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Powercat Financial

How To Save Money As A College Student

1.    Create a Budget

Before you start saving money, make sure you have enough to save. Start by creating a budget and see where your money is going. This will help you cut on unnecessary spending and allow you to contribute more to your savings.  Details on the process and a downloadable spending plan worksheet can found on our site at http://www.k-state.edu/pfc/budgeting/.

2.    Utilize Student Discounts

Take advantage of the perks of being a college student. When you go out to Carmike Seth Childs’ to watch a movie with your friends, show your student ID.  If you would like to save a lot more, be a little patient and wait for the new movie you really want to watch to be shown at the by UPC in the Union.

Use the CampusSpecial coupon book that’s being distributed to students, you’ll save plenty over the semester when you go out to eat.  Many restaurants offer perks for showing your student ID – just ask!

3.    Avoid ATM Fees

Brick and mortar banks are facing stiff competition from online banks. If your bank is only located in your home town and there isn’t a single ATM in Manhattan, then you may be paying annoying ATM fees when you have to withdraw money. Well, there’s a solution out there! Most online banks do not charge ATM fees and if you do get charged by the ATM you withdraw from your online bank will fully reimburse you! Some brick and mortar banks charge monthly maintenance fees and this isn’t the case for most online banks. They are growing in popularity and if you would like to save on ATM fees and account charges this might be something to consider. Remember to make sure that the online bank you choose is FDIC insured!

ATM fees can also be avoided by getting cash back with your debit card at the store.  Simply run it as debit and respond to the question with how much cash back you would like.

4.    Grow Your Savings Further

If you have money left over after taking care of all your expenses, then you can consider building your wealth.  Choosing the type of account depends on the individual and the financial goals in mind. Below are a few accounts to consider. 

Basic Savings Account

Offers low interest rates and allows a limited number of free withdrawals a month depending on the bank. It is very easy to access, especially if you use your current bank. The interest that you could earn ranges from 0.01-0.9%. In other words, this is an account to put money aside for rainy days and emergencies, not your entire life savings! 

Certificate of Deposit (CD)

You can earn a little more money by putting your money away for a set amount of time ranging from a month to 5 years. The certificate entitles you to receive a fixed amount in interest payments. Interest on CDs range from 0.15-2.35% depending on the length of time and amount of deposit.  They can easily be set up at any commercial bank.  Be aware that there are fees for withdrawing the money prior to the agreed upon time.

Money Market Account

MMAs offer a higher interest rate (0.05-1.02%) than a savings account and you can write checks against your deposit. However, you have to maintain a higher minimum balance compared to a savings account, hence the higher interest rate. Again, if you decide to open up this account, make sure the account is FDIC insured. 

Mutual Funds

If you would like to earn greater returns on the money you have left over after putting some aside in a safe savings account or MMA, then this is another vehicle to consider. Most of us don’t have millions of dollars to invest like Warren Buffett or Carl Icahn, but this fund allows the ordinary individual to be able to afford and hold a piece of the same fund that a billionaire is invested in. It is a pool of funds invested in stocks, bonds and other money market instruments. Their purpose is to beat the market and manage volatility by pooling money and diversifying investments. They are more risky compared to savings accounts, CDs and MMAs and they are more expensive since they are actively managed, but they have the potential for a higher yield.

Online Brokerage Account

If you would like to build your wealth, then you should have a long-term strategy – a brokerage account is one way to get there. You can create your own portfolio and allocate your funds into stocks, bonds and other funds however you please. The allocation depends upon your risk tolerance. When you are young, you can afford to lose more money, so it’s okay to have an aggressive portfolio (invested in more equities than bonds) as long as you understand the risks. When you reach your thirties, it’s recommended to reallocate your portfolio and lower the amount you have invested in equities and when you are close to retirement, you should have more in bonds than equities since bonds are safer and offer fixed, stable payments to the bondholder. Setting up an account is simple, but make sure to shop around first. Some accounts don’t require minimum deposits and others offer cheap trading costs. Learn about investing strategies before you put your money in the market!  Visit finance pages such as Google Finance, Yahoo Finance, Morning Star, Bank Rate, and Investopedia.

Gerald Mashange
Peer Counselor II
Powercat Financial Counseling
www.k-state.edu/pfc

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