2021 Guide to Back to School Finances for College Students

College students may feel overwhelmed at the idea of managing their own finances. Learn what the experts say about the importance of good financial management in college.
By Kathleen McWhirter

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Data published by the National Association of Student Financial Aid Administrators found that only 40% and 45% of newly enrolled four-year and two-year institution students, respectively, had participated in any type of personal finance course. Given that nearly 70% of college students take out loans, understanding financial decision-making and the implications of college debt is critical for today's generation of learners.

Whether you're a high school or college student, or a parent of one, we're here to provide accessible, concrete information on how to understand your financial situation and make smart decisions both while in school and long after.

Understand Your Student Aid

While most students are just excited to get on with moving into student housing and starting classes, it's important that they take the time to understand how their education will be paid for, especially if they are signing student loan documents. 

Why it matters

Students pursuing a four-year degree during 2018-2019 took out an average amount of $28,800 in educational loans, with many not understanding the full repercussions of significant debt when they signed on. With student loan debt following graduates for decades after entering the working world, understanding the long-term implications of significant loan amounts is critical.

How to do it

Reading the fine print of your loan documents can help you understand the basics of your loan terms, but often these are written in an inaccessible way. However, plenty of online resources can be found that explain the ins and outs of how student loans work - both while you're in college and after. Getting out of student loan debt can take some time, but it's well worth it if you want to achieve healthy finances.

Financial boost

  1. Pay interest on student loans while in school.
  2. Use student aid only for tuition and essentials.
  3. Keep applying for scholarships, even if you've never applied before. They are not just for high school seniors.

Earn While You Learn

If you want to hold down a job for even a few hours a week and think you might want to work on campus, answer "yes" to the "Are you interested in being considered for work-study?" question on the FAFSA form. You might end up working off campus, but by answering yes, you can be awarded work study and qualify for campus jobs.

Why it matters

Working in college can help you avoid putting expenses on credit cards, using student loan funding for everyday living costs, and feeling perpetually stressed about money. Even if you can only work five or 10 hours per week, this can help keep gas in your vehicle and snacks on your shelves.

How to do it

Earning money in college can take many different forms. Whether you decide to wait tables at a local restaurant, babysit for neighborhood families, take advantage of work-study funds from your federal student aid package, or use miscellaneous scholarships funds, there are plenty of ways to supplement your living expenses even while managing a full course load.

Financial boost

  1. Look for flexible jobs that work with your schedule and feel realistic.
  2. Consider part-time remote work that can be done any time and from any location with an internet connection.
  3. Try to apply for local jobs before the semester starts and everyone is looking for work.

Open a Checking Account

Even if you don't know how to write a check, it's ok. A checking account is the easiest and simplest way to keep track of your finances, get paid for your job, and pay for pizza on Friday night. You can even choose an online bank with a robust smartphone app.

Why it matters

Opening a checking account can help college students better monitor and track their spending. Many banks also allow you to easily add a savings account, creating the opportunity to start saving - even small amounts! - and building good spending and saving habits while in school.

How to do it

It's important to note that not all checking accounts for college students are created equally, making it important that you do your research before committing to one. Some may require no fees, while others charge a monthly maintenance cost. Some can require a minimum balance to avoid fees, while others do not set this requirement. Look at several options to find the best one for your financial situation.

Financial boost

  1. Look for checking accounts that allow you to earn interest on your balance.
  2. Set up direct deposits with your employer to get quicker access to your funds.
  3. Use the online banking portal to track your spending and look for any areas to cut costs. 

10 Free Checking Accounts for College Students

MoneyRates researched 300 of the top banks offering checking accounts to find some of the best accounts for college students. These banks were chosen for our top 10 bank accounts for college students because they offer free checking, have no minimum balance requirements, low overdraft fees, low overdraft fee caps (even if you overdraft on several items, they may not charge a fee separarately for each one), and no other requirements such as direct deposit.

  • Discover Bank Cashback Checking
  • Axos Bank Essential Checking
  • Ally Bank Interest Checking
  • State Farm Bank Checking
  • The Bancorp Bank OnePoint Checking
  • Chase College Checking
  • TD Bank Student Checking
  • BB&T Student Checking
  • Fifth Third Bank Student Banking
  • Chemical Bank Green Account

Create a Budget

You don't need a job to have a budget. You're getting money from somewhere, whether it's student loans, allowance from your parents, or scholarships, and you should know it's enough to get by. The only way to know this is by figuring out how much money you have each month and how much you spend. It's that simple.

Why it matters

Creating a budget helps students get in the habit of mindful spending and saving, prioritize future wants and needs, prepare for inevitable emergency spending, and exposes any harmful or bad spending habits. By learning good budgeting habits early on, this also sets you up for future success in your personal finances.

How to do it

With so many different pieces of advice out there, learning how to make a budget can take some research and thoughtfulness about what works best for your current situation. Given how busy college keeps you, don't overthink it. Add your monthly income and necessary expenses, set goals, and start monitoring areas where you can cut back.

