Good Morning Green Panda friends and Happy Thanksgiving to our Canadian readers.  Today we are discussing money tips and savings strategies while you are studying in college. We always hear about the benefits of starting to save at a young age and the financial impact of compound interest when we invest over the long term.  But with the financial stress of paying for tuition and books should we really be investing money when we are in college?

The answer is yes, if you can afford to save money while studying in college and if you have a smart financial strategy for your savings then you should definitely start saving money as soon as possible.  Investing money in higher risk investments such as mutual funds and stocks while you are studying in college may not be a smart financial strategy because you don’t want to take the potential risk of losing your investment. However, saving money in the form of cash (or close to cash investments) on a regular basis during college is a very smart financial strategy because it will give you a comfy savings cushion after graduation to start your life in the real world.

Saving money is very different than investing money.  There are no costs or risks associated with saving cash money in a high interest savings account and there are very low risks associated with investing in close to cash investments such as treasury bills and money market mutual funds.  If you purchase higher risk and longer term mutual funds such as balanced funds, stocks, and other more diversified investments there will be certain risks involved.  Investment accounts also have additional costs in the form of account maintenance and transaction fees; if you are a college student you may not be able to afford these additional costs.

Invest in Yourself During College

During college you are already investing in your future in the form of your education tuition; you don’t need to invest for your financial future at the same time because you are already spending money on your education. What you need to be doing is saving cash money during college so that you can start your life after graduation. Finding a job, renting an apartment, and buying a car all cost money so it will be nice to have a comfy savings cushion after graduation.

Having cash savings during college allows you to have the financial security of an emergency fund both while you are studying and after graduation; having cash savings also ensures that your money is accessible anytime that you may need it in case of a financial emergency.  You should determine your own definition of a financial emergency so that you are not dipping into your emergency cash savings for unnecessary reasons.

Living on a budget in college and setting your financial priorities will also help make sure that you do not dip into your cash emergency savings for unnecessary reasons.  Everyone needs to pay tuition and buy books during college; these types of expenses should be included in your budget and not an emergency expense.

If you can afford to save money in college start saving as soon as possible.  Even saving $25 on a biweekly basis can add up to a lot of money over four years of college. Check out this savings calculator from ING Direct to see how quickly your money can add up.

What are you saving for during college?

Photo by digitalmoneyworld


Tahnya Kristina

Tahnya Kristina

Tahnya is 30 years old and lives in Montreal Quebec. She graduated in 2005 from Concordia University, and she currently works for a major International Financial Institution. She recently launched You can follow her on Twitter @TahnyaP.