As part of my sabbatical, I've convinced my wife to write more posts. Yes! My master plan is working. Here is Sydney discussing money lessons for college students. – Sam
Even though I haven't been in school for over twenty years, I always get excited during back to school season. I think back to the days of Trapper Keepers (I hear they're back by the way) and pencil boxes.
And, I still remember the giddiness I felt flipping through the class registration guide in college. It was like a puzzle figuring out how I could max out my credits each semester. But, I also like to reminisce about the money lessons I learned while I was a college student.
College wasn't that fun for me in the grand scheme of things. But it was something I was determined to do. You see, neither of my parents nor any of my grandparents went to college.
My dad went to vocational school and my mom only went to a few secretarial training classes. This really limited their career options. As a result, they had money struggles their whole lives.
A College Degree Or Bust
Financial literacy in schools was not a graduation requirement when I was a student, and still isn't in many places. But I didn't want a lack of knowledge or my parents' money fails to jeopardize my own financial future. So I started learning personal finance basics on my own. And come hell or high water, I was determined to get a college degree that I could use to springboard into a reliable career.
First, I did my best to prep. I applied to six schools and thankfully landed my top choice. Go The College of William & Mary! I could start to envision doors opening in my future.
Then, I made an atypical decision to take extra credits each semester so I could graduate in 3.5 years. It was a total a$$ whooping, but it was worth it. What Sam says is quite true, “A college degree will set you free.“
Overall, I highly appreciate my college education and would do it all over again in a heartbeat. It gave me the chance to push myself, get used to independence, and start learning about the love of money and financial responsibility. But best of all, I fell in love (xoxo Sam).
5 Money Lessons I Learned In College
Here are five money lessons I learned in college. I plan to teach our kids these same lessons when they're older. And perhaps some of you may find them helpful for yourself of your college-bound kids too. Here goes.
#1: Have Skin In The Game
The first money lesson I learned in college was experiencing what it was like to have my own skin in the game.
My parents wanted me to get a degree, but they were limited financially. So I picked an in-state school, they applied for grants, and we worked out a financial plan. We agreed that I would pay for 50% of all costs and my parents would pay the other 50%.
Tuition prices plus room and board were significantly lower back then than they are today (roughly $8,500/year then vs $40,000/year today). But even still, knowing that I would owe ~$17,000 after I graduated was a huge wake up call. I think I only had a couple hundred bucks to my name at the time.
I realized I could not afford to screw up my grades and wind up without a job after graduation. My parents couldn't continue to support me even if they wanted to. I needed to become financially independent asap.
I admit that I cut classes a couple times when I was overly tired (primarily geology lectures, which I constantly struggled to stay awake in). But, ultimately I didn't want to waste the money I would owe for my degree nor my parents'.
If my parents had paid for 100% of my college tuition, I wouldn't have been so motivated to graduate in under four years. Because I was able to graduate six months early, I saved my parents and myself about $9,800 total. I was very proud of that and still am to this day.
Some of you reading this who have college-bound kids may have the means to pay for 100% of their tuition and more. But, your teenager doesn't have to know that.
There are benefits of putting some of their skin in the game. Consider coming up with a college payment plan to give them some financial responsibility for their degree. Chances are they will appreciate it much more.
#2: Start With A Debit Card, Work Up To A Credit Card
One thing I remember about college is aggressive credit card companies. There were booths around campus constantly trying to get students to sign up for a credit card. And the mail offers were ubiquitous. It made me feel uncomfortable then, and still does today.
All I had at the time was a debit card, and I'm glad. The money lessons I learned were basic budgeting and financial planning. I had to ration my money each week or I'd run out by the end of the month.
My debit meal card was similar. I had a set amount of money for meals each day. If I bought too much for breakfast and lunch, I'd be stuck cooking 10 cent ramen noodles in my dorm for dinner.
There is true value in learning how to budget within your means from a young age. Being able to spend with discipline is a life-long skill that is key to achieving financial independence.
If you're worried about less protections with a debit card, here's a list of protections according to the FTC. For example, you won't be at risk of losing any money if you report a debit card missing or stolen before anyone uses it. And within 2 business days the max loss is only $50. Parents should set up a separate checking account just for their child's debit card, keep the balance minimal for discipline and minimizing risk, and monitor it regularly.
I'm grateful that I only had a debit card. Otherwise, the frequent trips I took to Target with friends could have resulted in so much unnecessary spending that I couldn't afford.
Of course there are benefits of establishing credit before finding a full-time job. But, I still wouldn't let your college student get a credit card for the first 2-3 years. Let them prove to you they can budget wisely with a debit card first.
