The Savings Series: How to go about saving money as a student
Saving money when you might not be making any.
As fit as a fiddle, sick as a dog, broke as a student. The last idiom might not feature in your tattered copy of Wren and Martin, but no one can dispute the accuracy of this comparison. We’re constantly reminded how paise ped par nahi ugte, but aren’t told anything about saving money as a student.
In an attempt to save students from another lecture that’ll tell them what not to do, but will say nothing about what they should be doing, here is a guide to saving money, when you might not be making any to begin with.
The key to saving money as a student
Take matters into your own hands
Parents often use their own accounts to manage their children’s money. The first step towards financial literacy is having your own bank account.
Some banks also offer accounts that young people can operate themselves before they are 18.
“This is how you inculcate financial discipline,” says Binoli Dodhiwala, co-founder and CEO of a financial firm called The Money Managers.
You don’t have to have a job to start saving
Strike a deal with your parents. Convince them to give you extra pocket money provided you save a fixed percentage of it every month.
Pocket money is also an effective tool to help you wrap your head around the concept of interest – “If you don’t take pocket money this month, then next month you will get double the pocket money, plus a little more.”
“Saving 10% to 15 % of your total pocket money is a good amount to start with,” advises Dodhiwala.
Contact your bank and opt for recurring deposits. This feature automatically puts aside a fixed amount into your savings every month. You also end up earning interest on the said amount.
Spend, don’t splurge
“Very often, I struggle with drawing the line between spending and over-indulging,” says Saachi Jain, a 20-year-old studying filmmaking in the USA.
According to Dodhiwala, the best way to stop yourself from overspending is to put aside the money you want to save first, and then use the remainder for whatever you need and want.
Save first and spend later – write this on one of the unicorn post-its you splurged on recently, put it on your mirror, and make it your mantra.
Make budget buckets
Saving money as a student begins with budgeting. The best way to budget is to divide your money between four buckets – savings, daily expenses, entertainment, and discretionary expenses.
“Always keep a margin of 10% in each category when making a budget. Adults who’ve been doing it for years also find it difficult to stick to a budget, so having a margin makes it easier for beginners,” advises Dodhiwala.
The two categories that you should regularly work towards replenishing are savings and daily expenses, entertainment and discretionary expenses can be subjective depending on how much money you have in hand.
Also, before you make a budget for yourself, track your expenses for some time.
“Three months is a good time to assess how much money you should put in a category. Spend wisely those months and then get down to budgeting,” says Dodhiwala.
And if you think there is a particular month, when you’ll spend more than usual, prepare for it in advance. Don’t use your savings and then try to replenish them, that never works.
“Save extra in advance, and then use that money to splurge.”
Don’t ask Google how to save or invest
This might be impossible for you to accept, but there are times when your parents might have better solutions than Google (Sorry, but it’s true).
Especially when it comes to saving. “Observe how your parents run their house, how they compare prices and find affordable alternatives for recurring expenses, then apply the same to your life.”
“You cannot Google and then invest, just like you shouldn’t Google and self-medicate,” says Dodhiwala. Seek advice from your parents or a trusted financial advisor.
Liquid mutual funds are your safest bet
Liquid mutual funds are the best suited to students who have erratic expenses, and no steady cash flow. “You can take the money out whenever you want. It functions like a savings bank account. And you can deposit, and withdraw whatever amount you want, there is no limit or minimum requirement,” explains Dodhiwala.
Get your hands dirty
Monitor your own finances. Take advice from financial advisors, but do all the dirty work yourself. The more you learn, the less intimidating handling finances becomes.