How to Save Money in College: Budgeting Tips

Did you know that the average cost to attend college has more than doubled in the 21st century? The average college student spends up to $36,436 per year on textbooks, school supplies and daily living expenses, among others. Because of the average cost of higher education, college students must know how to save money!

When you save and manage your money wisely in college, you will not only enjoy having financial peace of mind, but you can also graduate with less student loan debt. Furthermore, your good financial habits today will benefit you tomorrow, particularly when you’re handling your income and expenses as a working professional. With that said, here are easy yet effective budgeting tips that will start you in the right direction of saving money while in college.

What is Budgeting for College Students?

Budgeting for college students in order to save money instead of spending money like it’s an inexhaustible resource is a crucial skill in a student’s academic and life success. At its core, budgeting is the process of creating a spending plan that will result in a balance between your income and expenses. You can then allocate your limited funds according to your most important expenses, such as tuition and fees, living expenses, and room and board, among other necessities, while also setting aside savings.

While saving money sounds like a good practice to have, it isn’t always easy to do for many reasons. As a college student, your first step is being open to the budgeting process, adopting the right mindset, and appreciating its benefits in your life. While creating good money habits can be challenging at first, it will pay, literally, dividends down the line.

Thankfully, there are budgeting outlines you can follow. One of the most common is listed as follows:

• Identify your sources of income and their amounts
• Prioritize essential expenses, particularly basic needs, in the budget
• Create a spending and saving plan with specific amounts allocated to basic necessities, discretionary spending, and an emergency fund.
• Track and adjust spending as needed

Why must average college students budget their money? With your limited income from parental support (if any), part-time jobs, and savings, your ability to stick to a budget will contribute to your financial health, including avoiding crippling student loan debt and achieving your financial goals.

Your budget is an effective tool in focusing on your financial priorities, controlling your impulse to buy nonessential small and large purchases, and being prepared for emergencies. Indeed, it isn’t just the opportunity to save money - it’s about your mental well-being as well that is crucial for your college success.

The beauty of how to save money in college is that these tips are simple, straightforward and easy! The follow through of sticking to your budget is the hard part. You should think of savings as a non-negotiable expense. Automate your savings by making automatic transfers to your savings account, starting with small amounts. Your college life will be more enjoyable when you have the peace of mind to know that you are being wise with your money and have a financial cushion to fall back on if an unexpected expense should arise.

Steps To Creating A Student Budget

College students must first recognize that creating a budget is a process. While it has a beginning, it doesn’t necessarily have an end because budgeting means regular tracking and adjusting of your spending plan. Your income and expenses will also change during your college years, as will your financial goals and your ways of saving money.

With that said, here are the first steps in creating a student budget.

Step 1: List Your Sources of Income and the Amount You Earn From Them

Your income as a college student can come from three sources:

• Financial contributions from your parents and other family members for your college expenses, such as allowances, college fund payouts, and loans (e.g., Parent PLUS loans and private loans)
• Income from your part-time jobs and federal work-study job, as well as student financing from credit cards and student loans
• Financial aid, including scholarships and grants that should be applied toward tuition and fees, among other allowable expenses

Be as detailed as possible when identifying your current and potential sources of income. It’s also crucial to be conservative in your income estimation. You don’t want to overestimate the amount of money you will receive from other people, even from your parents, because it’s beyond your control. You should also ask relevant questions about the financial aid you’re likely to receive for the semester for a better picture of your financial status.

Once you have taken into consideration all of your income sources, you should now create your budget wisely. Instead of spending money on non-essentials, you should consider saving it in a bank account or spending it on education-related expenses. You want to make sure that money is being put aside each month in case big expenses or unforeseen events come up.

Step 2: Identify and Classify Your Expenses

Let’s start with the cost of tuition and other fees in college since the these expenses are considered necessities for a college student. According to the Education Data Initiative (EDI), these are the average annual college-related costs in 2024 at a four-year institution:

• Tuition: $19,806 (54% of total cost of college)
• Textbooks and school supplies: $1,216
• Room and board: $12,111, but it can be as high as $32,895 for on-campus accommodations at private, for-profit universities.

While the items listed above will be required of every student, there are other expenses a student should take into account when creating a budget. Living expenses must also be accounted for, and these include:

• Standardized test preparation and exam fees
• Transportation expenses
• Personal care, including grooming expenses
• Entertainment, including movie tickets, dining out, and going out of town
• Clothes, shoes and other personal items

As with your income, be as detailed with your expenses as well. You should also separate essential daily living expenses from non-essentials. You might be surprised at the unnecessary expenses you’re making that can be substituted with free items or with DIY solutions.

Step 3: Create Your Tailored Student Budget

Now that you have detailed information on your monthly income and expenses, you can make your monthly budget! Of course, you must first add up all your income, then add up all your expenses, and finally deduct your expenses from your income.