Financial boost

  1. Look online to find a variety of free budgeting tools and frameworks.
  2. Learn good budgeting habits early on to save thousands of dollars over time.
  3. Institute budgets early on and work towards more robust retirement accounts.

Track Your Finances

Tracking your finances goes beyond just budgeting. By tracking what you spend, you'll know if you can afford that impromtu dinner with friends after the game on Saturday afternoon.

Why it matters

In addition to keeping a budget, tracking your finances can help you keep a closer eye on expenses across all your accounts and highlight areas with room for change. For instance, setting up an alert on your credit/debits cards any time you make a purchase larger than $50 can help you stay alert to your spending.

How to do it

Aside from finding one of the many free or paid expense-tracking apps that easily connect with your accounts, another great way of tracking finances is to categorize your expenses. This can often help highlight certain areas where you're overspending, such as eating out or buying clothes.

Financial boost

  1. Track your finances in real-time to help reduce impulse spending and avoid credit card debt.
  2. Identify areas where you're prone to overspend and work on developing new habits.
  3. Track your finances to instill better overall financial behavior.

Open a Savings Account

How can you save money when you're a starving student? It's really not hard, especially if you use a banking app that puts your "spare change" into a separate account that you can watch grow.

Why it matters

When money stays in your checking account rather than being transferred to a savings account, there's a greater chance you'll spend it. Additionally, learning how to save money - even if it's only $15-25 per month to start - is a practice that will serve you well throughout life.

How to do it

Often, the easiest way to open a savings account is to add it to your existing checking account. Many banks also offer student savings accounts that do not require you to keep a minimum amount and do not set monthly maintenance fees.

Financial boost

  1. Start an emergency account for expenses that pop up unexpectedly.
  2. Review several different savings accounts available to find the one with the best interest rates and terms.
  3. Create an automatic deposit from your checking into your savings account to get in the habit.

Use Credit Wisely

Thankfully, the days of credit card companies coming to campus to offer students free merchandise along with credit cards are long gone, but the temptation to take on a credit card to pay for spring break in Cabo still remains. Student credit cards can be a good way to manage finance and build credit for working students, but think carefully before applying for a credit card while you're in college.

Why it matters

Using credit wisely can make or break your future credit score, making it important that you have a clear and balanced understanding of credit usage. If a student decides to have a credit card, it should only be when they are working, can pay it off in full each month, and are nearing the end of their studies. Other ways to build good credit include having utilities in your name, using direct debits, monitoring your credit score, and making timely payments.

How to do it

Learning how to use credit responsibly can take time and practice, and college students should use restraint when first testing the waters. Rather than jumping at every credit card opportunity offered, take time to consider whether you even need one at present.

Financial boost

  1. Select a secured card that requires upfront payments for six months to help build good habits.
  2. Ask your parents to put you on one of their accounts to start building a credit history.
  3. Never use credit cards to purchase things that you couldn't buy with money you already have.

Frequently Asked Questions

How much allowance should I ask my parents for? 

2019 report from Forbes stated that the average budget for college students is currently between $100-$300 per month. That said, you should create a list of your monthly expenses to help justify the amount you request from your parents.

What is a reasonable food allowance? 

The USDA found that college students spend between $163-$367 per month on food. This can include a mix of college-based meal plans, off-campus dining, and trips to the grocery store.

What are effective financial habits for college? 

Making real financial headway in college can feel challenging given the limited resources you're working with, but it's a great time to build the habits that will serve you well when earning a salary. Some habits you can adopt include having an emergency fund, developing a side hustle, and starting your investing journey.

Experts Discuss College Student Finances

MoneyRates spoke with several financial experts on college student finance and how taking charge of money now can pay off big after graduation.

Meet the Experts

Kevin L. Matthews, II

Kevin L Matthews, II is a former financial advisor (selected by Investopedia for its Top 100 list), and he also previously served as the director of consumer information for NYC’s Office of Financial Empowerment. His Amazon bestselling book, "Starting Point: How to Build Wealth That Lasts," addresses common social issues that block most people from building wealth and how Americans can overcome these barriers to build sustainable wealth. Kevin holds a bachelor’s degree in economics from Hampton University, a certificate of financial planning from Northwestern University, and a certificate in disruptive strategy from Harvard Business School. He is a financial educator with Varo Bank.

Valerie Moses

Valerie Moses is a senior relationship manager at Addition Financial Credit Union, a credit union based in Lake Mary, Florida. As a credit union founded by teachers, Addition Financial partners with its local school districts and colleges to provide financial literacy workshops and other support to students and faculty. Addition Financial is the official financial institution of the UCF Knights and the preferred credit union of both Seminole State College and Valencia College, and our team members often work directly with college students. When Valerie is not at a community event or cheering on the UCF Knights, she can be found at her lifestyle podcast, Wellness & Wanderlust, along with her blog of the same name.

