While you’re in college, put away that extra money from babysitting, gifts, and part-time and summer jobs—rather than spending it. It will make a big difference down the road! Potential future expenses, such as the deposit and first month’s rent for a new apartment, buying a car, or the expenses of an out-of-state move for a job, can make a big financial impact if not planned for in advance.
Here are some ways to get started with your saving:
- Put yourself on a budget
- Check out our Budgeting page for help with creating your budget
- Cut out nonessential spending
- Think about things you can go without – coffee shop coffee, soft drinks, eating out, etc.
- Place the money you would spend on these things into your savings account
- Check out our Spending page for more information
- Shop around
- Shop around to make sure you are getting the best deals on essential purchases
- Use online marketplaces to purchase gently used items to save on cost
- Get a part-time job
- Work a part-time job to earn money to cover living expenses and to help build your savings
- Pay yourself first
- Always place a portion of your earnings into a saving account right away
- Set up an automatic transfer of 5 to 20 percent of your paycheck into your savings account
- Always place a portion of your earnings into a saving account right away
Saving for your future now will be of benefit later, when you have to repay college loans and/or credit card debt.
Saving Options
Ready to start saving, but unsure where? Be sure to understand the pros and cons of each savings method before deciding which is best for you:
- Savings accounts are offered by banks and credit unions. They offer low minimum balances and are considered among the safest places to put money.
- Pro: They earn a guaranteed rate of interest, can be government insured, and usually make it easy to withdraw money.
- Con: Standard savings accounts typically offer the lowest interest rate compared with other methods of savings.
- Money market accounts are offered by many banks and credit unions. They work like checking accounts and typically pay a higher rate of interest than savings accounts.
- Pro: You can take out money at any time, usually without a penalty.
- Con: They may require a high minimum monthly balance—$1,000 to $10,000—to avoid fees. Additionally, you may be able to write only a limited number of checks during each statement cycle.
- U.S. savings bonds enable you to loan your money to the government and, in turn, the government agrees to pay you a specific interest rate over a period of one to 30 years. At the end of that period, you get back the full amount of your initial loan.
- Pro: Savings bonds interest rates are typically higher than interest rates for savings accounts.
- Con: If you cash in your savings bonds within five years of purchase, you are subject to a penalty of three months’ interest.
- Certificates of deposit (CDs) enable you to loan your money to a bank or credit union for a set period of time—typically three months, six months, one year, two years, or longer.
- Pro: The bank pays a set interest rate on your money over that time, adding it to the initial amount of the CD in increments. When the CD “matures” (reaches the end of the agreed- upon time period), the bank returns the full amount plus the accumulated interest. The rate can be higher than for savings accounts.
- Con: To earn a higher interest rate, you have to agree to a longer maturity date. If you take out money before the maturity date, you may have to pay a penalty.
If you want to learn more, talk with a bank or credit union representative, or look at the information provided on your financial institution’s website.
Emergency Fund
An emergency fund is a bank account with money that is specifically set aside to cover larger expenses, such as, car repairs, medical expenses, unemployment, etc.
Emergency funds help to create a financial buffer to keep you from having to take on debt in times of struggle. Typically an emergency fund should be about 3 – 6 months of your normal expenses. Use the Emergency Fund worksheet for help planning how much you need to save.
Content provided from https://www.cashcourse.org/Topics/Save-and-Invest/