Did you know that the average American couldn’t come up $2000 if needed for an emergency? This is just one of the reasons why it’s a great idea to start saving money.
Saving money may seem difficult as a college student. Sometimes, there’s barely enough to cover food and rent. However, if you’re using a budget (which you should!), you might find that you do have some money available to put into a savings account.
While every person’s financial situation is different, we think it’s important that everyone get in the habit of saving money. You never know when you might need to dip into your savings. Here are some examples:
- Transportation—buying a car or bicycle
- Travel—summer trip with friends or study abroad
- Emergency—medical bills are the #1 cause of bankruptcy in America
- New wardrobe for your first job after graduation
- Apartment deposits and 1st month’s rent
- Wedding—your own or attending others’
By stashing money away into your savings account every month, you’re giving yourself options. Options to take that sudden travel opportunity or pay that unexpected medical bill right away instead of incurring late fees. You’re also planning ahead and preventing the stress of having to come up with money suddenly. Knowing that you have your savings to fall back on if needed can give you sense of financial freedom.
How to start
The easiest way to get start a savings habit is by paying yourself first. This means that every time you get paid, you designate a portion of your paycheck to go straight to your savings account. It could be 10% of your paycheck or it could be $10. As long as you’re saving something, you’re on the right track.
It’s a good idea to open up a separate savings account, instead of keeping it all in one account (like your checking account). Most banks should let you open a savings account with a $25 initial deposit. Try to avoid any banks that want to charge you maintenance fees or make you maintain a large minimum balance.
If all you can afford to save at the moment is $5 a week, that’s great! It’s okay to start small and then increase the amount you save every time you get a pay raise or start earning more money. Again, as long as your saving something, you’ll start to get into the savings habit. Before you know it—as long as you don’t dip into your savings—it’ll really start to add up!
Emergency Fund vs. Savings Account
Essentially, an emergency fund is a form of savings. For most adults, the recommended amount to have stashed away is three to six months of expenses (food, rent, transportation, bills) to cover you in case of a true emergency such as job loss or other catastrophic event. As a college student, we recommend that you try to save up at least $500-1,000 as an emergency fund.
Once your emergency fun is stocked, then it’s time to figure out a few other financial goals to save for. As previously mentioned, this could be a new car in a few years, a study abroad trip, or moving to a new city after graduation, or even a house.
“It’s not about how much money you make, it’s how you save it!”