Dear Ash Cash: What’s the best way to save money as a college student? -Tamara McCloud
As a college student, it’s very important to begin the habit of saving as soon as possible. The most effective way is to “pay yourself first” and figure out the difference between what you need and what you want.
“Pay Yourself First” is a concept that was first introduced in George Classons classic book, “The Richest Man in Babylon” Then in Robert Kiyosaki’s “Rich Dad, Poor Dad” and also in my book, “Mind Right, Money Right: 10 Laws of Financial Freedom”. This concept is pretty simple: in order to create the habit of saving money, you must see yourself as a priority. Not your bill collectors! You!! What most people don’t realize is that it costs us way too much to borrow money, and as a college student, you will have many creditors begging to get you into debt.
What may seem like a deal at first becomes a big mistake after you add all the interest you will be paying. Sometimes people wind up paying three times the original amount of an item because of interest. The best thing to do is to have patience and save for what you want. Having money saved will alleviates financial stress and stops you from having to borrow money to get what you want. Beginning immediately, every time you get any income, no matter where it comes from, put aside $1 for every $10 you make. The best and most effective way to develop this habit is to make it as painless as possible. There is a saying “out of sight, out of mind” – if you make it automatic and make it invisible, you will create the habit without it even disrupting your day to day life. If you recieve money via direct deposit, take out your savings before you receive it, you’ll never know it’s missing. If you receive income in the form of a check, then have automatic deductions come out of your bank account on a monthly basis.
In order to avoid the temptation of using the funds for everyday purchases, you should open a separate bank account at an institution other than the one you keep your primary account in. I suggest a high interest savings account at a bank like ING Direct or FNBO Direct. Because these banks have little or no physical branches, it limits the access to your account, making it easier for you to save, while receiving a reasonable interest rate.