13 Ways College Students Accidentally Ruin Their Finances

Help set your child up for financial success during college and beyond by avoiding these harmful money missteps.
Updated April 17, 2024
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As most of us know, people accidentally ruin their finances all the time. It’s unfortunate, but it happens. And it’s not something that only occurs with younger adults — even seniors often fall culprit to financial errors.

If it’s easy for adults to make money mistakes, imagine how easy it could be for a college kid. Here are 13 potentially disastrous financial blunders you can help your college student avoid.

No budget

Andrey Popov/Adobe Woman Calculating Bills In Her Room

If your college student doesn’t know how to budget, they’ll likely spend more money than necessary. This could lead to falling into debt and carrying additional finance-related stress.

What to do:
Explain the importance of budgeting, which includes setting aside money for financial goals and other expenses. This could include saving up money for a study abroad trip, buying a car, or having an entertainment fund. For help with budgeting, your student can utilize budgeting apps.

Not keeping track of expenses

fizkes/Adobe woman working using laptop computer

If your child doesn’t know how much they’re spending and what it’s being spent on, they might not realize how much unnecessary spending is happening. The concept of tracking your expenses is closely tied to creating and sticking to a budget.

What to do:
Show your college student how to track their expenses through whichever means works best for them. Depending on how they pay for things, this could be through credit or debit card statements and online bank accounts, an app like Simplifi, or by simply keeping notes via spreadsheet. Be sure they track all expenses, including anything that might be tax-deductible, like medical expenses.

No savings or emergency funds

New Africa/Adobe Young man with money near cash machine outdoors

Without any savings or emergency funds, your child could end up in an unfortunate financial predicament while away at school. This could involve not having the funds to cover unexpected medical expenses or something else out of the ordinary.

What to do:
Help set up a savings account for your student with the explicit understanding that the funds shouldn’t be touched except for specific reasons. This wouldn’t typically include everyday expenses, such as groceries or gas. Check out this list of the best savings accounts to find the right one for your college student.

Overpaying for items

Алексей Закиров/Adobe Woman frustrated reading something on computer

Buying everything new or not on sale is a good way to spend as much money as possible. This leaves less leftover money for savings and other financial goals.

What to do:
Teach your student about the importance of looking for sales and discounts, as well as shopping in bulk, buying used textbooks, and using coupons. For bulk purchases, consider sharing these Costco shopping hacks to help them save money. And for savvier online shopping, share these Amazon shopping hacks with your child.

Impulse buying

Drobot Dean/Adobe Happy optimistic young girl student holding credit car

College could be the first time your child has loads of freedom to choose whatever they want to do. This could lead to impulse-related expenses, whether it’s going out with friends or simply buying things they like more often.

What to do:
Express to your student how important it is to keep a rein on their finances. If they’re on a budget and tracking expenses, they’ll know the exact amount of money available at all times. This can help guide their decision-making when it comes to wants versus needs.

Overpaying for living space

DragonImages/Adobe Woman stretching at desk in dorm room

Housing and rent aren’t necessarily cheap, especially for a college student with limited funds. Paying for too much living space can quickly reduce other parts of your child’s budget.

What to do:
It’s not always fun to have roommates or to share spaces. But smaller living quarters and sharing a home with other students can help your child save a lot of money at school. Help them research different places to live, and point out that a dorm or apartment might be little more than a place to rest and relax between classes, activities, and study sessions.

Bad investments

ZeroThree/Adobe Friends watching a fun video on their computer

College is about trying and learning new things, but that doesn’t mean your student needs to throw their money at any investment opportunity that comes their way. There’s very little chance that their roommate is creating the next Facebook, and their cash has a much better chance to grow elsewhere.

What to do:
If your student wants to learn about investing, show them how to get started. It can take a lot of personal experience and research to become well-acquainted with the investing landscape, so it’s best for them to get started early. For easier investing, check out the best investment apps to find the one that will work for your child.

Misusing student loans

insta_photos/Adobe student using computer studying

Student loans are meant to be used for college-related expenses, but unfortunately, that’s something overlooked by many student borrowers. This is extremely risky, as misusing those funds could lead to the termination of their loans.

What to do:
Educate your student about how student loans should be used, which is generally inclusive of many different expenses. This could include tuition, books, housing, and more. Stress that proper use and paying off student loans can help build your student’s credit. For more credit-building strategies, see these simple ways to boost their credit scores.

Major credit card usage

Natalya Lys/Adobe Women with paper bags at the mall

Using credit cards improperly can lead to major debt and negatively impact your student’s credit, setting them up for a difficult financial future.

What to do:
Teach your kid that credit cards are important financial tools and resources, but only if they’re paid off in full each month. Otherwise, their high interest rates typically make them a huge detriment. There are some great credit cards specifically for students that can help them develop good money habits and build a solid credit history.

Not reading student loan repayment terms

fizkes/Adobe Annoyed woman looks at computer

If your student doesn’t read or understand their student loan repayment terms, it could end up costing them loads of money.

What to do:
Go over the terms of your child’s student loans and how repayment works. Consider the timing of when payments need to be made and if there’s a grace period.

Waiting until after graduation to learn money management

Prostock-studio/Adobe A group of graduates celebrating

The longer your student takes to learn about money management, the less control they’ll have over their finances.

What to do:
Financial education isn’t learned overnight, so it’s best to start as early as possible. It may seem like your student would already have too much on their plate while going to school, but it’s the perfect opportunity to start learning finances and money management lessons as well. You can start as simple as teaching about different types of budgeting methods.

Not working

Artem Varnitsin/Adobe Customer paying with her mobile phone at a small cafe

Not working means your college student will miss out on earning extra income and learning valuable skills.

What to do:
Having a job in college isn’t always the best idea, but it can be beneficial in certain situations. If it makes sense for your child, consider different jobs that could align with their schedule. Having employment can teach your child about earning and saving money, and it can help them keep a budget.

Missing out on scholarships

Kzenon/Adobe student using computer studying

Not applying for certain scholarships or financial aid can result in missed opportunities for saving loads of money.

What to do:
If your student is eligible to apply for scholarships, they should, and they should do it as early as possible. It could also make sense to fill out forms for financial aid, including the FAFSA, even if you don’t think you would qualify for aid. The FAFSA can help qualify you for other savings opportunities, including private scholarships.

Bottom line

charmedlightph/Adobe Young people at lunch

Your college student will have to go through many of life’s experiences on their own. But you can help them prepare as much as possible for managing their money by teaching them important financial lessons now. This will help keep them grounded as they work toward graduation and beyond.

To further their education, teach them about saving money on loans through refinancing. Here are options to refinance student loans.

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Author Details

Ben Walker, CEPF, CFEI® Ben Walker, CEPF, CFEI®, is credit cards specialist. For over a decade, he's leveraged credit card points and miles to travel the world. His expertise extends to other areas of personal finance — including loans, insurance, investing, and real estate — and you can find his insights on The Washington Post, Debt.com, Yahoo! Finance, and Fox Business.

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