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15 Common Money Mistakes College Students Make

Written by College Cliffs Team At CollegeCliffs.com, our team, comprising seasoned educators and counselors, is committed to supporting students on their journey through graduate studies. Our advisors, holding advanced degrees in diverse fields, provide tailored guidance, current program details, and pragmatic tips on navigating application procedures.

Reviewed by Linda Weems I got started researching colleges and universities about 10 years ago while exploring a second career. While my second career ended up being exactly what I’m doing now, and I didn’t end up going to college, I try to put myself in your shoes every step of the way as I build out College Cliffs as a user-friendly resource for prospective students.

Updated: February 23, 2024, Reading time: 16 minutes

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Transitioning from high school to college life could be overwhelming and intimidating for some students. As much as you can benefit and enjoy the liberty, independence, and new experiences, you will also have more significant responsibilities – one of the most crucial aspects of it is your funds.

You are now obliged to handle your financial expenses and make sure to make the best spending decisions. Although it is somewhat exciting for some, mismanagement of your money could lead to severe consequences. 

Financial Mistake fact 1

According to Ohio State News, 70% of college students have experienced financial stress. A study conducted by the National Student Financial Wellness Study mentions the different financial wellness of higher education students in the 52 participating institutions worldwide.

The results show more than half of all the students surveyed are confident in managing their finances. However, even though this data could support and prove financial confidence, you still can’t turn a blind eye to how vital it is to make the wisest monetary decisions.  

Some students have not been able to finish their college education due to their money’s poor handling. The fuel added to the fire is when they can’t get access to loans, and they don’t have savings to help them sail through college. They might have a bad credit history, which flushes all the chances of college education down the drain. 

Your personal financial management experience in your college life is your steppingstone towards your professional and career life. Hence, it is imperative to hone your skills at knowing how to spend your money well on things that do matter. This will help you prepare to experience minimal to zero monetary stress in the future. 

Here are the common mistakes that a college student makes, which you should try to avoid:

College Cliffs is an advertising-supported site. Featured or trusted partner programs and all school search, finder, or match results are for schools that compensate us. This compensation does not influence our school rankings, resource guides, or other editorially-independent information published on this site.

Lack of budgeting.

A 2016 College Students and Personal Finance study reports that 58% of the students do not have monthly savings, while 43% say they don’t track their expenses. There are many reasons why budgeting does not appeal so much to young students. Let’s face it.

It could be troublesome to record and track down your expenditures each time. So, you tend to compute everything else mentally, but unfortunately, you would realize you’re short of money at the end of each month. Or if you got lucky, you could sustain and last the month but with no spare change. Thus, you couldn’t save anything too.

It’s understandable to find it challenging to keep track of all expenses when you have many tasks and other obligations like your studies, sports, internship, and assignments. Compared to using an annual budget system, it’s more effective to segregate your expenses through a semester model.

You can estimate your money from your parent or guardian, based on the entire semester. Divide and equally distribute the money every month. Doing this helps you control your spending every month.

Buying something based on impulse.

Buying impulsively is somewhat a familiar tendency for young people and all human beings of all ages. The Science Behind an Impulse Purchase lets us understand more about why we buy things based on our emotions. And it all boils down to the concept of buying something because it makes us feel good.

We feed our brain this idea because we want to justify our spending habits. However, you have to come down to your senses and properly differentiate something which falls under the want or needs category.

No matter how hard, follow tips for stopping yourself from impulse buying. If you are familiar with the movie “Confessions of a Shopaholic,” you could relate to the main character, especially if you’re a woman. However, this does not exempt the men from being guilty of it too.

A CNBC article claims that men tend to shop more on impulse purchases than women. Being aware of this tendency and trying your best to avoid it as early as you are a student is smart to develop discipline and control against impulse buying habits. 

Excessive credit card use.

While we live in an era where purchasing something requires just a single swipe of your credit card, you must be aware of the responsibilities that come with it. According to Sallie Mae’s 2019 Majoring in Money report, 57% of all US college students own a credit card. 

60% of these students use it so they can build and stabilize their credit score. This is convenient and will help you when things go downhill financially and you are caught in emergencies. Nevertheless, you must be fully aware not to overuse it. Knowing the limits of your credit card is very critical.

Almost 25% of students leave college with a $5,000 credit card debt, according to a report conducted by TrueCredit.com. There is no doubt that most companies love offering credit cards to college students, knowing that they have lesser self-control on their expenditures and that their parents and guardians would save them and bail their credits out.

The reality is that you will have more real-life expenses and credits to think about right after you start your professional life, so go easy on your college credit card debts. Condone the use of credit cards if you can’t monitor and keep track of your usage. It would be better to retain a mentality wherein you’d set up a credit card consumption limit every month so that you can stick to your budget.

