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Your Financial Life

Money Basics for College Students: Budgeting, Credit and Debit Cards and Emergency Funds

6 minute read time

For college students taking their first steps towards financial independence, who may not know as much as they need to about financial literacy, it can be daunting to know how to start building good money habits. Understanding how to get started with budgeting, the difference between credit cards and debit cards, and the importance of an emergency fund can go a long way in securing your financial future.


A good budget offers a snapshot of your income, expenses, and savings. Creating a real budget is about more than just "making ends meet;" it's a proactive approach to managing your money and setting yourself up for good long-term financial hygiene.

Steps to Create a Budget

  1. List Your Income: Whether it's from a part-time job, a work-study job, an internship, a stipend through a scholarship or a monthly allowance, you need to figure out how much income you have each month.
  2.  Categorize Your Expenses: Divide your spending into "needs" and "wants." "Needs" are non-negotiable costs like tuition, rent, and groceries, while "wants" could include dining out, shopping, or entertainment.
  3. Calculate and Compare: Subtract your total expenses from your income. If you are spending more than your income each month, you may need to take a critical look at your spending habits. Now is the time to build sustainable money management skills.

Financial institutions often offer budgeting tools integrated into their online and mobile platforms. These tools automatically categorize your spending, allowing you to see where your money is going at a glance. The MyFinance Manager has tools that can help you create a budget, monitor and categorize your spending and look at your finances.

Credit and Debit Cards

Many students are familiar with debit cards, but freshly out of high school, college is the first time many young people will have access to a credit card. While debit cards offer less risk, they also typically offer fewer rewards. Debit cards don't help you build credit history, but since the funds are directly taken from your bank account, there's less chance of accumulating debt.

Meanwhile, credit cards are not just a convenient payment method; they're also a tool for building credit history. A good credit score can open doors for you down the line when you're considering larger financial milestones like buying a car or a house. When used responsibly, credit cards can also offer benefits like cash back, rewards, and zero-liability fraud protection.

How to Use a Credit Card Responsibly

  • Always pay your credit card bill on time. Late payments can negatively impact your credit score and cause your balance to grow through late fees and compounding interest.
  • Don’t max out your credit limit. Keep your credit utilization below 30% to improve your credit score
  • Use your card’s rewards program wisely. When selecting a credit card, evaluate what types of rewards fit your lifestyle best. If you’re studying abroad, a travel rewards card might be best, while cash back or rewards that give increased points for gas and groceries might be better for others.

Your credit score affects various aspects of your life, including loan eligibility and interest rates. This score is based on several factors like payment history, credit utilization, and the length of your credit history. Keep an eye on your credit score through the free tools offered by many financial institutions and aim to maintain a high score.

Emergency Funds

Life is unpredictable and having a financial cushion for unexpected scenarios like medical emergencies, car repairs or even just an unexpectedly expensive textbook is essential. An emergency fund provides peace of mind and financial stability during uncertain times.

Financial experts typically recommend having enough to cover at least three to six months' worth of essential living expenses. For college students, even a smaller fund of $500 to $1,000 can make a significant difference.

Financial Dos and Don'ts for College Students

Budgeting, understanding the role of credit, and establishing an emergency fund are vital steps towards financial stability and independence. Here are a few quick dos and don’ts:


  • Have a budget
  • Use credit cards responsibly and work on building good credit
  • Start an emergency fund—even a small fund can be a lifesaver


  • Ignore your spending and create bad money habits
  • Neglect your credit score
  • Dip into your emergency fund for non-emergencies

Financial literacy is a lifelong journey, and the college years are the ideal time to lay a strong foundation.