How To Build Emergency Funds As A Student

Mary Joseph
Mary Joseph June 28, 2023
Updated 2023/06/28 at 9:27 AM
How To Build Emergency Funds As A Student

How To Build Emergency Funds As A Student

Everyone, including college students, should prioritize having emergency savings. It is crucial to accumulate a financial cushion to avoid accumulating significant debt in the face of unexpected expenses. This applies to students as well, as financial emergencies can arise at any age, even during college years. Therefore, it is essential for students to focus on building emergency savings.

Undoubtedly, the task of saving money becomes challenging for students who are fully occupied with their academic pursuits. However, with determination and resourcefulness, it is possible for students to generate some extra cash reserves during their college years.

How Much Cash Should College Students Have Set Aside For Emergencies?

Working individuals are advised to allocate a minimum of three months’ worth of essential living costs into a designated savings account. However, considering that your main expenditure is tuition, it would be wise to also consider other necessary expenses unrelated to college and aim to save an amount that can cover those expenses for a period of at least three months.

Suppose you currently allocate $300 per month for car expenses, an additional $100 per month for your cell phone, and another $300 per month for food and personal supplies. Assuming your housing, utilities, and other costs are covered by your college expenses, and your health insurance is taken care of by your parents, your total monthly expenditure unrelated to college amounts to $700.

These essential expenses should be considered. If you also spend $200 per month on social outings and an extra $100 on clothing, these are discretionary items that you can forgo if financial circumstances require it.

In this scenario, it would be wise to aim for an emergency fund of $2,100. The following steps will guide you in building this fund.

How To Build Emergency Funds As A Student

Work While Attending Classes On The Side

As a student, your main responsibility is to excel in your classes; however, it doesn’t mean you can’t consider taking up some part-time work. By taking on shifts at a local business or finding employment on campus, you can gradually save money and protect yourself from unexpected expenses that may arise without relying on your parents’ support.

If you’re unable to find on-campus employment and lack transportation, you can explore opportunities to work remotely from the comfort of your home or dorm room. For instance, you can register to create content for websites or utilize your tech skills to design websites. Additionally, some companies offer remote bookkeeping positions, which could be a viable option if you have a knack for numbers.

Take On A Summer Job:

If you don’t have any plans to enrol in summer courses, you typically have a substantial break of approximately two to three months each year between your academic sessions. Instead of idling away during this period, consider finding employment opportunities. Many companies require extra staff for seasonal purposes, and if you make wise choices, the income you generate during these few months could be sufficient to establish an entire emergency fund. This way, you won’t have to work while attending classes.

Old Textbooks Can Be Sold For Money:

Are you tired of buying expensive textbooks that your professors insist you need? Well, instead of throwing them away or letting them collect dust, consider selling them to someone who can benefit from them once you’re finished. While you may not recoup the full amount you paid, even earning $20 or $30 here and there can contribute to your savings objective.

Invest Your Gifts:

It’s highly likely that you will receive cash gifts throughout your academic journey, whether it’s for your birthday, during the holidays, or on other special occasions. Instead of using that money to buy gadgets or go on vacations, consider depositing it into a bank account. Alternatively, it’s advisable to save most of it. The individuals who give you these monetary gifts probably want to see you enjoy some of it, so it’s acceptable to keep a portion for yourself.

Just because you’re a college student doesn’t mean you shouldn’t have emergency savings to rely on. Making a modest effort on your part could make all the difference when faced with unexpected expenses. Having the money to cover a surprise bill can alleviate the stress that comes from realizing you have no idea how to pay for it.

What Occurs If There Is No Emergency Fund?

If you lack an emergency fund, your life becomes precarious, akin to walking on a tightrope. Any unexpected event can occur, leaving you in a difficult situation where you have to find ways to cover the expenses.

In situations where you require immediate funds, you may find yourself resorting to borrowing money from your family, friends, or other relatives. If they decline to help, you might consider turning to alternatives such as obtaining a credit card or taking out a title loan. However, both choices involve steep interest fees and can ultimately result in you paying back more than the initial amount you borrowed.

Several students opt to sell valuable belongings such as their Xbox or iPhone. I have a friend who nearly contemplated selling her laptop and relying on the computer lab for completing homework. When you’re compelled to sell an item, its actual value is often not fully realized, particularly when pawning it.

Having emergency funds also helps alleviate undue stress and anxiety. To illustrate, if your tire gets punctured and you have the means to promptly replace it, you won’t have to skip classes or resort to donating plasma in order to purchase a new tire.

How To Make Use Of An Emergency Fund

After establishing your emergency fund, it is crucial to understand its proper utilization. An emergency fund serves the purpose of covering unexpected expenses such as dental emergencies, tire punctures, or emergency room visits.

It is not intended to be used for non-essential expenditures like a spring break trip to Panama City Beach or purchasing a set of AirPods.

Drawing from your emergency fund should be an infrequent event. If you are aware that your car requires an oil change, it is advisable to incorporate that expense into your budget and avoid dipping into the emergency fund.

Conclusion:

Additionally, possessing a modest reserve of funds for unexpected situations will prove beneficial upon your graduation. The process of establishing independence comes with considerable financial burdens, necessitating a more substantial emergency fund. By already having a small fund in place, you’ll be starting from a solid foundation and can further expand upon it.

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