ROULHAC ENTERPRISES

By: Nancy L. Anderson, CFP - Forbes Contributer 

When we made the decision to pay for my son’s college education many years ago, we never expected the price of tuition to almost double just as he entered the University of California. To top it all off, the timing of his freshman year followed a decade of lackluster growth in his college fund.  We are not alone as parents everywhere are struggling to help their children walk across the stage in the cap and gown to gain a coveted college diploma.  Parents may have socked away funds to pay for tuition and books, but with costs rising there is simply less money to spend on all the other expenses associated with being a student.

Because of the poor economy, students now have more of a burden to help pay for their own college expenses.  No one wants to rack up huge student loan debt to pay for it all, but nearly two-thirds of undergraduates take out student loans, and college seniors are graduating with an average loan balance close to $24,000.  It is daunting to finish college with high student loan balances and large monthly payments, and it sure takes the excitement out of graduating when you start making those payments, usually within the next six to nine months.
College students need to manage their money differently today than they have in the past.  I was reminded of that the other day when I saw an ad with a college graduation photo of a student who obviously had a skier’s tan with huge pale eyes in the outline of goggles.  The caption said, “Congratulations on your eight year college experience.”  I smiled but cringed at the thought of my son doing that!  The days of lingering at college and wasting money are over.  Students today need to embrace the “starving student” mentality not just to help their parents pay for the COST of going to college—and thus reduce the amount of loans needed—but also to help themselves learn solid money lessons that will serve them well later in life.

Managing cash well is not only a good habit to learn but it also contributes to future financial success. In our research, we have seen a high correlation between employees who know they are on track for retirement and day-to-day money management skills. In the landmark book The Millionaire Next Door, Thomas Stanley and William Danko found that one of the common denominators among people who become wealthy is to live below their means.  The millionaires in their study saved a much higher percentage of their income than the 10% that financial planners typically suggest as a rule of thumb.  They also exhibited traits of being frugal throughout their lives.  Now might be a good time for students to start.

Struggling through college, taking on greater financial responsibility to reduce expenses, and learning to live on less, could actually make the poor economy a lifelong benefit for today’s students.  Students who master managing their cash flow will not only receive their diploma for intellectual excellence, but will graduate with practical life experience and a financial acumen that will give them a great start in life.

There are many ways students can cut costs—some more drastic than others—but the bottom line is students do waste a lot of money.   Those wasted dollars could certainly be put to better use.

Here are 10 Things College Students Waste Money on:

Textbooks – Buying new textbooks from the campus bookstore is expensive.  Years ago the alternative was “off campus” bookstores, but now students can buy and sell textbooks online through retailers such as Barnes and Noble, or on websites such as Amazon.com and SlugBooks.  SlugBooks even allows you to search for your school, class, and professor, and it compares prices from the bookstore, Amazon.com, and Half.com.  They also have an option to rent books at a fraction of the cost to buy.  For example, in the UCLA bookstore you can purchase a brand new copy of A First Course in Probability by Sheldon Ross for $137, or rent the same book for $47.  Students who average 4 classes per semester and only have two books per class could save $5,760 over four years on textbooks.

Tuition – For the 2010-11 school year, the average cost of tuition and fees for a public college was just over $7,600, and for a private college was over $27,000.  Parents are feeling the pain as tuition has risen on average about 5.6% a year since 2000, and with many state budgets in fiscal crisis, future increases could be even higher.  Unless you get a full scholarship, paying tuition is unavoidable if you want to graduate from college. To minimize the cost of tuition, high school students can take advanced placement (AP) classes or take classes at the local community college and get some of the core classes out of the way.  Students at 4-year colleges may want to take lower division classes at summer school or over a winter break at a local community college and transfer the units.

Students who enter college with 15 transferable units (at $300 per unit) from a community college or AP classes just saved themselves $4,500.

Automobiles – Sell your car or don’t bring it to school. Owning a car means a lot more than putting gas in the tank; there is the maintenance, insurance, and parking to consider.  According to a calculator on Edmunds.com, the true cost to own a Ford Focus for a 5 year period is not just the $15,000 price to buy the car, but another $21,700 to operate it.  (Click here for the calculator.)  Insurance is still high for the 18 – 25 age group, even with a good student discount.  Choose a college where you don’t need a vehicle, and if you want to come home to visit your family and friends, put a sign up for ridesharing.  Those students with cars are starving and they need the gas money. Pitch in and make some new friends.
Students that bike, walk, or use local (usually subsidized) transportation can save about $20,000 during their four years of college.

Housing – You have to live somewhere but how you go about it can make a huge difference to your bottom line in college.  Many college students want their own room after being crammed in a room in the dorm with someone they have never met before.  They long for some privacy and peace and quiet but when it comes down to it, rent is one of the highest expenses in college.  Investors love to buy rentals in college towns and sign the students up for annual leases so they have to pay all summer even if they are going home!  Frugal college students who double up and share rooms all through college can save a small fortune.  They do have to trade off the peace and quiet and privacy.  No one said it would be easy.
Cheap units…………….. $4,500
Not having a car……….. $20,000
Sharing a room…………. $12,000
School supplies ……….. $320
Food………………………. $2,500
Socializing……………….. hard to quantify
Credit cards…………….. $4,100
Missing deals…………… hard to quantify
Total money saved:        $49,180

Most college students can save money by avoiding at least one of these money wasters. Considering the impact that could be made with a concerted effort in being frugal, it seems like the first class they should sign up for is one on managing personal finances. In fact, that class should be required for all lower classmen.  The good news is students don’t have to live ten guys to a room or never leave the library to save money. With a little forethought and maybe a little sacrifice, the “starving student” may just end up being the millionaire of tomorrow.

Link to article: forbes.com/sites/financialfinesse/2011/09/15/ten-things-college-students-waste-money-on/