#3: Get A Part-Time Job
Although I was unsuccessful at getting a part-time job in high school, I tried. The rejections made me mad, but I didn't have any prior job experience. So it's hard to blame them for not hiring me.
Fortunately, college had lots of part-time job opportunities. Plus, it was pretty easy to get hired. It didn't matter that I didn't have prior experience. None of us really did.
I learned a lot of money lessons from my part-time work in college. I got my first minimum wage job making cold calls to alumni to raise donations for the school. Man I hated that job, haha. But, I'm glad I suffered through it.
Seeing my name at the bottom of the leads board day after day was so humbling. Having alumni hang up on me was also eye-opening. The nerve! lol
I learned several things. 1. I am not a natural sales person. 2. People hate getting random phone calls asking for money even from their alma matter. 3. I had to make sure I could graduate and find a job I actually liked and was good at. I couldn't imagine working a job like that full-time.
Although I didn't last long at that job, I found a new one working at the music library. It was a delight. I was able to work independently, the environment was tranquil, I could use my knowledge of music, and best of all I didn't have to make any phone calls.
Encouraging, or possibly insisting, your college-bound student to get a part-time job during school builds character. Not only that, they'll learn about their strengths and weaknesses while making some money.
Every job experience is valuable because it helps you get closer and closer to figuring out what you really want to do in life. Not only that, it teaches time management skills, discipline, and the value of both time and money.
Related: Spoiled Or Clueless? Try Working A Minimum Wage Service Job
#4: Get Internships By All Means Necessary
I'm very grateful to both my high school and college counselors for emphasizing the importance of internships. Only one of the internships I had was paid, but they were all well worth the time I put in.
I did all sorts of random things from filing papers at a bankruptcy company, observing a marketing manager at a jewelry startup, to updating facts in industry guides for a job ranking firm.
None of the work I did was earth shattering. But, it gave me fundamental experience to put on my resume and job skills. Having experience to reference was vital for getting interviews and eventually got my whole foot in the door. This money lesson helped set my entire career in motion.
The job market is an entirely different place today than it was for me when I first graduated college. Things are incredibly competitive now. Sam and I are worried about our children's future, which is part of the reason why we want to keep Financial Samurai going. It's nice to have an option in case society doesn't give our children a chance.
See: Start A Business To Save On Taxes And Help Take Care Of Your Family
If you have a college-bound student, I strongly suggest you insist they get an internship every single year. Use whatever networking you can leverage to help land internships for your kids.
Even if the internships are not highly related to their interests, that's ok. Ultimately, more experience is better than less. There are many transferable skills they can develop and take with them across industries.
And please encourage your college student to stay in touch with the people they meet at these internships. Networking can be invaluable. Regular check ins strengthen relationships, show appreciation, and can be the difference in scoring a full-time job over someone else when the time comes.
#5: Eye On The Prize – A Reliable Full-Time Job
There's another reason why I wanted to graduate early besides saving on tuition. It's kind of silly, but true. You see, I really hated homework and studying for exams.
Instead, I wanted a full-time job that wouldn't require me to do homework anymore. I didn't want to party it up to balance things out. My idea of a good time on Friday nights was going to the Music building by myself and playing the piano for 1-2 hours.
I admire those of you who continued on for a Masters or PhD. But, it wasn't my thing. I couldn't wait to graduate and enter the real world. I wanted to work, earn money, and not have to worry about cramming for any more exams during my “off” time.
Even though it's highly possible you or your son/daughter may graduate, not knowing what they want to do in life, that's ok. Help them keep their eye on the prize – a reliable full-time job.
It may take months and months of rejected job applications. They're going to need your support and encouragement more than ever. But once they can land a reliable full-time job, the wheels for their future are set in motion.
If they end up hating their first job, help them focus on the positives. Now they are closer to figuring out what it is they do want to do. Just try to make them gut things out for at least one year.
Frequent job hopping, especially with stints less than a year long, doesn't impress hiring managers. They want to see people with a demonstrated ability to commit to a role or project.
Related: Examples Of Great Resumes That Get Jobs
Bonus: Fund Your Roth IRA ASAP
With the part-time income you're earning in college, please use as much of your proceeds as possible to fund your Roth IRA. Then invest any amount over the maximum contribution limit into a taxable brokerage account.
The standard deduction limit for 2021 is $12,550. Therefore, you can earn up to $12,550 and pay no taxes.
The maximum Roth IRA contribution limit is $6,000. Therefore, you can contribute up to $6,000 in tax-free income into a Roth IRA, let it compound tax-free, and then withdraw the money tax-free in retirement.
When we were in college, the Roth IRA was a new concept. It was introduced in the Taxpayer Relief Act of 1997 and became a savings option in 1998. Please take advantage of this powerful retirement plan while in a zero or low tax bracket.
