Frugality 101: Tips for students on limited budgets

Students will be heading back to college soon with dreams for the future and limited budgets. But they don't need to live the life of a pauper or risk their financial future because of the high cost of education and student financial traps that lurk. Putting together a plan to manage financial affairs during college can be the groundwork for future prosperity.

Here are items to consider:

• Textbooks: Perhaps the largest expense outside of tuition, textbooks don't have to break the budget. Look for used ones online at sites such as Amazon.com or Craigslist.

• Transportation: While most students prefer to have a car, college is one place the expense can be delayed. Students are eligible for mass-transit discounts in most areas. Getting around campus is not only cheaper but can be easier with a bicycle. Delay the cost of a car, gas and insurance while you can. Even if you can afford a car, a better strategy is putting the cash in savings or making monthly deposits to use for a car when you graduate and really need one to get to a job.

• Insurance: A necessary expense for personal financial protection during college is insurance. Buy policies that protect against loss of personal property, including computers, and that cover medical expenses. Many colleges offer students such programs. An unexpected loss can put a student in a hole financially.

• Save for emergencies: Just because you get $500 a month to spend from your loans, job or parents doesn't mean you should spend it all. Put aside about 10 percent of your income during college in an emergency savings account for those times you need it, such as for a student trip or new bicycle or computer if yours is stolen. If no need arises for the emergency funds, you have money built up to use as you transition to the real world after graduation.

• Credit: Many students are lured by credit-card offers and fail to use their cards responsibly. A good rule is to not use them at all or to be a co-user on a parent's card for emergencies. Using a parent's card allows the parent to monitor activity on the account, which can help keep spending in check. A better option is a debit card, where the money is deducted from your account immediately.

Following these five simple financial strategies for college can give students a head start in the real world.

Dan Serra is a retirement planning specialist for Rainsberger Wealth Advisors in Colorado Springs, Colo. Send questions or comments

to serrafinance@yahoo.com.