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At the start of my freshman year of college, I quickly faced a harsh reality — I needed to learn how to manage my money better. I had always saved as much as possible from birthday money to my first paycheck, but it felt like college came with endless expenses I needed to budget for.
Now, in my third year of college, I have learned numerous ways to set myself up for financial success and make the most out of my money. Here are a few lessons I wish I had known before turning 18.
Find the right savings account for you
Start building a credit history early
A strong credit history is important when buying your first car, home or other large purchase requiring a loan.
Certified financial planner and president of Financial Behavioral Keynote Group, Mary Carlson recommends starting small and building good credit habits over time by borrowing smaller amounts of money. For example, spending on a credit card is typically easier (and takes less time) to pay back than a loan and still builds credit.
Capital One SavorOne Student Cash Rewards Credit Card
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Rewards
8% cash back on Capital One Entertainment purchases; unlimited 5% cash back on hotels and rental cars booked through Capital One Travel (terms apply); 3% cash back on dining and at grocery stores (excluding superstores like Walmart® and Target®); 3% cash back on popular streaming services and entertainment; 1% cash back on all other purchases
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Welcome bonus
Earn a $50 cash bonus when you spend $100 on purchases in the first three months from account opening.
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Annual fee
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APR Promo
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Regular APR
19.99% – 29.99% variable
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Balance transfer fee
4% of the amount of each transferred balance that posts to your account at a promotional APR that Capital One may offer to you
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Foreign transaction fee
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Credit needed
Discover it® Student Cash Back
On Discover’s secure site
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Rewards
Earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases-automatically.
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Welcome bonus
Discover will match all the cash back earned for all new cardmembers at the end of your first year
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Annual fee
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Intro APR
0% for 6 months on purchases
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Regular APR
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Balance transfer fee
3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*
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Foreign transaction fee
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Credit needed
Pro tip: Carlson says there’s a common misconception that you have to carry a balance on your card to build credit. In reality, carrying a balance has the potential to hurt your credit and can result in costly interest charges so it’s important to pay your balance in full by the due date.
You can also build credit before turning 18 by becoming an authorized user on a parent or guardian’s credit card.
An authorized user is an additional cardholder on someone else’s card. While you can make charges on the credit card, you also benefit by piggybacking off the cardholder’s credit and good financial habits without even making a purchase.
Carlson says that becoming an authorized user can be beneficial when the primary cardholder has good credit but warns that it can also negatively impact your credit score if the primary cardholder has bad credit habits, such as late or missed payments.
Keep extra cash in a high-yield savings account
When I began building up savings from working, my first instinct was to deposit my money into a traditional savings account at a brick-and-mortar bank. However, these accounts often offer a measly 0.01% APY, so I’d only be earning a few cents in interest per year.
I quickly learned that a much better option was to put my savings into a high-yield savings account where the money could grow with a significantly higher APY. These days, it’s not uncommon to find APYs around 5%. So, if you deposit $1,000 into a high-yield savings account with a 5% APY, for example, you could earn around $50 in interest each year.
Carlson says high-yield savings accounts can be a great option for short-term savings since the money is easily accessible compared to investing in bonds, the stock market, or retirement accounts which is better suited for savings you won’t need in the near future.
One option for a high-yield savings account with no fees or minimum deposit requirement is the Marcus by Goldman Sachs High-Yield Online Savings Account. You can read more about our top high-yield savings accounts to find the best fit for you.
Marcus by Goldman Sachs High Yield Online Savings
Goldman Sachs Bank USA is a Member FDIC.
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Annual Percentage Yield (APY)
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Minimum balance
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Monthly fee
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Maximum transactions
At this time, there is no limit to the number of withdrawals or transfers you can make from your online savings account
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Excessive transactions fee
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Overdraft fee
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Offer checking account?
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Offer ATM card?
Pro tip: Carlson recommends making sure your high-yield savings account is FDIC-insured to minimize risk.
Compare savings accounts
Budget with the 50-30-20 rule
The 50-30-20 rule is a popular budgeting method that suggests putting 50% of your paycheck toward needs, 30% toward wants and 20% toward savings. Needs are essentials like rent, utilities, gas and groceries. Wants are the fun things, such as a dinner with friends or a new book you’ve been eyeing. Savings should be set aside for long-term goals, like buying your first home, and short-term safety nets, like an emergency fund for unexpected expenses.
While the 50-30-20 rule isn’t perfect, especially since income typically varies in college based on internships and part-time jobs, it provides a flexible framework that helps keep your spending on track. Plus, if you make more money in the summer, you can adjust the percentages to boost your savings for expenses during the school year.
Use a budgeting app
Learning to stick to a budget can be difficult when juggling academics, extracurriculars and work.
If you don’t want to manually sift through bank and credit card statements to track your income and expenses, many budgeting apps link to your accounts and do the work for you.
Monarch SMALL
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Cost
$8.33/month (billed $99.99 yearly); $14.99/month (billed monthly)
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Standout features
Net worth tracker, investment portfolio tracking, goal creation and progress tracking, budgeting and expense tracking
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Categorizes your expenses
Yes, but users can modify
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Links to accounts
Yes, bank and credit cards, as well as IRAs, 401(k)s, mortgages and loans
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Availability
Offered in both the App Store (for iOS) and on Google Play (for Android); web version also offered
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Security features
Utilizes industry-leading security practices, according to Monarch’s website
Another option is Goodbuget which offers a free version and beginner-friendly interface. However, you have to manually input purchases and transactions if you don’t have a premium plan.
Goodbudget
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Cost
Free for 20 total envelopes; $8/month (or $70/year) for unlimited envelopes
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Standout features
Allows users to plan their household’s spending using the “envelope method,” where they allocate a certain amount of their income into categories like groceries, rent and debt payoff. Users are only supposed spend what’s in their envelopes and if they go beyond their budget the envelope will show red to indicate that they overspent
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Categorizes your expenses
Yes, but users can customize
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Links to accounts
No, users manually create “envelopes” and input their transactions
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Availability
Has a web-based version, and also offered in both the App Store (for iOS) and on Google Play (for Android)
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Security features
256-bit bank grade encryption in a secure data center
Find reliable sources for financial advice
When it comes to financial advice, it seems like everyone has something to say — from strangers on social media to family and friends. But not all advice is created equal, and it’s important to be selective about where you get your information. Just because someone appears to live a flashy lifestyle on TikTok, doesn’t mean they are financially savvy.
I focus on finding sources that are credible, unbiased and backed by industry experience. Think certified financial advisors, professors and well-established publications. Once I identify trustworthy experts, I stay informed by subscribing to their newsletters or other alerts they may offer.
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Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Mary Carlson who is a certified financial planner, president of Financial Behavioral Keynote Group and adjunct professor at the University of Georgia.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of personal finance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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For rates and fees of the Discover it Student Cash Back, click here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.