Money Lessons To Take Us Further
If your teenager is about to enter college, congratulations mom and dad! You did it! Hopefully, you've already been teaching them lots of money lessons along the way. But if not, don't fret. It's never too late to start encouraging financial awareness and independence.
I hope these money lessons I learned in college are a helpful reference you can use in one way or another. Even if you have a teenager who is technically now an adult, or soon to be, don't fully check out. They can still benefit from your guidance and encouragement.
They may gripe and groan when you talk to them. But hopefully one day they'll randomly look at you and say, “thanks mom and dad for everything you've done for me.” Sam and I sure dream about the day our kids say that to us. <3
Related posts about college:
What If You Go To Harvard And End Up A Nobody
Is Giving Up $1 Million For Private School Really Worth It?
The Differences Between Public School and Private School People
Readers, what money lessons did you learn in college? Did you have a credit card, a part-time job, internship, and/or the responsibility to pay your own tuition? What do you wish your parents did differently for you during college?
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This is a great list and one my daughter is following. I’d like to highlight how important internships and networking have been to my daughter. Her freshman year she was cleaning toilets at a fishing lodge but made a few contacts. Her sophomore year she became a lodge assistant at the same lodge and made a few more contacts. Her junior year she got an internship at NOAA based on connections she made at the fishing lodge. Her senior year “current” she was offered an internship at the Max Plank society in Germany based on her NOAA contacts.
She’s gone from cleaning toilets to the most prestigious scientific non-profit in the world in 4 years simply by networking, and sending thank you emails to people she’s met.
Networking and internships definitely help!
Thanks, Bill
Amazing! Love it, thanks for sharing!
Absolutely loved this, Syndey! In High School, I didn’t take studying serious at all. I luckily got into a college near home and sought to start off strong. As a college student, I learned the value of budgeting and knew that my purpose for being there was to get that degree and graduate with a full-time job offer. Though that was easier with an Accounting degree and going into public accounting, I wish I had used the money from my part-time job to pay off student loan interest and contribute to a roth IRA. As my sister-in-law is entering her freshman year of college, I plan to motivate her to practice each of these points and learn from my mistakes.
Thanks, glad you liked it! And thanks for helping teach your SIL important financial lessons.
Hey Sydney! Our stories are very similar! I also graduated in 3.5 years, but I did it by going summers to get those extra credits. I also lived close enough to school that I commuted to save money and I was required to get a job while in school. I worked at the campus library in the mailroom delivering packages, and lifting heavy boxes full of books. It forced me to be up early, work hard and maintain a schedule. I feel like this put me in a better position to adapt and excel when I entered the working world. I have a 13 year old, and we plan to put him on a similar path while in school so he can have a similar experience and build skills.
Great story and interesting similarities! Glad to hear you are already thinking about how to put your son on a similar path. There are lots of benefits!
Wow, I had no clue you also got a job raising money for your alma mater. When I went to college, the company would give out those jobs like candy and they would hire as many people as they could because well, turnover was insanely high lol.
It also did teach me a thing or two about sales and I too felt the suffering of getting told no, hung up on, cursed at, and so much more!
One of my biggest regrets in college was getting a credit card. I think you try to keep up with the Joneses more there than when you’re older. Everyone’s trying to look like they’re having an easy time of it, but you have no idea where your friends are getting their money from… rich parents or perhaps a student loan.
I lived off of 25c generic mac & cheese, had a job, drove a hand-me-down car. I still remember overdrafting my checking account on a $1 parking fee. That hurt. What hurt more was having to pay off that card out of my wedding budget 7 years later so I wouldn’t bring that mess into my marriage.
I’ve been without any consumer debt for year, and it feels good.
Oh yes I know those boxes of Mac and cheese so well. That overdraft must have been such a burn. Glad to hear you’ve worked your way forward from that and are now free from consumer debt!
The Roth IRA really can be huge. I was a Junior in college when the Roth IRA came out, so I had no idea about it. My dad did mention something, but I brushed it off.
It is important for parents to thoroughly explain the benefits of contributing to a Roth IRA. It’s like you have to be a good sales person and sell the benefits to your child. Otherwise, the easiest path is to just spend.
All I wanted was a decent car in college that had proper gear ratios!
If you would just put that college fund money in a mutual fund, you will be a millionaire by retirement. Nowadays college just inductro you into Marxism and liberal/ communist beliefs. Why don’t colleges lower their annual attendance fees. Students are many years in debt to pay off their student loans. Students should boycott their colleges until the fees are cut by 90%. If students don’t enroll, colleges are forced to lower their attendance fees. Parents should also not pay part of the student loans for their kids, the loan payback for students should be borne by themselves to teach them discipline and responsibilities. Just my take and my personal opinion.