Andrea Ferrero

Andrea Ferrero became an educator over a decade ago to be part of changing the world. Teaching on the Navajo and Hopi reservation where she grew up, Andrea saw how even the brightest students faltered when money moved from math class to practical application. Looking for tools to address issues of educational equity, Andrea stepped into the world of financial literacy and ed-tech. She brings over a decade of experience in teaching and learning, curriculum and program development, and community capacity building together to design award winning educational programs and digital products. Andrea holds a teaching credential in PreK-12th grade multiple subjects and two master’s in educational leadership and curriculum & instruction with multicultural contexts. Leading Pockets Change, Andrea works with schools, organizations, and businesses to make finance fun through innovative educational approaches and meaningful ed-tech tools. She has served as a delegate to the World Innovation Summit in Qatar, the ASCD Supervision and Curriculum Development Delegation in China, the Multi-Age Learning Institute in New Zealand, and the Mozilla Open Leaders in England. Andrea is also a board member of the California Jump$tart Coalition. She is always happy to share coffee and a conversation about changing the world through the development of financial capability.

Why is college such a crucial time of financial learning and independence for college students?

Matthews: It is such a crucial time to learn and practice financial independence because it is in the sweet spot in your life where you’re young enough to take advantage of compound interest and young enough to recover from any potential mistakes. About 10 years after college, the stakes are much higher, you’ve already lost a decade of potential compounding interest and the opportunity to build an even longer credit history.

Moses: College is a pivotal time for many young people as they begin to develop positive money management habits and become responsible for their own finances. Being away from home for the first time gives students the chance to become more independent from their families and start making their own decisions around money. College is the perfect opportunity for students to establish a budget that works for them, seek out part-time employment or paid internships, and practice making timely payments on larger expenses.

Ferrero: As an undergrad, the extent of my financial education stopped with a single sentence from a well-meaning advisor, “Don’t buy pizza with student loans, that $15 will cost you hundreds in interest.” The lack of money conversations across generations led me and my co-founder to start Pockets Change, where we work to help students, parents, and educators find their rhythm with finance. When it comes to avoiding financial pitfalls or bouncing back from money missteps in college, it’s important to take action even when you feel all the feels.

Buy-in to money conversations and ask questions about the details. Too many of us leave school uncertain about loan terms, repayment plans, or even the college to career transition.

While you're on campus, reach out to student services and get curious about resources.

Find your flow with spending. It’s easy to get to the end of the month or semester and have no idea where the money went. Start building budgeting habits by looking at where you enjoy spending and where you could make some small change.

Explore ways to earn while you learn. Don’t wait til your degree is in hand to start building your career connections and professional network. Taking on paid internships, projects, and part-time work can increase your income in short term and build lasting relationships for the long run.

What are a few financial pitfalls college students should be aware of?

Matthews: There are two big pitfalls that I see for many college students. The first, is the feeling that you can just wait until graduation or you’re in the “real world” to start learning and building those financial skills. The second, is settling for the status quo with your financial relationships. We tend to get our financial habits from our parents. This sometimes includes using the same bank as your parents too. As a college student, this could be a major pitfall due to the number of fees while in college or shortly after you graduate. I would encourage college students to begin shopping around now, look for banks that don't have any hidden fees and offer high yield savings accounts (like Varo Bank) that can help them reach their financial goals both now and in the future.

Moses: While college can be a great time to start establishing credit, students should be wary when opening up that first credit card. Consider opening a secured card to avoid getting into massive amounts of debt, and look out for annual fees and high interest rates, especially on store cards. While it may be tempting for some to overspend on a credit card, students should aim to make timely payments in full whenever possible. In addition, students should be careful when sharing their personally identifying information. In times of uncertainty like a pandemic, scammers are especially likely to prey on our sense of distraction, and sharing your information too freely can lead to identity theft and fraud. Instead, students should verify whom they are sharing their information with, and get in the habit of checking their credit reports annually.

Is there any other advice you'd like to offer to college students regarding personal finances?

Ferrero: Handling major financial decisions while navigating university systems and courseloads can be stressful. Financial stability is connected to graduation rates and retention along with overall well-being. Whether you’re a recent graduate or just starting out on your college career there’s no better time to start thinking and talking about money.

Matthews: College is the perfect time to take calculated risks and experiment with starting a business or investing. While I was a sophomore, I started my own business that still runs to this day. By my senior year, I wrote my first e-book. It did not bring in any sales but it did give me the skills to write my best-selling book eight years later. I would not have been able to do those things if I didn't have the opportunity to practice and learn in college.

Additional Resources

Avoiding Student Aid Scams

Federal Student Aid highlights some of the many student loan scams currently out there and provides tips on how to spot fraudulent offers.

Five Personal Finance Tips for New College Graduates

The University of Tennessee at Knoxville looks at some ways new graduates can set themselves up for success by making sound financial decisions.

Manage and Repay Student Loans

USA.gov highlights best practices when it comes to handling student loans, including how to select a repayment plan and get financially settled after graduating.

Manage Your Debt

Sallie Mae provides actionable and concrete information on how to deal with student loan debt and pay it off in a timely manner.

Parents, Let's Talk College Finances

The University of Michigan Extension provides this extensive page to help parents of current students learn how to talk to their kids about money in college and set them up for success.

Paying for College

From student financial aid to loan repayment, the Consumer Financial Protection Bureau provides easily understandable information about making informed decisions and knowing your rights.

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