6 Common Money Management Mistakes College Students Make | Announce (2022)

For many young people, college is their first money management experience. However, many students are not adequately prepared to handle their own finances. One of the leading reasons that students drop out of college is because of finances – often due to poor personal money management.

Parents recognize the need for their students to have basic personal finance knowledge, but many don’t know how to teach their children good money management skills. Parents should recognize that learning good personal finance habits doesn’t have to be difficult or complicated.

By practicing basic money management techniques, college students can feel confident about their ability to manage their finances. Following are the most common money management mistakes the UNL Student Money Management Center, a financial education program, sees students make. There are easy solutions to help students avoid making these common money management mistakes.

1. Not Knowing Where Their Money is Going

Want to know a millionaire’s secret? Live within your means. Even Donald Trump has to control his spending. He has to make financial choices based on the money he has available, like only buying only one private island instead of two! Overspending is a problem everyone faces at one time or another – especially college freshman. We have talked to countless freshmen that drain their savings accounts within the first month of college and then have to take 1, 2 or 3 part-time jobs just to pay for basic expenses.

(Video) 7 common money mistakes college students make

The first thing every college student should do to gain control over their financial lives is create a spending plan. Having a spending plan will allow students to see where their money is going and where they can cut back their spending. We recommend that students try http://www.mint.com – which is free, easy-to-use budgeting software that will automatically create a basic spending plan that the student can then personalize.

Basically, when creating a spending plan, you compare your income to your expenses. Making your income and expenses match OR having more income than your expenses is the goal. This means your financial life is in balance and you are living within your means. A negative number means you are spending more than you are earning and need to adjust your spending habits.

2. Not Having a Plan for Their Money

Students often have no plan for how to use their money. In this case, they would benefit from setting financial goals. There are things each of us wants to get out of life, and we have to plan for how we will pay for them. For example, a common financial goal for UNL students is to go on a study abroad trip. They need to write down this goal, as opposed to just thinking about what they want to do with their money in the future. Writing goals down has been proven to lead to greater success in actually achieving goals. Writing down a goal makes it more permanent and you are more apt to remember and reach it.

Another goal might be to have an emergency fund to use for unexpected expenses, such as parking tickets and car repairs. It’s easy to let one unexpected incident make your financial life spin out of control. Another common goal is to graduate with as little debt as possible. To save money, students should remember to pay themselves first. They should try to put aside 5-10% of their monthly net income for savings.

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Savings goals, financial goals, and debt repayment obligations should be included in their spending plans.

3. Not Determining Wants vs. Needs

Sounds pretty basic, but many college students try to live outside their means because they haven’t thought about categorizing their expenses – determining what they really need versus what they want. Following is a good example of choosing between wants and needs: You probably understand food is a need and coffee is a want. But some mornings, a Starbucks latte is sure to feel like a need. However, there are almost always inexpensive alternatives for your “wants.” In this situation, skip the trip to the coffee store and brew your own coffee at home for a lot less. Determining wants versus needs will help college students avoid impulse purchases and overspending.

4. Succumbing to Peer Pressure

Peer pressure is a very powerful phenomenon on a college campus. Students need to understand it’s okay to say “no”. If their friends want to go out to eat, see a movie, or go on a trip, but they know they do not have enough money in their entertainment budget, they should know they don’t need to give into peer pressure. This is where financial goals are important – students need to concentrate on what they really want out of life in order to help them avoid overspending. Plus, if they make good financial choices, they could help their friends make better financial choices.

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5. Abusing Credit & Ruining Their Credit Score
Many college students mismanage credit cards and find themselves caught in a cycle of debt. To prevent making mistakes with credit cards, students that are considering using credit cards should first determine if credit really is a good option for them. The students that can handle credit wisely understand that they need to set limits for themselves on what they use credit cards for, know they have the self-discipline to not use credit to purchase what they can’t afford, and know they will be able to pay the credit balance in full each month to avoid wasting money on interest. Also, people under 21 cannot get a credit card unless they have a co-signer or are able to prove that they will be able to pay their bills with only their present income. Before parents co-sign for a credit card, they should make sure that their student understands how to use credit wisely.

Students should understand that their credit management habits will affect their credit score - which will affect their future financial life. For example, they should know that if they create a low credit score, they will pay more for mortgages, auto loans, etc., may be prevented from getting an apartment, and, in some cases, even getting a job. Many employers now check credit scores before extending job offers, as a credit score is an indicator of responsibility – if you can handle your finances correctly, you most likely are a responsible person.

Students who wish to build a good credit score should know to: pay their bills on time - the most important thing you can do to establish your score; only open accounts you need - generally 1 or 2 cards are enough for college students; maintain long account histories - the longer you have accounts open and the longer you manage the account responsibly, the more your score will rise; and keep debt levels low - keep balances under 30% of the total credit limit.