Low savings and having no emergency funds.

Students incur so many expenses not only in your school activities but also in other after-school events. You will need to spend money on hobbies, sports, parties, love, and friendship relationships. It is rare for young people to practice saving their allowance in preparation for rainy days.

You may be tempted to spend everything you have, knowing that your parents can eventually keep you should you be no longer able to support yourself. But although this is practically and ethically correct, you have to set your mind to economic discipline correctly. As you mature and become more independent, you will learn the value of money and understand the best way to save it. 

You will realize why you need to have an emergency fund because it will provide you with an optimal safety cushion. Learning how to save will allow you to enjoy the fruits of your sacrifice later. You will notice that you could make space for some discretionary spending, which would result in being able to afford your other wants.

Once you have saved well and fair enough, you could finally afford to reward yourself by eating in a good restaurant or buying something you’ve been longing to have. Having some savings will give you the financial freedom to spend on extra things because you have more space than you need.

Prioritizing wants over needs.

If there is one thing that will help you with your financial management, it can determine what you need or want. You need to understand the substantial difference between the two.

A “need” is something that you must have to survive and live, while a “want” is economically defined as what you desire and that you may or may not be able to gain. Although these two would often depend from people to people. You should be able to set your needs from your wants.

Being able to do this will help you determine your priorities and stick to them. Overspending on wants will stress and trouble to pay for the necessities you need, like books, food, tuition fees, and transportation. You can’t help but disregard your needs simply because your wants are taking a priority in your life!

This is unhealthy and completely dangerous for a college student. Always choose to spend on your necessities first and your heart’s desires second. 

Giving in to peer pressure.

While there is nothing wrong with keeping many friends, trying to please them sometimes comes with a price. An article published by The Guardian shows that young adults tend to spend more money because of peer pressure. You will be compelled to disburse more than what you’re capable of because of your friends’ influence.

This could lead to unhealthy financial management on your end! Learn how to say no to your friends when it comes to too expensive and impractical activities.

Spending time with your buddies would be fine, but you should know your limitations. If you keep on going with them to expensive bars and restaurants, you would be quite aware of the financial impact it will cause so, if you do want to spend time with them, schedule and limit the frequency of incurring such expenses.

Financial Mistake fact 2

Making bad investments.

Investing your extra money on something is a make or break scheme, even for adults. As a student, it would be riskier for you to invest your cash recklessly on anything, simply because you still don’t have the liberty of earning your income compared to working professionals. Be extra careful with your investments!

Before starting on any investment, you have to learn the ropes and gather many tips about it. They said that college is the perfect time for you to start investing in something. Many low-cost investment options are cost-friendly for college students.

Be aware, though, of the risk it entails. Study and plan out your investment schemes first before anything else. And make sure only to invest your extra money.

Not applying for scholarships.

It would help if you took a chance at applying for scholarships. Since college education fees are quite expensive, it would be the smartest decision to help your family and parents by trying out scholarship opportunities. Sallie Mae published a guide on How to Apply for Scholarships, which will help you get more chances to win.

Once you get into a scholarship of any sort, you will have more financial freedom. It will also decrease any financial burden of repaying debts after you finish college.

There are many institutions, universities, and organizations that offer a wide assortment of scholarships. Grab your chance and learn more about their eligibility requirements. You won’t know if you won’t try.

Missing out on free opportunities.

Most of the places all over America provide freebies and discounts to students nationwide. You can earn perks and advantages that are not offered to adults and regular citizens. Showing your student identification card may earn you discounts on on-campus gym memberships, public transportation, book purchases, and other perks.

Aside from these expenditures, US News and World Report published a list of student discounts that you can use for 2020, and private companies and businesses give these. 

It is financially wise to take advantage of these free opportunities, as they are economically helpful. You’d be surprised by how much you could save each month because of these student benefits. Do not let one chance pass you by and maximize your opportunities for saving money. Your money saved on these things could be spent on other necessities instead.

Resulting in bad credit scores.

You have to familiarize yourself with what a good credit score means. In reality, young people lack time to cultivate healthier credit histories than adults and older Americans. Applying for a car loan and owning a credit card are ways for college students to build up their credit history.

These will you make you more visible to the credit-scoring industry. Many transactions that you will have and deal with would depend on your credit scores, so it is advisable to build them as soon as possible gradually.

Once you have financial obligations like your credit cards and a car loan, you need to make sure that you could afford to pay them on time. Otherwise, these could turn a backlash to your credit scores.