” If students don’t enroll, colleges are forced to lower their attendance fees.”
Sadly, that’s not how it works. Classic example: Penn State. Little known fact: Penn State (NOT U Penn) is a private university. So the taxpayers of PA have no obligation to support them at all, and yet a huge chunk of their $ comes from state taxes. Why this is the case is another story and one you can research yourself.
If enrollment dropped, the taxpayers would simply be on the hook for the difference as no governor will ever want their legacy to be “the person who got our biggest uni shut down.” So it continues…
For the record, few STEM professors go into deconstuctionism or intersectional Marxism in their classes. I imagine the same is true in schools of business.
Did not realize Penn State was a private university!
As a current college student halfway through this journey that was unfortunately interrupted due to the pandemic my first year, I’m thankful to say I’ve carried on these valuable lessons you’ve outlined prior to freshman year of college!
As a personal finance advocate and blogger myself I would also like to add:
-Remember: what you put in is what you get out
– Be aware of the fields/divisions you’re getting into and understand the pay, sadly passions don’t always pay the bills
-Be fearful when others are greedy-WB
-Make your live easier by passively investing in the long term. It historically beats out active trading as well
-Time in the market > Timing the market
-More risk = more reward or loose it all
-Don’t obsess over title, positions, logos or compensation. That will not make you a better person, enhance your character or make your life easier. Instead focus on impact, value, leaving a legacy, making people feel good and making the world a better place than where you found it
– College is more than traditional txt book or lecture learning it’s about fostering relationships, connections, reaching out of your comfort zone, networking, taking more risks as the younger you are, the easier it is to do, treasuring your most precious asset: time-compounding works wonders and take advantage of everything that’s there!
– Be aware of major student discounts and perks to save big bucks!
-Decisions have consequences-think before you speak and I suggest waiting 24 hrs+ before any major decision
-Health is priceless and cannot be reversed
-Be grateful for the small things that cannot be replaced
-Things happen for you not to you
-Failure is not the opposite of success
-Live the frugal minimalist stealth wealth lifestyle to truly get ahead! It’s easier the younger you are!
– Study abroad when you can to stay humble, grateful and gain new perspectives
– Don’t cling to cliches or popularity, instead get to know diverse students with various interests and majors unlike yours
– I would suggest get a credit card not a debit card to build credit, go over your payment history and know your balance at the end of the month
– Understand what the 529 plan covers and what it doesn’t- biggest surprise for me: doesn’t reimburse commuting expenses!
– Don’t compare yourself to anyone except your former self
And remember… nothing lasts forever!
I hope to cherish the second half of my college experience with a fresh perspective and take advantage of everything I’m offered!
Thank you Sydney for this informative post.
Thanks for the detailed comment Mia. Good to know on 529s not covering commuting expenses. How is your school handling classes this fall, are they all back in person?
Since my school is located in NYC hybrid is still an option for now but most classes are finally back in person with mandatory vaccinations!
Great article, Sydney, but I have to take issue with your #2 piece of advice of using a debit card instead of a credit card. Back when we were in university, there were less scammers out there and I know the “debit card” was a fairly new concept as compared to the traditional “ATM card”. If I had lost all of my cash through a debit card number being stolen, it would have caused many problems and distractions from school trying to sort out the fraud claim with the bank, all the while not having any cash backups to cover living expenses. Having a credit card is simply better protection. Perhaps a pre-paid credit card would be a better option than a debit card for the reasons you state having a debit card over credit card?
Yes, the credit card companies were aggressive, but I couldn’t have had the college experience I did without a credit card since I was paying my own way 100% and simply needed leverage to buy books or participate in classes with relatively high lab fees etc. AMEX was what I used the most because back then, and the particular AMEX I had required the full balance payment be made each month. It was a great teacher in and of itself. If I had been paying more attention, I would have tried to get a card that offered air miles back then to start building my hoard for future travel. :) Credit cards can be trouble but with proper guidance and self-discipline, (which may take a tough lesson or two) I think they are a better option these days.
I see your point on better protections with credit cards. However, debit cards do have their own set of protections.
For example, if you report a debit card missing or stolen before someone uses it, your maximum loss is $0. If you report it within 2 business days the max loss is only $50. Between 3-60 business days though the max loss jumps to $500. Beyond 60 days you could be wiped out but hopefully nobody would go that long without realizing something was up.
A parent should set up a separate stand-alone checking account just for their child’s debit card, keep a minimum amount of funds in it, and monitor it often. I certainly don’t plan to give my kids access to a lot of cash when they’re in college.