When students are choosing a credit card, they should read all application materials carefully – especially the fine print to know what fees they may be charged. Also, they should know that the introductory interest rate often will not last. They need to know what their interest rate will jump to after the introductory period.

6. Abusing Student Loans

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Many students are at a loss when they try to figure out how they will pay back their student loans. The most important thing students should know about student loans is they should only borrow enough to pay for necessities. Often students use their student loan refund (if students borrow more than they have to pay in, they will receive a the difference in the form of a refund check) to purchase their “wants” – big screen TVs, video games, clothing, vacations, etc. They should strive to graduate with as little debt as possible. Once they graduate, they want to put their money towards achieving their financial goals, such as purchasing a house. They don’t want all their money to go towards debt payments.

Also, students should understand that their refund check has to last throughout the semester. They should strive to use their refund to pay for only necessary items. If they have money left over at the end of the semester, they can use that money for the next semester, which will cut down on the amount of money they will need to borrow. {Note: Students may find it helpful to stop by the Money Management Center to create an initial budget earlier in the semester so they can see what funds they actually have available. This is a wonderful opportunity to learn how to manage their money and expenses.}

One of the greatest satisfactions in life is having a sense of control over your personal finances. When it comes to money, students should always remain positive – practicing good money management habits can be challenging, but with a little practice and patience, it is possible. Practicing good personal finance habits is an empowering experience, and helps students gain confidence in themselves and their ability to be financially successful.

The UNL Student Money Management Center is a joint effort between ASUN, Student Affairs, and the department of Child, Youth & Family Studies in the College of Education and Human Sciences. The mission of the program is to encourage students to take responsibility for their financial futures by creating and upholding a culture of financial empowerment among the student body through financial education.

FAQs

6 Common Money Management Mistakes College Students Make | Announce? ›

6 Common Money Management Mistakes College Students Make
  • Not Knowing Where Their Money is Going. Want to know a millionaire's secret? ...
  • Not Having a Plan for Their Money. ...
  • Not Determining Wants vs. ...
  • Succumbing to Peer Pressure. ...
  • Abusing Credit & Ruining Their Credit Score. ...
  • Abusing Student Loans.

What have been your most significant money management mistakes? ›

  • Unnecessary Spending.
  • Never-Ending Payments.
  • Living on Borrowed Money.
  • Buying a New Car.
  • Spending Too Much on a Home.
  • Misusing Home Equity.
  • Living Paycheck to Paycheck.
  • Not Investing in Retirement.

What are some ways that students can get into money trouble? ›

Learn about some of the most common financial problems for college students and find out how you could manage your money wisely.
  1. Not Taking Advantage of Financial Aid. ...
  2. Not Creating a Basic Budget. ...
  3. Not Knowing the Difference Between Wants & Needs. ...
  4. Credit Card Misuse — or Disuse. ...
  5. Not Planning for the Future.
May 14, 2021

What are 5 money management tips to help achieve your goals? ›

Read on and discover the tips to help you meet your financial goals.
  • 7 Financial Tips to Meet Your Goals. ...
  • 1- Create a budget. ...
  • 2-Get organized. ...
  • 3- Know where your money goes. ...
  • 4-Shop Smarter. ...
  • 5-Create a spending plan. ...
  • 6-Save for your future. ...
  • 7- Start investing money to reach your goal.
Jan 24, 2021

What is poor money management? ›

Poor financial management happens when credit facilities are used to pay for items that an individual cannot afford out of their income. Get advice now. Credit cards, personal loans, store cards, catalogues and overdrafts are all ways in which people can get money to pay for items they couldn't usually afford.

What are five common money mistakes? ›

Here are five common money mistakes and steps you can take to avoid them.
  1. Not having an emergency fund. ...
  2. Paying off the wrong debt first. ...
  3. Missing out on employer matching contributions. ...
  4. Not having credit monitoring or an alert service set up. ...
  5. Allowing 'lifestyle creep' to occur.

What are the biggest money mistakes youth often make? ›

Table of Contents
  • Not having a budget.
  • Using credit cards too freely.
  • Trying to get by without health insurance.
  • Not having an emergency fund.
  • Going deeply into debt for college costs.
  • Paying monthly for a high rent apartment.
  • Not saving money every month.
  • Having high car loan payments.
Jun 2, 2021

What are common mistakes college students make with finances? ›

Racking Up Credit Card Debt

Many cards have high-interest rates and unfavorable terms and allow students to spend more money than they have. If you get into the habit of only paying the minimum payment each month, you could be stuck trying to pay off the card long after graduation day.

What do you think are the 3 biggest money mistakes that college students make and why? ›

Here are the common mistakes that a college student makes, which you should try to avoid: Lack of budgeting. Buying something based on impulse. Excessive credit card use.

