’t Cut Expenses
Students today spend money without thinking, House said. As a result, many students don’t value money enough and use it too freely.
One of House’s favorite quotes is: “If you live like a professional while you’re a student, you’ll live like a student when you are a professional.”
She said students live in an instant gratification culture — they want what they want, and they want it now. This behavior can cause students to become stuck in debt.
“The time to be a poor college student is now,” House said. “There is absolutely nothing wrong with being a poor college student. In fact, it will pay off in the long run.”
The most common unnecessary expense that students admit to is eating out too much, she said. Friends often want to go to restaurants to get off campus or go out for drinks, and the tabs can add up quickly. Instead, House suggests that students take advantage of the discounts they can get with their UCard, and pay attention to free food events on campus.
“It comes down to needs versus wants,” she said. “Students often get these two ideas confused. Many students think they need a car, but really they want a car and need transportation. The U offers free UTA passes for students, and that covers the need for transportation at no cost to the student.”
3. Students Don’t Spend Enough Time Building a Good Credit Report
Students are often told not to open a credit card account, but House said it’s not such a bad idea. If used responsibly, it can help students build up a good credit score before they make larger purchases later in life.
“Students will eventually want to take out a loan to buy a house or a car,” she said. “Without good credit, people will find themselves in an embarrassing situation. In addition, people will also be subject to higher interest rates if they do not take the time to establish a good credit report for themselves.”
Car insurance rates and job offers can also be affected by credit scores. House said during the U’s recent career fair that she spoke to several employers and asked if they pull a credit report for applicants. She said more than half of employers will. This is a relatively new phenomenon. A good credit report can easily differentiate one applicant from another.
4. Students Don’t Save Enough Money
College students tend to be compulsive shoppers. Many want the newest and latest trends, but House warns against this behavior and said students need to get into the habit of saving money.
“Managing money is not about the money but about positive habits and behaviors,” she said. “Saving allows students to form good money habits.”
One of the best ways to save money is to open a ROTH IRA account. The only prerequisites are to be at least 18 years old and working. ROTH IRAs allow students to earn 12 percent returns on the money they save. This can add up to huge figures by the time they retire.
“It’s like the old saying goes,” House said, “you can either work or you can put your money to work for you.”
5. Students Don’t Make School Their Top Priority
House said 80 percent of U students work in addition to taking classes so they can afford tuition, books, parking and rent. While she acknowledges that each of these is an important part of being a student, House said working can sometimes be detrimental to education.
“Students fail to understand how demanding college is,” House said. “Work can quickly get in the way of being able to study for upcoming tests and turning in papers on time. As a result, grades go down, students lose scholarships and soon they find themselves retaking classes. That’s a lot of unnecessary money spent.”
Students who wish to avoid these and other major money mistakes should contact the Personal Money Management Center, located in room 317 of the Union.
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