If the difference results in a negative number (i.e., expenses are higher than income), then you are most likely overspending with no money left for saving. If this is the case, consider ways to earn extra income or what nonessential items can be removed from your budget. If the difference is a positive number (i.e., income is higher than expenses), then you have extra money for savings, even for an emergency fund.

• Find other sources of income. Even as a broke college student, you will find plenty of resources, such as your local community job board, your school’s career services, and your network of friends, that can lead to the right job. Engage in as many part-time work opportunities as possible without compromising your academic performance.
• Minimize, if not eliminate, unnecessary expenses, a must when you want to save money in college. Examples include cooking your meals at home instead of getting takeout, asking a classmate to share textbooks instead of buying new textbooks, and finding free or low-cost entertainment options. Even brewing your coffee instead of patronizing a coffee shop or using the school gym instead of paying for gym membership will result in significant savings over time.
• Be aware of your financial aid options and make the most of them. Don’t assume you’re unqualified without asking or trying. Otherwise, you can miss out on great opportunities to cut costs on your college education.
• Take advantage of student discounts offered with public transportation, movie tickets, and car insurance, as these are great ways to save money in college.
• Create a savings plan actually to save money! We suggest the 50/30/20 rule wherein 50% of your income should be for essentials, 30% for your discretionary wants, and 20% for your savings, emergency fund, and financial goals. If this isn’t a reasonable goal, figure out what you can save and stick with that. Even having a little bit of money put away each month can add up.
• Maintain a journal of your income and expenses. You can then keep track of these aspects of your finances, make adjustments as needed, and celebrate your small wins.

You may also want to consider attending a community college for your associate degree and then transfer the credits to a bachelor’s degree at a four-year university. Community colleges usually have more affordable tuition rates and fees in addition to financial aid opportunities.

Keep in mind that taking the first step isn’t always the easiest thing to do, especially if you’re already juggling your academic responsibilities, social commitments, and work obligations. But even a small change is the right step! You can, for example, start saving 10% of your income if 20% seems too burdensome in your current financial situation.

Step 4: Make Adjustments As You Go Along

Remember that budgets aren’t set in stone. You shouldn’t be discouraged if your first attempt at setting and adopting a college student budget didn’t go as planned - you can start over.

However, you should also be wary about being complacent about starting over with every failed attempt at sticking to a budget. College is a great time to learn good financial habits that can set you up for success for the rest of your life. Being thousands of dollars in debt as a consequence of attending college isn’t fun, but that doesn’t have to be your reality. So, save money while you’re in college and learn good money management as soon as possible.

And what better way to save more money than to earn extra cash? If you’re a broke college student, the incoming funds will definitely be welcome. Look into part-time jobs that will not interfere with your class schedule, like:

• Resident assistant in the library, office or research laboratory
• Freelancing work, such as tutoring or writing services, photography, virtual assistance, or any skills you’re good at
• Online surveys and reviews

Many colleges offer have a plethora of work study jobs available to students. Ask your financial aid office about options available.

Students’ Submitted Questions on How to Save Money in College

Michelle asks, “What should be in a college student’s budget?”

Dr. James Barham’s answer: College students who want to save money must include the following items in their budget:

• Total income, including money received from parents, jobs, scholarships and other forms of financial aid, refunds, and income from work
• Monthly income, including the recurring money received on a regular basis
• Fixed expenses, including necessities with the same prices or costs every month (e.g., car insurance or tuition)
• Variable expenses, including the necessities and luxuries (i.e., wants) with varying prices every month
• Emergency funds for unexpected events usually kept in a savings account

Brian asks, “How can a college student not worry about money?”

Dr. Jed Macosko’s answer: Creating and adopting a budget tailored to your specific circumstances is the first step in decreasing anxiety about money as a college student. You should also get educated about financial matters, such as credit scores, interests and loans, which will result in smarter financial decisions.

You might also want to look into options that can make college cheaper. You can conduct cost comparisons between universities and even course substitutions at community colleges. Online college, which has become increasingly respected, is another great option to make college cheaper.

Andrew asks, “What is financial stress for college students?”

Dr. James Barham’s answer: Financial stress for college students is the result of the pressures from meeting expenses on a limited income - and it’s a common part of attending college without a trust fund. Poor academic performance, anxiety and depression, and even physical health issues are among the manifestations of financial stress among college students. The worry about paying for tuition and fees, textbooks and school supplies, and food and housing, among other daily living expenses, can take their toll. This stress is why we advocate so heavily for students to learn healthy financial habits as soon as possible. With the right practices set in place, this stress can be mitigated.

Mel asks, “What factors should be used for assessing a college student’s financial situation?”

Dr. Jed Macosko’s answer: The crucial factors used for the assessment of your financial situation are:

• Your total income and expenses
• Your debts, such as student loans, personal loans, and credit card debt (i.e., liabilities)
• Your financial aid options, including FAFSA
• Your credit history and credit score
• Your savings and assets
• Your budgeting goals and habits
• Your financial goals