What are the common problems of students? ›

10 Common Problems College Students Face
  • Time Management. ...
  • Debt. ...
  • Too Much on Your Plate. ...
  • Stress and Depression. ...
  • Independence. ...
  • Health. ...
  • Relationships. ...
  • Academic Decisions.

What's the 50 30 20 budget rule? ›

Senator Elizabeth Warren popularized the so-called "50/20/30 budget rule" (sometimes labeled "50-30-20") in her book, All Your Worth: The Ultimate Lifetime Money Plan. The basic rule is to divide up after-tax income and allocate it to spend: 50% on needs, 30% on wants, and socking away 20% to savings.

How do you manage your finances as a student? ›

Avoiding Debt
  1. Pay with cash when you can. ...
  2. When possible, use a debit card instead of a credit card. ...
  3. Record a debit card purchase in your checkbook register as soon as possible.
  4. Make it a priority to pay your balance in full every month. ...
  5. Don't get cash advances on your credit card. ...
  6. Don't use more than one credit card.

What are the tips to manage money? ›

7 Money Management Tips to Improve Your Finances
  1. Track your spending to improve your finances. ...
  2. Create a realistic monthly budget. ...
  3. Build up your savings—even if it takes time. ...
  4. Pay your bills on time every month. ...
  5. Cut back on recurring charges. ...
  6. Save up cash to afford big purchases. ...
  7. Start an investment strategy.
Sep 28, 2021

What major mistakes did David make while in college? ›

Self-made millionaire: Opening 3 credit cards in college was 'the biggest financial mistake of my life' Self-made millionaire David Bach made the biggest money mistake of his life on the first day of his freshman year at USC, when credit card companies were tabling in front of his dorm.

What are the three common money mistakes people make? ›

  • Key takeaways. ...
  • Mistake #1: Spending every penny. ...
  • Mistake #2: Spending too much on housing. ...
  • Mistake #3: Carrying a balance or running up credit cards. ...
  • Mistake #4: Not saving for retirement. ...
  • Mistake #5: Investing too conservatively for long-term goals.

What are the common mistakes in financial planning? ›

Here are those 6 mistakes that you should avoid:
  • #1. Ignoring inflation. ...
  • #2. Undervaluing long term expenses when considering retirement. ...
  • #3. Not saving enough or investing when you are young. ...
  • #4. Investing too aggressively or too conservatively. ...
  • #5. Making financial planning all about investing. ...
  • #6.

What are the two basic problems in financial management? ›

Accounting and budgeting are the two most crucial aspects of financial management in business, so inefficient processes and oversights in either of these areas can lead to a great deal of trouble.

What causes financial stress in college? ›

The Ohio State University's National Student Financial Wellness Study found that 72 percent of college students experience financial stress stemming from the fear of being unable to meet tuition costs (60 percent) and meet monthly expenses (50 percent).

What causes poor budgeting? ›

The results of the analyses show that factors such as poor planning, fraudulent manipulation, lack of adequate professional knowledge, delay in passage of budget, late release of fund are all responsible for poor budget performance in the state.

Why is money management important for students? ›

When they complete it, they have to start paying their debt right away, with interest rates usually impacting their ability to pay down the principal balance quickly. By understanding the importance of money management, students have the capability to get ahead financially before they make poor decisions.

Why do college students struggle to stick to a budget? ›

For many young people, college is their first money management experience. However, many students are not adequately prepared to handle their own finances. One of the leading reasons that students drop out of college is because of finances – often due to poor personal money management.

What are the top three issues facing college students today? ›

Common Issues for College Students.
  • Social anxiety, general anxiety, test anxiety, or panic attacks.
  • Family expectations or problems.
  • Depression, lack of energy or motivation, hopelessness, being overwhelmed, low self-esteem, homesickness, loneliness.

What are 10 personal issues? ›

Here are 10 personal issues no one needs to hear about at work.
  • Legal Troubles. ...
  • Relationship Disasters. ...
  • Previous Employment Drama. ...
  • Sex Life. ...
  • Family Crises. ...
  • Money Matters. ...
  • Political Positions. ...
  • Religious Views.
Oct 11, 2016

What is the biggest problem students face today? ›

9 challenges students face in school are poverty, homeless families, child abuse and neglect, bullying (including cyber bullying), violence, obesity and eating disorders, sex and pregnancy, suicide, drugs, and dropping out. This article reviews the first two challenges which are poverty and homeless families.

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1. 8 Common Mistakes to Avoid as College Students (In Tamil) | College Student Mistakes | Sana Ram
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5. 5 Money Mistakes College Students Make | 5 Money Mistakes That You Must Avoid (Hindi) | Fayaz
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