Nine money tips for college students

It is that time of the year when students start college and begin making routine financial decisions independently. Is there a set of rules for the youngsters? Let’s make a list.

First, consider it a shame if parents give you a debit or credit card and tell you they will pay for whatever you swipe. Even if they choose to be super-indulgent parents, 18 years is an old enough age to give up instant gratification. If you believe you want a solid foundation on which you will make personal financial decisions all your life, begin by defining personal spending allowance. Knowing that money is not limitless is the first lesson to learn. Take the initiative to define your monthly allowance and tell yourself you will spend the next four years learning to live within this amount.

Second, however boring it is, keep accounts. Use any of the several apps that enable you to keep tabs. Many of the modern apps can also classify the expenses, tabulate and represent it pictorially. You are on a journey that identifies your money personality. You can’t walk that path blindfolded. Whatever be the expense, track it. Take a look at how it all adds up. You can always make corrections as you go along. You need a record of expenses to do that. For instance, taking a cab instead of public transport after the weekly outing might have cost more than you thought, and mattered more than it should.

Third, apply yourself to what you see as your spending pattern. Face up to who you are as visible in your monthly spending. Add up the mandatory expenses on food, rent, utilities and subscriptions. That is where your allowance must primarily go. You should be left with surplus to spend on discretionary items after these heads of expenses. If you have a bank loan, it represents what an average stuIt is that time of the year when students start college and begin making routine financial decisions independently. Is there a set of rules for the youngsters? Let’s make a list.

First, consider it a shame if parents give you a debit or credit card and tell you they will pay for whatever you swipe. Even if they choose to be super-indulgent parents, 18 years is an old enough age to give up instant gratification. If you believe you want a solid foundation on which you will make personal financial decisions all your life, begin by defining personal spending allowance. Knowing that money is not limitless is the first lesson to learn. Take the initiative to define your monthly allowance and tell yourself you will spend the next four years learning to live within this amount.

Second, however boring it is, keep accounts. Use any of the several apps that enable you to keep tabs. Many of the modern apps can also classify the expenses, tabulate and represent it pictorially. You are on a journey that identifies your money personality. You can’t walk that path blindfolded. Whatever be the expense, track it. Take a look at how it all adds up. You can always make corrections as you go along. You need a record of expenses to do that. For instance, taking a cab instead of public transport after the weekly outing might have cost more than you thought, and mattered more than it should.

Third, apply yourself to what you see as your spending pattern. Face up to who you are as visible in your monthly spending. Add up the mandatory expenses on food, rent, utilities and subscriptions. That is where your allowance must primarily go. You should be left with surplus to spend on discretionary items after these heads of expenses. If you have a bank loan, it represents what an average student’s mandatory spend must be. Learn to stay within this. If you have indulgent funding, negotiate with your parents for a better allowance if it falls short. This process will ground you; give it a shot.

Fourth, sum up your discretionary spending on outings, entertainment, recreation, and other activities. Hold back the urge to feel entitled about these. Think of yourself as the one funding these expenses, rather than merely spending them. Where would you cut back? Find alternatives that cost less. Trekking with friends with a sandwich and water can also be fun, rather than a movie and eating out as a default plan for the weekend. You don’t have to label it as cutting costs and feel small about it. Push yourself to genuinely explore how you can spend less and also have a good time.

Fifth, evaluate your expenses to see if there are items that result in regret or resentment. Did you pay for a friend you think is systematically leaching off you? Did you go out with people who are out of your league and spend too much, but don’t feel good about it? Is there an expense you know to be too much, but you want to complain that it’s out of pocket for you? Is there an expense you thought was a good choice, but ended up being less worthy? Learning personal finance involves developing this ability to face up to your money decisions and being ruthless about it. Many adults live in denial and vanity because they have never carried out this exercise in their lives.

Sixth, is there an opportunity for some parttime work? Are you pushing it aside thinking that it pays too little and that you couldn’t care less? Think about it again. Taking up a job enables so much of implicit learning and a measure of personality development that’s not taught in schools. You will witness how organisations function, how roles are defined,how people perform, and how there is a mix of roles, skills, behaviours and attitudes in play. Formal school teaches you to compete; real life requires you to collaborate. Taking up a job will also challenge you to manage your time better, make choices and assign priorities better, and feel more confident in your ability to communicate. The addition to your monthly allowance is also welcome.

Seventh, try your hand at saving. You may not have long-term goals, but anything that needs a lump sum in future requires advance planning. You might want to take a holiday with friends during a break. From finding out where to cut back, to rearranging your spending so that you prioritise this goal, you will find yourself making tough financial decisions. Real life involves this exercise more often than not. You will enjoy the sense of accomplishment when your decisions—cooking at home rather than eating out, buying fewer clothes, resisting the temptation to spend your part-time earning—translate into an indulgence you have funded with your money management skills. Saving is not boring. The earlier you learn it, the better your life will be.

Eighth, try your hand at investing. What is college without some money set aside for trading on stocks, futures and options? Make sure you haven’t staked too much, but give it a shot. Find friends who also trade and exchange notes on what works. Enjoy the high of winning and having some money to spend; suffer the unexpected meltdown. You become a sensible and hardy long-term investor when you have experienced first hand the perils and prizes of speculation. Just don’t do it secretively and become an addict. Be aware that speculation can take a toll if indulged in obsessively. Most students give up after one or two losses that wipes off their capital. Many I know have grown into serious investors, who analyse stocks thoroughly as life-long investors.

Ninth, consider your student years as those that shape your money personality. How you treat your income, what you do to augment it, how you allocate it, whether you stick to plans, whether you face up to the consequences of your own actions, how truthful you are to your own personality as revealed by your actions, how well you learn and how you adapt are all foundations for how you will manage your money in your lifetime. Student years offer a lowrisk platform to hone these traits. Don’t pass it up and remain a lazy spender who leans on his parents.

(The auhtor is CHAIRPERSON, CENTRE FOR INVESTMENT EDUCATION AND LEARNING.)