Unfortunately, most of us know the struggle of being broke in college… and it’s not a fun one! We are often left wondering why books, laptops and meal plans are so expensive, leaving us with little room to do fun activities or to start saving for the future.
But, contrary to popular stereotypes, being in college doesn’t automatically equate to being broke. In fact, I have five tips for you that will start saving you money!
Tip #1: This is rather obvious, but it needs to be said, nonetheless. Avoid excessive takeout or food deliveries! I know those late-night pizzas are SO tempting. Same with the convenience of using a food delivery service when the dining hall or cooking for yourself may not sound so enticing. But, think about how much money is spent each time food is ordered.
With a delivery fee, a small service fee, and a tip, the total bill for an $8-10 sandwich can go up to $15-17 very quickly! So, enjoy the occasional stuffed cheesy bread, but try not to go overboard.
Tip #2: For me, this tip has been truly life changing. Save every single $5 bill. It may seem mundane but, believe me when I say this trick helps to rack up a pile of cash savings fast. Plus, this stockpile of extra cash could go towards something useful like groceries or books!
I even recommend saving the occasional $10 to make that stockpile grow even faster!
Tip #3: Tip two and three go hand-in-hand. Save all change too! Investing in an electronic money counter and watching the number go up is the best feeling ever. Plus, there’s no need to carry around a clunky wallet (a win-win, if you ask me.)
So, start dropping those coins into a jar and see just how surprisingly fast this trick helps to save money.
*Bonus tip*: When the jar is full, take it to a coin machine to turn the coins into a more useful form. And, if given the option between cash or a gift card voucher, always take the voucher! There are generally no service fees to get a voucher, and they are able to be used at common places like grocery or online stores.
Tip #4: This tip is straightforward. For every paycheck earned while in college, place some of it into a savings account. A lot of us have jobs to finance necessities and fun activities. However, any amount that can be “given up” to savings is more money in the bank for the future! A common theme in this article—if you haven’t noticed by now—is that every penny counts!
Tip #5: This final tip is the most daunting but, is still simple. So, don’t worry! It has to do with high-yield savings accounts, which are SO valuable because the savings build at a faster rate than normal.
For my personal choice, I opened a CapitalOne 360 Performance Savings Account. This is just one example, but many of these high-yield savings accounts are similar from bank to bank. Still, I recommend doing research to see what works best!
First and foremost, what is different about these accounts compared to a regular savings account? According to CapitalOne’s site, a high-yield savings account has a higher interest rate, or annual percentage yield (APY), than traditional savings accounts. High-yield accounts typically pay five times the national interest rate, which is practically zero given the current economy. But accounts like my CapitalOne are still paying about 0.50 percent APY or more currently.
Basically, this means the money put into these accounts will grow at a much faster rate than usual!
Another standard factor about these accounts is the concept of compound interest. Compound interest is the addition of interest to the amount first put into the bank (aka the principal sum) that then builds onto itself monthly. In other words, it’s interest on top of interest.
Let me give a quick example. Let’s say $1000 is originally put into an account that has a two percent APY and monthly interest payouts. After the first month, about $1.67 is earned in interest based on the rate, so the balance becomes $1001.67. This cycle repeats monthly, generating interest on the new, higher balance each time. By the end of the year, this account with originally $1000 will have turned into $1020.18!
Month to month, year to year, even though the two percent APY (from this example) stays the same, it gets added to a higher number every time. Therefore, compound interest allows for exponential growth as opposed to linear growth, meaning that pile of cash gets bigger faster.
Side note: When looking into high-yield savings accounts, there are a couple stipulations to avoid. One, make sure to look for accounts with no monthly maintenance fees to avoid losing cash. Also, some banks require a minimum balance to access higher APYs. I recommend finding an account that allows a start with any amount!
I have two final pieces of information about these accounts, so bear with me.
First, keep in mind interest rates will vary based on the national rate. The national rate is based on the current economy, and that is always fluctuating. Luckily, the bank worries about this, so its not necessary to pay much attention to it with a starter savings account!
Secondly, these types of accounts are meant for savings. This means that you shouldn’t make tons of transactions in and out of them each statement cycle. In fact, most banks limit how many deposits/withdrawals can be made monthly.
At the end of the day, I sincerely hope I offered at least one helpful tip for saving money in college. And please, don’t be daunted by the idea of breaking into more adult banking, especially if everything I said about the high-yield savings account seems complicated. I too am a college student who once had no prior experience in finance, but I figured it out! The most important thing is to just give it a shot. And remember, every penny counts!