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7 Tips for Building an Emergency Fund in College: Financial Advice for All Teenagers

Career & Money

Mon, June 10

Picture this: You return to your dorm after a day out with your friends and notice that your lights won't turn on. When you call up the dorm supervisor, he tells you that YOU have to take responsibility and incur all the related costs. As you look in your purse, you realize you don't have enough money.

You panic, look through your closet, and rummage through your whole dorm, only to find out the harsh truth: that you are indeed out of money. What does this mean?

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In simple terms, it means that you were a reckless spender and now have to face the consequences of those spending habits. College life is no easy phase; in fact, it is one of the most challenging phases of life, where you transition from being a dependent high school student to now a full-on adult. While this is an intimidating change for most people, it is an integral part of life that can not be avoided.

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To properly understand the complications of college life, we must first define it. 'College' is not just a place to get a degree but is also a hall of life lessons as well The situations that arise during your days at college are something that you have to overcome yourself. Simply resorting to help from family or friends may have worked in high school, but will not work anymore. There is no better time than college to suit up and deal with your problems like a responsible adult.

The first step for that is to become financially independent. You should have enough funds at your disposal to cover all your necessary expenses. But that's not all.

Life is unpredictable. Anything can happen at any second. To be ready for whatever path your life is going to take, you must have an emergency fund.

As the name suggests, these funds remain untouched until the occasion of an emergency, when you have no other choice but to bite into those funds. The presence of this financial source will provide peace of mind, and financial security during moments when you face unexpected expenses or emergencies.

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With that established, here are some strategies for college students to individually develop an emergency fund:

1. Constitute a Savings Ratio

Every time you receive any amount of money, you should set aside a predetermined ratio towards savings. This way, no matter how much income you have, you will always have a decent amount of savings to help you during difficult situations. While this may sound reasonably easy, it requires a lot of commitment.

After getting your hands on fresh money, it requires sheer will and strength, to not spend all of it. However, you should always think of the bigger picture, and resist the urge of spending.

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Warren Buffett, the man who is considered the most successful investor of all time, said “Do not save what is left after spending, but spend what is left after saving." There could not be a truer statement. Save first, and spend after.

2. Become Mentally Prepared

At times, after having set aside a portion of your income towards savings, you may not have enough money left,m to satisfy all your needs. But not even in this situation should you cut into your savings. The wants of humans are infinite, but resources are finite.

You should never compromise on your savings, regardless of your requirements. “Oh, but it is just for this week” NO. If you succumb to your thoughts today, there is a much higher chance that you will suffer in the future, without funds to rely on. You should be so determined that the mere thought of giving up on saving should not even cross your mind. Only then will you be able to save efficiently.

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3. Ignore Peer Pressure

College life has its fair share of entertainment, with students acquiring the freedom to go out at any time and with anybody for events such as parties. In fact, this is also an integral part of the transitional phase from school to college, as you slowly develop an identity for yourself. Frankly, without such entertainment, college life would be such a bore, and you would become a robot. Therefore, while such outings are not wrong in any manner, it is important to monitor your spending in such environments, because there are so many opportunities for you to throw your money at.

Moreover, when surrounded by peers, you might feel left out, if everybody purchases something and you don't, but this feeling won't last long. Tomorrow, in an emergency, they will be regretting their ruthless, impulse purchases, and you will be enjoying your financial freedom. At such an age, you will definitely feel the urge to experience all sorts of new things, but spending your money meaninglessly won't get you anywhere.

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It's not that you shouldn't spend any money at all on outings, because that is completely inevitable. However, think before spending. Don't just spend, because your friends are spending.

Take a moment to slow down and think logically before even pulling your wallet out. Those two minutes that you spend contemplating, will give you years of financial freedom in the future.

4. Be Consistent

Whatever you do, if you aren't consistent at it, you will not see any significant changes. The same applies to savings too. Once you settle on a specific savings ratio, it has to remain the same for as long as your income matches it.

If you feel like your savings are not enough, you can always change the ratio along the line, but whatever you settle on, you have to consistently use it. If you do this, you will be able to visibly see the money accumulating day after day.

When it comes to savings, there are no holidays. Whether you have classes or not, or whether you go to work or not, is completely irrelevant in this situation. If you get even a dollar a day, you should split that into savings, and spending.

