How To Save Money As A College Student—As Shared By An Expert

Pooja Maheshwary , 05 Sep 2019

Ask any financial expert and they’ll say—there’s no such thing as starting to save money too early in life. We’ve all heard of compounding. And to really make use of it, we need to utilise the gift of time. So, one must start early, even if it means starting small.

Your college years are a good time to start saving money. Any small amounts of investments made during this age could go a long way in building a great savings and investing habit. But of course, it may seem quite a herculean task for someone in their early 20s. So, we reached out to Hena Mehta Agarwal from Get Basis, to break it down for you. Read on to know her tips and suggestions for college students who’re looking to start saving money.

1. What are the benefits of saving early in life?

Compounding, compounding, compounding! This is something we learnt in high school. The time you stay invested is so much more important than trying to time when to invest. Time in the market is more important than timing the market.

For example: Person A who invests 2500 every month for 20 years, will see it grow to approximately 25 lakh. In a similar vein, Person B who invests 5000 every month for 10 years, gets to 11.6 lakh. Which basically goes to show that a small amount over a long time goes a really long way. 

Another benefit to this is that you start making investing a habit from a young age, and are well prepared for various life situations that may come up.

2. What are the baby steps one can take to start saving for the future?

The best way to start saving for the future is by dividing your plans into financial goals. For each goal, follow a simple three-step process:

  1. Identify the goal for which you need the amount. Let’s say your goal is a trip to Europe.
  2. Define by when you want to achieve the goal. So, you want to go on a trip in 2 years.
  3. Put down how much money you’ll need for that goal. For instance, I need 2.5 lakh after 2 years for a trip to Europe.

Post this simple exercise, you’ll be able to calculate how much you need to start saving and investing to get to the goal.

3. Are there any resources that one can use to financially empower themselves?

For a student, here is what we recommend:

  1. Start making saving a habit, even when you are not earning. Create budgets and stick to them.
  2. Learn from your seniors. Parents, older siblings, and other family members could give you valuable lessons based on financial mistakes they may have made.
  3. And finally, empower yourself with knowledge on money and investments. You can learn the basics of money management on the Basis app while you’re on the go.

 4. Tips on saving money

1. Save before you spend.

2. Start investing small. It’s a myth that your investment amount has to be big. In fact, with mutual funds, you can get started with as low as 100 a month. A good place to start should be 500 or 1000 a month. Warm yourself up before you invest more.

3. For those who’ve started earning, a good rule of thumb to follow is to save and invest 20-30% of your income.

5. Tips on reducing expenditure

1. Create a budget and stick to it. If it helps, write down your budget instead of typing it on your phone or computer. Keep a little buffer for that thing you may want to splurge on, and for emergencies.

2. Don’t fall for sales. Sales are nothing but spending on things you most likely may not need.

3. Understand your spending patterns and priorities. Keep a log of what you spend on, and review it every three months. See what are the must-haves for you, versus the nice-to-haves. Try to cut down on the nice-to-haves if possible.

4. Pay your credit card bills on time. Credit card debt is the most expensive loan you can take, it could come up to an interest of 35% to 40% per year.

5. Save before you spend. As a habit, put away your savings and investments in the first week of every month.

An interesting method to follow is the cookie jar method, where you divide up your money into separate categories of expenses. For example:

  • 50% for the essentials: this jar is for your daily needs such as rent, food, utilities. In short, the basic requirements for day-to-day living.
  • 30% for the future: this jar is for your savings and investments, that you do not touch once allotted. A discipline that must be followed diligently.
  • 10% for emergencies: this is your emergency fund jar because life is full of surprises. These surprises can sometimes be unpleasant and may cost money to fix.
  • 5% to indulge: your spending money.
  • 5% towards charity: because when you have, it is good to share.

6. How to live within one’s allowance?

1. Tell yourself you only have 80% of what you actually have available to spend. So if your allowance is 5000, tell yourself you only have 4000 to spend.

2. Avoid borrowing money—it’s a slippery slope.

3. On a similar note, try to avoid lending money to friends since it’s awkward to ask for it back.

4. Prioritise. Spend on the need-to-haves, and skip on the nice-to-haves.

5. Look at renting instead of buying. If you need something only for a short period, rent it.

6. If you’re a student, take advantage of student discounts. There are many offers and these can help you save a lot.

7. Don’t give in to peer pressure—that can eat into your allowance and savings, and could lead to a high level of stress.

8. Plan, plan, plan! Plan out current and future expenses.

We hope this guide helps you get started on saving money efficiently. If you have any questions, please leave them in the comment below, and we’ll help answer them!

Don’t forget to follow us at @missmalinilifestyle to never miss a beat!

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