How to Build Savings as a College Student

How to Build Savings as a College Student

Even if you're only earning a little while studying, use the following strategies to build up your savings account.

1. Pay Yourself First

When you pay yourself first, you choose a certain amount of earnings you're comfortable saving and set that aside before paying other bills.

Example: If your part-time job pays you on the first of the month, set up an automatic transfer to your savings account on the second of each month. That way, the money isn't available to spend as readily.

An even better option is to ask your employer if you can split your paycheck into multiple accounts so that some income goes to checking and some directly to savings. Additionally, some banks let you divide your savings into multiple sub-accounts, or buckets. You can give them nicknames, like Spring Break Fund or New Car. That might motivate you to save money specifically for those goals.

Learn more: What Does It Mean to Pay Yourself First?

2. Automate Transfers

Setting up automatic transfers from your checking account to your savings account is the best way to keep your reserves growing. You won't have to set reminders, and you'll probably get a thrill from watching your balance rise. You could set a recurring automatic transfer once a month or each time you receive a paycheck.

If you have a specific goal, like buying a car in two years, break down how much you'll have to save each month to get there. Or plan to save a specific amount each month as a general goal to get used to the practice of saving—even $20 or $50 is a starting point.

Choose an amount that won't put you at risk of overdrawing your checking account, which could lead to fees and falling behind on bills.

3. Find Ways to Earn Extra Money

While studying is your priority, working part time will give you the flexibility to earn spending money and save at the same time.

You can take on a work-study job on campus as part of your financial aid package, if you qualify. Or opt for tutoring, babysitting, pet sitting or monetizing skills like videography, translation, software development or graphic design as a freelancer.

If working during the school year isn't possible, use the pay-yourself-first concept for summer earnings. Transfer as much as possible to savings as soon as you're paid so you don't have immediate access to the money, and let it earn interest during the school year.

Learn more: How to Make Money as a College Student

4. Stretch Every Dollar

Use these tips to create a budget that will support your savings habit:

• Know how much you spend. Take a look at your checking account or credit card statement for the past two to three months. Note some basics, like the total you spent on food, utilities, housing, transportation, entertainment and school supplies. If anything sticks out—such as, "Wow, that's a lot of Uber rides"—note it and consider cutting back.
• Choose a budgeting method and test it out. Choose a budget plan and see how it suits you. A popular one is the 50/30/20 rule, which splits your spending into needs, wants and savings/debt repayment. First, try to limit spending on needs to 50% of your income, which can include parental contributions, student loan disbursements, scholarship money and your own earnings from work. See if you can increase your savings as a result.
• Adjust as necessary. Make changes to your spending based on the expenses audit you did in the first step, but slowly: Putting too much pressure on yourself could backfire. Not sure how to track your spending? Try a budgeting app that can do it for you.
• Cook in big batches. One major way to save money in college and thereafter is to limit spending on meals out. If you have roommates, set aside one day a week to make a few big meals—stew, chili, lasagna or pasta sauce, for example—and freeze them. You'll be less likely to turn to takeout for meals other than those you eat at the dining hall.
• Opt for used over new. This applies to big-ticket purchases like cars and smaller items like furniture, clothes, books, phones, laptops and more. Browse options on online marketplaces, email listservs and even fliers at the student union or other public spaces. Selling your own lightly used items is another way to make extra money and add to your savings.

What Type of Savings Account Is Best for College Students?

You can choose either a traditional savings account at a bank or credit union or a high-yield savings account at a bank, credit union or online bank.

For most students, a high-yield savings account is a good choice, since it will offer user-friendly online banking tools and you're likely to do most banking tasks on your phone or computer anyway. Just as importantly, high-yield accounts—as their name suggests—offer significantly higher interest rates than traditional savings accounts, which helps your money grow faster.

If you'd prefer to bank in person instead of online or need to deposit cash regularly, a traditional savings account may work better for you.

Tip: If you really want to opt for a high-yield savings account but need that ATM access from a regular bank, you can deposit and withdraw cash from your regular savings account and then transfer funds to and from your high-yield savings account. Just be sure to check the average time it will take to transfer money between banks when paying bills and other expenses.

Here's how the two types of savings accounts compare.

Learn more: High-Yield Savings Account vs. Traditional Savings Account

How Much Should College Students Have in Savings?

There's no rigid rule for how much a college student should have saved. Student profiles vary widely—from the undergrad who works only in the summers to the part-time student who has a family and works year-round. To determine how much you should save, focus instead on your goals.

For example, everyone, no matter how much they work or study, should have an emergency fund. This is cash set aside for unexpected expenses, like a car repair or medical bill. Having money saved for these unplanned bills prevents you from relying on credit cards or even leaving school in order to earn more to cover your expenses.

Some students can count on their parents or other family members for financial help, while others can't. If your family is covering some of your costs and is able to help out in emergencies, your personal emergency fund may be on the lower end, such as $500 or $1,000. But it should still be there to help you build independence and develop a savings habit for after graduation.

If you don't have support from family, aim to build an emergency fund of at least three months' worth of basic expenses. That may take a while, but is a valuable goal to work toward.

In the most dire of emergencies, you can also check if your school or other local organizations offer emergency grants for students whose financial situation puts them at risk of dropping out of school.

The Bottom Line

Now is an ideal time to build strong financial practices that you'll use for years to come. If you can save money on a college student's tight budget, then you'll be able to save for retirement, a house and other milestones once you're working full time. In college, the amount you save isn't as important as seeing that it's possible, and empowering.

College is also a good time to start thinking about building credit. A solid savings account combined with a growing credit score can help you when it's time to rent an apartment, buy a car and more. If you haven't started using credit, Experian Go^™ can help by establishing a credit profile for you and suggesting ways to begin your credit journey.