You may have acquired these credits to increase your score, but not paying your dues will turn your financial records into a mess. So, take good care of your credit standing and pay your dues on time.

Not taking your college education seriously.

It’s a no-brainer that you must take your studies seriously. What is the point of going through all the troubles here in there when you would keep on skipping classes? Since college fees are expensive, don’t take your classes for granted. Once you fail on any course, it would mean you need to retake it, and it would require you or your parents another hefty amount of money.

This is the ultimate way to waste your money. Being lenient with your studies will forfeit all of your efforts and goals of finishing higher education. Make sure to focus your efforts on your tasks and live a balanced life as a college student.

Impractical spending (even on basic expenses).

Your necessary expenses are mostly composed of housing, transportation, schoolbooks, or food. As a student, you will have many housing options that are cheap and almost free. You can opt for on-campus accommodations, which are way less expensive than paying for expensive house rental fees.

This is a more practical option, and you should make use of it because it will lead to maximum savings on your rental costs. Oregon Institute of Technology shows the many benefits for students if they opt for living on-campus.

It’s highly recommended, especially if you’re single. However, you can also share with your friends and peers, splitting rental fees among each other. This could lead to high savings compared to living by yourself. 

Another necessary expense that you can save is your books and other academic costs. Together with your friends, you can all buy books in bulk. It will allow you all to buy at a discounted wholesale price rather than retail cost.

Applying for loans with huge interests.

Some many financial institutions and organizations conveniently offer loans to college students these days. Some of them are too tempting and alluring to say NO to. But what you need to be aware of is that there’s always a catch.

Even if you are a new credit borrower, they can lend you money even without collateral and excessive document requirements. However, this would lead to higher interest rates. A lot of companies implement strategies to encourage young people to incur and increase their debts. 

Loans are sufficient, but you must choose well and make sure that the interest rate is reasonable. Forbes.com shows a list of their handpicked lenders in 2020 who offer private student loans. You have to limit your borrowed money to the amount you can pay, especially in your first year of college. This will give you leeway and time to pay for everything in your capacity. 

Lack of recording expenses.

Enlisting and recording all your financial expenditures could seem troublesome. Especially if you’re the type of person who considers recording expenses a tedious task, it is hard to keep up with your budget.

One way to push yourself to pursue this task is through the use of a College Budget Template. It’s a useful tool to fill in the blanks conveniently because the template is very organized, and you will only need to complete the form on a physical paper or an online sheet. 

Template.net offers many kinds of templates for college students, and you can select which form is more useful for you to utilize. This will make you track down your financial matters and nurture your growth as a responsible spender. Try out any form you think is easy for you to use. You can customize it to add any more information.

Financial Mistake fact 3

Wasting your loan on unnecessary purchases.

Once you have been granted private loans, you would be effortless to spend on many things you like. And doing that will mess up your school fees and your priorities too. Loans will take years for you to pay back and just a few days to spend them all.

Make sure to use your loans for your tuition fees and other academic expenses. You might end up spending it on things that are useless and will make you regret it later.

Lifehack.org published an article about the increasing number of students applying on private loans, simply because federal loans are no longer cutting it. And it mentions how this tendency could influence and create a slippery impact for students to keep applying for loans to sustain their comfortable unnecessary lifestyles.

Learn to balance your priorities and be more financially responsible.

Choosing an Overly Expensive College.

Is the name of the school on your diploma important? It does in some cases. Perhaps not so much in other fields.

Some students dream of attending a prestigious school or moving out of state, but this may not be the best financial decision. With certain degrees, it may not matter as much where you obtained your degree. In that case, paying the extra money to get your degree may be a waste of money.

Choosing a community college or a less expensive public university for the first two years before transferring may be the more cost-effective option.

Consider the actual return on investment before enrolling in your dream school. Take the time to look into other options and determine whether attending a prestigious school is the only way to chase your desired career path.

You might discover that transferring to a different school is a better deal. As a result, you’ll be in a better position to start your professional career with less student debt.

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Wrapping up

Starting to save as early as your college life will be fruitful shortly, as you practice becoming frugal and more practical. Many financial skills will hone you to become responsible for your economic activities.

Once you learn to save for rainy days, not only will you be equipped with funds and resources when emergency and unpredicted situations happen, but you will also get to breathe loosely when you’re about to reach the end of the month. You still have more than enough money.

Another way to effectively take charge of your financial spending is to be crucially aware of the value of money. You can realize and think about how hard your parents and family work to sustain your higher education. You wouldn’t want to waste their efforts, just as well as their hard-earned money.

Think about these things, and you’ll have a better view of your financial management. 

READ: 100 Ways To Make Money In College