Common Money Mistakes College Kids Make (Teach Your Kid This ASAP)

Everyone knows that college is expensive, but they’re usually just thinking about tuition, room and board, and meal plans.

The expenses that people don’t talk about enough are the avoidable money mistakes that college students make that will follow them long into the future.

Paying $10 for a coffee shop run or $25 for dinner may seem small, but these little expenses add up quickly, and soon they’re out of money and calling home asking for help.

Before your college student moves out, talk through these common money mistakes college kids make, and teach them how to avoid them!

1. Not Having a Budget at All

Before I lived on my own, I never had a budget. Despite taking a Life Skills class in high school that taught budgeting, this wasn’t a priority in my young adult life.

I suspect this is the same for most new college students.

They’re used to having all major bills paid for them, while the money they earn is mostly fun spending money.

College is likely the first time they’ve been responsible for handling their own finances and ensuring that there is enough to make it to the end of the month.

Luckily, this is a skill you can teach over the summer…while helping them save some money!

This is what we did:

We gave our kids “bills” to pay using the income from their summer jobs.

You could charge something like $300 for rent, $250 for food, and then expect them to pay for their own car insurance and gas.

Instead of actually keeping the food and rent money, set it aside for them.

By the end of the summer, they’ll have some experience budgeting for real expenses AND a little savings account that they can fall back on in college when they’ve accidentally overspent!

2. Blowing the Financial Aid Refund

I was personally guilty of this one during my college years, and I highly suggest being diligent about warning any college student against making the same mistakes I did.

Getting a financial aid refund as a broke college kid can feel like hitting the lottery!

Most of that refund is probably borrowed money that they’ll eventually have to repay…with high interest.

Before they spend any of that money at all, teach your child to figure out where the money came from and how much they need to cover the rest of the semester.

Our kids know that we expect them to keep those extra funds in a savings account and to only touch it when absolutely necessary.

It’s much easier to avoid spending financial aid refund money when they see it as debt instead of free money.

3. Ordering Food Delivery Constantly

Even as financially secure adults, we hardly ever order food delivery.

It just seems smarter to save the money and go pick up the food ourselves.

Teach your college student early that eating out, especially when someone is delivering your food, is one of the fastest ways to blow their budget.

This is another category that can add up fast without your child realizing it.

Delivery fees can quickly double the cost of any meal. Add a tip on top of that and suddenly your son or daughter might as well be eating filet mignon instead.

I’ve found the best way to approach this is to explain that if food delivery is important to them, it just has to be budgeted for.

Maybe they can afford to order food once a week or a couple of times per month.

It’s when it becomes a habit that it becomes a big, expensive, problem.

4. Mismanaging a First Credit Card

Credit card companies are notorious for their presence on college campuses.

It’s very common to find their booths at every event, and it is dangerously easy to sign up for a credit card with a massive interest rate.

A first credit card can be great for your student’s credit, but only if they know how to use it wisely.

Teach your child to keep their credit card balance below 30%, to deduct these charges from their checkbook register just like a debit purchase, and to pay off their credit card each month.

Once they understand that paying the minimum payment each month would keep them in debt for possibly decades, that $25 credit card purchase suddenly seems less appealing.

Credit cards can be very useful tools to quickly build up their credit, but only if they understand the dangers and expenses involved.

5. Racking Up Overdraft Fees

While every bank account owner should have a checkbook register and balance it regularly, too many college students never learned this skill.

Using a debit card like a credit card can have drastic consequences, including overdraft fees.

Teach your child to check their bank account regularly, even if they do balance their checkbook often.

It’s easy to forget about an automatic payment or a semi-annual bill that they weren’t accounting for.

We asked our bank to turn on low-balance alerts when we helped our kids to open their own accounts.

I highly recommend this to all parents. It costs nothing and can easily save your child hundreds of dollars in overdraft fees!

6. Buying New Textbooks Without Comparing

Textbooks are notoriously expensive and buying each book brand new can make this one of the biggest expenses your student faces all year.

Instead, look into purchasing books used or even renting them!

My kids have been able to rent textbooks online for a semester and have saved over $100 each time.

It’s also a good idea to wait until the semester starts before buying the textbook.

As a planner, this is always hard for my daughter, but it has saved us several times.

Professors often list books as required, and rarely (if ever) refer to them in class.

This is especially true of the classes that list several books as required.

Even if a book is required, sometimes an older version that is significantly cheaper will suffice.

Always compare your options and you’ll see that the new book is almost never the best financial move!

7. Ignoring Student Discounts

In college towns, there is a student discount for almost everything.

Need an oil change? There’s a student discount.

Want coffee at a mom and pop coffee shop? There’s a student discount for that too.

Something else that surprised me is how many things my kids were able to get through their college for free.

Some streaming services, sporting events, shuttles around town, and even some mental health services are completely free to some university students. My kids were even able to get their taxes done for free.

