Budgeting Advice for Students Who Want to Build Money Knowledge

As students move into high school and college, they’re ready to earn their own money and get their first taste of financial freedom. It’s essential for them to understand that financial independence comes with financial responsibility–and they may need some guidance to help them along the way.

Addition Financial has an array of financial products designed for students, including our Student Checking Account and school pride debit cards. We got our start as a credit union for educators, so financial education is in our blood. With that in mind, here’s our best budgeting advice for students.

What Are the Top Five Budgeting Tips for Students Just Starting to Manage Their Own Money?

Money management starts with money awareness. We believe that having a budget is beneficial regardless of your age or income level. Budgeting is the foundation of financial wellness, so here are our best budgeting tips for students.

#1: Get a Handle on Your Expenses

Creating a budget is all about understanding how much you’re spending and how much money you’ve got coming in. We suggest that any college student creating a budget should start with their expenses, which may be more predictable than their income. Some of the expenses to consider include regular living costs such as rent (if you’re living off campus), utilities and groceries. Keep in mind that some of your costs will be variable expenses (expenses that can change month to month) while others will be fixed expenses (expenses that will stay consistent).

#2: Total Your Net Income

Net income can sometimes be difficult to predict for college students since they may not be working the same hours every week. You may want to use an average to create your budget. We recommend totaling all sources of income, including an allowance if you receive one from your parents.

#3: Leave Room for Discretionary Spending

One of the biggest mistakes students make when creating a budget is not leaving room for fun. College is supposed to be a time of learning but it’s also an opportunity to make friends and enjoy yourself. Your spending should be controlled but should leave room for the best parts of student life, too.

#4: Make Saving a Priority

Saving money should be built into your student budget. A popular way of dividing money in college is the 50/30/20 rule. The idea is that you spend 50% of your net income on your needs, 30% on your wants and put 20% toward your savings. You may be saving to create an emergency fund or putting your money into investments, but saving at least 20% of what you make is a good financial habit.

50/30/20 Rule

#5: Choose a Budgeting Method That Works for You

There are many methods of budgeting to choose from, and you should pick the one that feels natural and easy to you. One popular budgeting option is zero budgeting, which has been recommended by Dave Ramsey. It involves accounting for every penny you earn and every penny you spend, so by the end of the month, your earning and spending (including contributions to savings goals) comes to zero. You may also like the envelope method, which allocates funds to each spending category. If you have $300 in your entertainment envelope and you spend it all in the first week of the month, you’ll need to stick to free options until your envelope refills the next month.

What Are Some Common Money Mistakes Students Should Avoid?

There are very few college students who start their freshman year with money knowledge that allows them to avoid financial mistakes. Here are some of the most common errors that students make with their money with pointers on how to avoid them:

  • Credit card debt can quickly become a problem if you aren’t careful. A lot of college students have a credit card for the first time. We suggest spending only what you can afford to pay out of pocket. Using a credit card can help you to build credit, but you don’t want to end up with a high balance (and high interest rate) that you’ll need to pay later.
  • Overspending is a common mistake for college students who are managing their own money for the first time. It’s important to be mindful of what you spend and not overdo it, which is why we recommend creating a budget.
  • Speaking of budgets, not having one is definitely a mistake. It doesn’t need to be complex, but budgeting will help you keep track of your money and avoid other mistakes on this list.
  • One of the best parts about college is that your student ID can unlock an array of student discounts. Taking advantage of these discounts can allow you to stretch your entertainment budget substantially.
  • Not having an emergency fund may prove to be stressful. When you’re on a student budget, any unexpected expense can demolish your savings. We suggest that your first saving goal should be creating an emergency fund with at least six months’ worth of expenses.
  • Investing some of your money is something we recommend, but it’s important to avoid bad investments. College students should balance exuberance with research and choose investments that aren’t overly risky or speculative.
  • Not keeping your student loan in mind is another pitfall to avoid. Even students who qualify for financial aid and scholarships may take out student loans. If you can afford to do so, you may want to build some room into your budget to start making loan payments before you graduate.
  • Student support related to money is available on most campuses. Since it’s usually provided to students at no cost, there’s no reason not to take advantage of these services.

Identifying the most common money missteps that college students make can help you avoid them.

How Can Students Track Their Spending Effectively Without Getting Overwhelmed?

If you’re not accustomed to tracking your spending, it can feel overwhelming to start. The good news is that there are tons of free apps that you can use to help you get a handle on what you spend and avoid overspending.

Goodbudget is a free app that uses the envelope method of budgeting. Each month, you’ll allocate money into spending envelopes. Goodbudget will help you track your spending from each envelope. The free version should be fine for most students, but there’s also the option to upgrade to the premium version for $8 per month.

YNAB is another budgeting app to consider, although it’s one of the more expensive ones at $14 per month. It uses the zero budgeting method and is best for students who want to take a hands-on approach to student finance.

Zero-based budgeting method

What Should Students Know About Credit Cards and Using Them Responsibly?

Overspending with a credit card can lead to debt and that’s not how you want to start your adult life. That said, it’s essential to learn how to use credit cards responsibly. Here are a few tips to help you learn:

  • Don’t apply for (or accept) every credit card you qualify for. College students receive a lot of credit card offers and some are predatory. Make sure to read the fine print and avoid cards with exorbitant fees or high interest rates.
  • Build credit by using your card for predictable monthly expenses. We don’t suggest using your credit card for things you can’t afford, but there’s nothing wrong with using it to pay for groceries or utilities. Just make sure to pay your balance in full at the end of the month.
  • If you do have a balance you can’t pay in full, be mindful of not adding to it. Credit card debt has a way of creeping up on people. Choosing a debt repayment method can help you get out of debt.
  • Don’t be fooled by a high credit limit. Your credit card company may offer you increases if you manage your card responsibly. It’s a common mistake for college students to spend up to their limit and accrue debt.

You need to have a history of debt repayment to earn a high credit score. That doesn’t mean overspending, but it does mean learning how to use your credit card wisely and in a way that benefits your financial future.

How Can Students Balance Having Fun and Saving Money?


Students can and should have some fun, but they also should prioritize saving money. One of the best ways we know to do that is to choose a financial institution that provides student checking and student savings accounts.

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Budgeting is truly the key to having fun as a college student without overspending. Every month, you can build “fun money” into your budget. Your entertainment budget may include money for ordering pizza, paying for streaming services or hosting a party in your apartment or dorm room.

The key to saving money is to build it into your budget, too, and to pay yourself first. If you allocate a percentage of your income to savings, we suggest making that payment to yourself at the beginning of the month. That way, you won’t be tempted to rob your savings to pay for entertainment.

At Addition Financial, we have student accounts as well as a huge library of online financial resources for students to use. We encourage our student members to educate themselves by reading blog posts or listening to our podcast.

Get Financial Tools for Students by Joining Addition Financial

Students in high school and college can learn about money management by creating a budget and sticking to it. We recognize that the idea of making a budget may be daunting, but the budgeting advice we’ve included here can help you do it quickly and in a way that works for you.

Are you looking for a financial institution that cares about your financial future? Become an Addition Financial member today!

The content provided here is not legal, tax, accounting, financial or investment advice. Please consult with legal, tax, accounting, financial or investment professionals based on your specific needs or questions you may have. We do not make any guarantees as to accuracy or completeness of this information, do not support any third-party companies, products, or services described here, and take no liability or legal obligations for your use of this information.