How to build an emergency fund for college

College. It’s one of the most exciting times in your life and could very well be your first real crack at living independently and full-on adulting. You can stay up late. Eat what you want. Pay your own bills.

Unfortunately, paying-your-own-bills is part of the tradeoff of college independence, especially for students with limited budgets and part-time jobs. You may have some pretty tough financial challenges like paying for groceries or covering rent. And even those who have housing and meals covered have to deal with those other pesky expenses that can come up, like replacing a broken cellphone or getting some new and important part for an old and important car.

There is, however, a very responsible way to prepare for those unexpected expenses on your own: having a student emergency fund.

What is a student emergency fund?

An emergency fund is simply cash you have stashed in an account to protect you from urgent and unexpected expenses that may come up while you’re in school. Think of it as a financial safety net that will keep you from having to ask your parents (Bank of Mom and Dad) for money — or worse, having to charge things to a credit card. For a lot of students, using their credit cards to pay for things they can’t afford in college can make managing money after college that much harder. According to a survey by EVERFI and AGI, more than a third of college students have more than $1,000 in credit card debt. That’s on top of what they’ll owe in student loans after graduation.

There are other smart benefits of creating an emergency fund while you’re in school. It can help you develop some good financial habits for after college when your responsibilities and your living expenses are likely a lot higher. For example, after you graduate, you may need a few months to find a job. Your emergency account can help cover your rent or other expenses while you’re searching. It can also help ease your mind about paying back your student loans when they enter repayment.

But perhaps one of the best benefits of starting your emergency fund now is that it will help lower your stress level and allow you to sleep better — when you do sleep — while you’re in school. Who doesn’t like the sound of that?

Ways to save money as a college student

Understanding the benefits of having an emergency fund in college is a no-brainer. What’s a little more challenging is building one, especially if you’re only working part-time and not exactly crushing it in the earnings department. Don’t worry, though; you can still get it done by following these simple steps:

• Determine how much you’ll need in your fund: If you’re in college now, you may have a good idea of what expenses might come up. If you haven’t yet started, you’ll need to estimate them. For example, will you have a car at school? If so, is your car in good condition? What about your computer or cellphone? Are they in good condition? Do you expect to keep your part-time job during school? You certainly can’t predict every expense that you’ll face, but you can arrive at an estimate of what you might need for a cushion. After you think about your expenses, set a goal for how much you should start with in your emergency fund.
• Make saving part of your budget: Once you determine how much you want to save, look at your income and expenses and figure out how much you can put toward saving for your rainy day fund. For instance, say you want to have $1,000 in your emergency fund. Could you put aside $50 each pay period to reach your $1,000 goal? If you don’t have extra money in your budget, could you get a better paying part-time job or a side hustle to boost your income? Do you have a summer job? Can you take on more hours? If taking on more work isn’t a possibility, are there things you could sell to generate income, such as books or electronics you don’t need?
• Cut your expenses: Another way to free up money to add to your emergency fund is to lower your expenses. Look at all the ways you spend money and think about expenses you can eliminate. For example, could you eat dining hall pizza instead of ordering delivery every week? Do you really need a car on campus? Can you cut down on your streaming subscription services or split the cost with your roommates?
• Understand what constitutes an emergency: An emergency fund is called an emergency fund for a reason. It’s for urgent, important, and unexpected expenses, such as car repairs, medical or dental bills, or travel expenses for an unexpected trip home. It should be used only for things you absolutely need — not things you want. For example, last-minute concert tickets should not be considered an emergency. Nor should “fashion emergencies,” despite what the name might lead you to believe.
• Open a separate savings account: Your emergency fund should be held in its own interest-bearing savings or money market account, separate from your checking account and perhaps separate from any other savings accounts you may have. It's important that you have access to that extra money when you need it for emergencies, but co-mingling your funds may make it difficult to track spending vs. savings-not to mention make it a bit more tempting to use for non-emergency.
• Automate your savings plan: If you want an easy way to put money in your emergency fund, arrange to have funds direct deposited from your paycheck and leverage tools like Citizens Savings Tracker™¹. You can enroll in automatic transfers, set and track your goals and hold yourself account with this convenient tool.

Stay the course

Having an emergency account takes discipline. You’ll need to ensure you continue to contribute to it every month or pay period and avoid the temptation to use it for non-emergency purposes. If you reach your emergency savings goal, keep going. Think of your fund as an investment in yourself and your future. Continue to add to it so you’ll always have a safety net (and peace of mind) to protect you now and when you're doing that whole adulting thing full time.

Ready to take the stress out of your college finances?

While saving money can seem like a real and difficult challenge, it isn’t as hard as you think. In fact, we can help. We’re committed to helping you reach your college goals and fullest potential. Connect with us online to set up a virtual checkup.