Teach your kids to ask whether there is a student discount, basically anywhere that they are about to spend money.

The worst that could happen is they’re told “no.” That is so much better than spending more than they have to!

8. Subscription Creep

We’re feeling this in our own budget as adults, so I know this category is hitting college students too.

It seems that everything has become a subscription model.

We used to own Microsoft Office on our computers as a one time purchase. Video streaming services are a relatively new thing.

Now, we pay monthly for seemingly every single thing that we use.

Teach your college student to regularly look at their bank statement. If they see a charge they don’t recognize, dig into it.

It’s probably a subscription they meant to cancel or possibly didn’t even realize they signed up for.

Free trials are an easy trap for this!

Who among us remembers to cancel things during the trial period?

Busy, distracted college students are no exception.

Teach them to set a reminder to cancel subscriptions before the free trial ends, and to ruthlessly purge subscriptions regularly. Buying something one time, if it’s an option, is almost always a better idea!

9. Lending Money to Friends

I am very passionate about this one, so bear with me if I rant.

College is going to bring your kids some of their best friends. Probably people that will serve in their weddings, meet their children, and be a part of their lives forever.

This friendship will be a hugely important thing in their lives…and still my advice stays the same.

You have to do what’s right for your kids, but we’ve taught our children to never lend money to friends.

My rule about loaning money is to treat it as a gift.

Too many adult relationships end because of disagreements over money.

If your child wants to buy someone lunch, that’s okay.

But mentally, they need to treat that money as though they’ll never get it back, because chances are they never will.

College students also need to understand that by loaning money to others, they may be putting their own financial security at risk.

This doesn’t mean your children can’t generously give when they are able to. It just means that giving with the expectation of repayment can complicate even the best relationships.

It just isn’t worth it, in my opinion.

10. Not Understanding Their Student Loans

I was attending college well into my adult years and even I misunderstood some of my student loan paperwork.

Imagine how confusing student loans are to 18 year olds as they sign that paperwork.

Before your son or daughter signs anything, make sure they understand how much they’re borrowing, and play with a student loan calculator together.

They should have a grasp of what their monthly payment may look like when they leave college.

Also help them to see how much interest compounds what they’re paying over time. Some loans even start accruing interest while your child is still in school.

They may sign loan documents for $20,000 each year or significantly more, but the amount they will repay over the course of their lives is exponentially higher.

11. Relying on Buy Now, Pay Later

These buy now, pay later services are common around college campuses.

It can seem attractive to a broke college student to make tiny payments on a much bigger purchase amount.

I believe it’s important to teach our kids to look at the amount of money a purchase will ultimately cost, including taxes and interest.

When they realize that $200 television is going to cost them double that by the time it’s paid off, they may opt to save up and pay in full instead.

Learning to delay gratification is a very important life skill!

12. Having No Emergency Fund

This is such a common problem in households everywhere.

If you have no emergency fund, any unexpected expense is basically a financial emergency.

This is the case for college students as well as anyone else responsible for their own finances.

I highly recommend helping your child build up a small emergency fund before they move out.

As I explained above, we did this by charging our kids for things like rent and food…and then promptly put that money into an emergency fund for them to use later.

I should also mention how important it is to understand what an emergency is.

“My friends are going out and I can’t afford it,” doesn’t count as an emergency.

“My car broke down and I can’t get to class,” does.

How to Teach This Before It Costs Them

While all of this may sound like our college kids are destined to be destitute and in debt forever, I promise it isn’t as bad as it sounds!

Especially if your kids are still living at home, you’ve got time to teach them these things before they ever become an issue.

Even if you think that your child has no financial skills whatsoever, take comfort in knowing that you have taught them so much by your example.

If you’ve got a few months before they leave, use this time wisely!

Go over their expenses with them and help them to create a budget. Revisit their budget every time they get paid.

Help them to balance a checkbook.

The simple act of balancing a checkbook alone is enough to make anyone on a tight budget rethink those spontaneous purchases ahead of time.

Your kid doesn’t have to be perfect with money before college.

They just need some practice actually managing money before they’re living on their own.

Money Habits Matter Most

The number one thing that will determine your student’s financial success more than any other are the habits they develop.

It’s not that college students are buying cars and houses and getting themselves into a financial hole.

They’re buying Starbucks too often. They’re ordering food delivery out of convenience instead of necessity.

These two habits alone can total up into the thousands over the course of a college career.

This is why teaching your child to manage their money now is so important.

While you can’t prepare your college student for every financial possibility, you CAN teach them healthy money habits, budgeting skills, and how to read important documents that will lock them into payments for years.

These lessons will carry them through the rest of their lives.

This is also a good time for you to go over your own budget if you’re planning on footing any of the bill for your college student.

There are so many hidden costs associated with college, knowing these ahead of time can help take some of the sting out of them when they come up!

Teach your students the right money habits now and it will serve them long after college graduation!