As long as you receive any sort of money, you should add that to your savings. The only excuse for missing a day of savings is that you genuinely did not receive any sort of money that day. Otherwise, keep saving, and you will be proud of yourself later when your savings come in handy.

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5. Do It For You, Not For Anyone Else

What is your ulterior motive? If it is anything other than personal benefit, then saving is not for you. If you have financial goals or are genuinely willing to achieve financial freedom in the future, then by all means, begin saving.

If you think that saving would be good so that you will have enough money to boast about to your friends or appear rich, then you have the wrong motive. As a student, these kinds of motives are completely normal, but if you begin saving based on these motives, you will soon become frustrated and begin treating it like a chore. Then, saving will become a burden for you, and will unnecessarily stress you out. Never save just to reap the profits in the future. This kind of ulterior motive will not get you anywhere. Therefore, for your own wellness and mental health, you should only start saving if you are serious about it, and are genuinely passionate.

6. Don't Hesitate To Do Part-time Jobs

As a student, you might feel like your only responsibility is to get good grades. While this is true up to some extent, there are various aspects that you can explore, in college. College is basically a gateway into your adult life.

It will be your last preparatory period before you step into the real world. If you don't prepare for your life now, you will never get another chance as breezy as this one.

So, it is never a bad, or embarrassing thing to take up part-time jobs. According to WifiTalents, “70% of college students work, while enrolled in class.” If anything, you will not only have a regular source of income but also discover a whole new community of students with similar interests. Moreover, a steady part-time job is a surefire way of adding to your savings, and also increasing your spending, since your income will increase, while your expenses remain the same!

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Most colleges offer jobs on campus, which you can take up, but other than that, working as a shop assistant, cashier, or coffee shop barista, are some examples of feasible jobs that you can take while maintaining your study schedule.

7. NEEDS Strategy

For moments where you are unsure whether to spend your money on something, here is an acronym that you can use:

  1. Necessity
  2. Expense
  3. Evaluation
  4. Delay
  5. Savings

First, you should consider, whether you need it, right now. Would you be able to move on with your life normally, without having that product? If yes, you might be wasting your money on something unnecessary. While you can always spend some money on personal luxuries, it is important to draw a line between, luxuries, and something that would become unused after a day of purchase.

Secondly, are you able to afford it with your current budget, and in your current financial position? If that expense is out of your reach, then don't even consider going for it, because it will leave you in an icky spot, financially. Buying that one thing out of your budget might make you end up in a situation where you are not able to afford the bare minimum.

Have you compared the prices and options? For instance, you may be ready to purchase a phone for a high price, without realizing that there are other phones, with the same features, but at a lower price. Doesn't that seem like you are digging yourself a hole? To avoid such situations, you must always evaluate your options before making an investment decision.

Then, is the time factor. Scale the urgency. If that investment is a must, and you need it immediately, then do not even give it a second thought. However, if it can be held off, then why waste your money at that point in time, when that money could be used on something more productive instead?

Finally, last but not the least, savings. What impact will that purchase have, on your savings or financial goals? If by any means, that investment becomes a hurdle in your financial situation, you could not have made a worse decision, by going through with the purchase.

The whole point of an emergency fund and savings is to have something to rely on in dire situations. If you continue to make such bad decisions, you will regret it heavily in the future, when you have to face the consequences.

What Is Your Role?

All you have to do is think twice and be smart about your money, and you will have a trusty and stable emergency fund in no time. Most people take half their lives, to get settled with a steady financial background. But by following these simple tips, you will achieve this, and a lot more financial freedom, all by the time you finish your college education itself. You will then have the rest of your life, to freely enjoy yourself, and treat yourself to the luxuries that you require, without having to worry the least about your finances.

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Remember that if you work hard and are committed to saving in your college years alone, you will have tens of years of freedom. Work now, for a stable future!

Being a student is not a disadvantage, but an advantage for you! You have so much time left, to establish yourself, so don't fear about your future, and happily enjoy your college days, as these tips will barely take a minute a day!

Adhitha Chezhian

Writer since Jun, 2024 · 3 published articles

Adhitha Chezhian is a high school student, pursuing the IB Diploma at LMOIS. She enjoys participating in MUNs, and other conferences, and has won the Best Delegate Award in Harvard Model Congress, and represented India in SCoPA : GEM Youth Conference 2021 on COP26. She is very passionate about literature, and loves to take part in essay and other literary competitions worldwide.

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