Why is it necessary to save money as a student? Because the start of good personal finance habits influences your journey through life. When I graduated college, I had $40,000 of cash to my name. That allowed me to have $400,000 just 6 short years later.
The habits you employ on a day to day basis are what makes up who you are. You’re not a product of your upbringing, you are a product of your choices. You influence your future more than anything or anyone else in your life. If you understand this, you will flourish.
If you don’t understand it, you will not. When I was a student, I took on two jobs on top of having a full time course load on my plate. I saved every single one of those paychecks and spent as little money as I possibly could. Why? I understood that was how to build wealth.
After learning how to save a dollar, I never stopped living like a student even after graduation. While my friends were spending money in bars and clubs and living in overpriced apartments, I was saving and investing 50%+ of my income.
While they were buying fancy clothes, I was buying the S&P 500.
Why is it necessary to save money as a student? There are many reasons but the biggest one is to set yourself up for success. Just because you’re young doesn’t mean you should waste the golden opportunity to permanently set yourself up for life.
Why is it Necessary to Save Money as a Student?
The first reason it’s necessary to save money as a student is so you can SMASH that social share button and post to your favorite social media! Your friends might just need that extra push in order to do good personal finance habits as well.
The more students who understand good personal finance habits, the better. So with that said, let’s go into the reasons why it’s necessary to save money as a student!
1) Save Money as a Student to Compound Money
When you invest as a student over the long term, compound interest is more impactful. Investing $500/mo at 18 for 47 years at an 8% annual return rate equals to $2.7MM at the retirement age of 65. Investing $500/mo at 22 for 43 years at an 8% annual return rate turns into $1.97MM.
A 4-year, $24,000 difference turns into $700,000 by the end of it all. Saving money when you’re young matters more than you think because it’s much more impactful that way. That’s why it’s necessary to save money as a student. It’s very impactful over your lifetime.
And on top of that, if it was in a Roth IRA, that would’ve been $2.7MM of tax-free money you could withdraw. When I was 17 and working at Sears and making minimum wage, the first thing I should have done was open a Roth IRA account and start contributing.
I can’t imagine how much further ahead I would have been by now. Learn from my mistakes.
2) To Set Yourself to a Rich Mindset Early in Your LIfe
The earlier you start saving money, the more used to it you get. Saving money is a rich mindset. The poor spend money like they’re rich and the rich spend money like they’re poor. That’s one of the reasons why the rich get richer and the poor get poorer. The poor do not have the rich mindset.
They get enamored by the shiny new toy and think they just have to have it. When you start having the rich mindset from an early age, it snowballs as you get older. Good decisions in your life have a way of causing more good decisions in your life.
My savings mentality came from my mom. She instilled just how important saving a dollar really is. From an early age, that had a heavy influence on my approach to money. Whenever I can save a dollar here and there, I do it. No hesitation.
There is no pride when it comes to saving money. I gladly use coupons to never pay more than what I have to.
3) Self Reliance
Self reliance is amazing because no one can condition anything against you. No one attaches strings from which you have to perform against. You will find that dependency puts you at the mercy of the other person. When you go to someone with wants, they will have even bigger demands in return.
Demands that you don’t want to do. Why is it necessary to save as a student? So that you can be independent and stand on your own two feet. Financial independence is the best independence you can have. It brings peace of mind to you incase of financial emergencies.
The bear market of 2022 certainly didn’t make me feel good. Especially because companies are now preemptively laying off employees and implementing hiring freezes when historically, they waited until we actually entered into a recession before implementing layoffs.
Many people will get laid off in 2022 – 2023 and with a low savings rate of 5.1% as of June 2022, people will not be prepared for a job loss. It will not be fun.
4) Financial Emergencies Happen for Students, Too
You hear of financial emergencies like a necessary housing repair or of car trouble that requires thousands of dollars to fix. However, that doesn’t just happen to adults. It happens to students as well. Maybe you need to move between apartment complexes and you need to hire movers.
Or maybe you suddenly get into a car accident and the person just happens to not have insurance. Whatever the case it may be, life doesn’t just happen to you quickly. It happens to you dramatically as well. You just never know when or where something bad is going to happen.
In your life, something bad IS going to happen to you, at least once. No one on Earth ever led perfect lives. Everyone of us felt pain, regret, and hurt at one point in our lives. Some are more trivial than others but the point is, it will happen to you at some point in your life.
Why is it necessary to save money as a student? Because life is unexpected and emergencies pop up. In my senior year of college, I had a bad health stomach scare that required me to go to the doctors. Thank goodness it was a school hospital, otherwise, it would’ve costed a pretty penny.
5) Save Money as a Student to Live it Up In Your 30s
People save in their mid 20’s to live it up by their late 30’s. If you save when you’re 18 – 22 and consistently invest the money over the long haul, you can live it up in your early 30’s or maybe even in your late 20’s! That’s a flex amongst your peers that will leave them wondering how you did it.
Why is it necessary to save money as a student? You want to live the good life without money struggles. money is such an important aspect of our lives. It’s one of the major reasons for divorce. I’m nearing my 30’s and I can’t imagine just how much further along in my journey I would be then.
The feeling of financial stability really cannot be beat. There is no substitute for feeling that if I were to get laid off tomorrow, I would still be just fine in order to live my life. There will still be food on the table and a roof over my head.
Then in 3 more years, I can certainly look into spending more of my hard earned money. Becoming a millionaire by 35 is definitely doable for me.
6) Positions Yourself to Walk Away from Bad Careers
When I graduated college, I was as optimistic and bright eyed as you can be. I thought I was going to get promoted as quickly as possible, and that working a 9-5 and earning money would be great. Much better than the weekends and nights that I spend studying.
Why? Because I can mentally shut off my brain. I thought being a student was much more time consuming than working a 9-5. It could’ve been because I had more energy back then. Or it could have been because I didn’t know it yet. Whatever the reason, I was wrong.
Working a 9-5 is HARDER than being a student even though I work less hours. It’s a different kind of work. When you’re a student, you can choose when to start work. In a 9-5, you have to be in the office by a certain time. Why is it necessary to save money as a student?
You just never know how difficult, frustrating, and mentally draining working a 9-5 is. It’s not easy to convince someone else to pay you in exchange for your labor.
7) Save Money as a Student to Buy a Car
The first car that I ever bought after graduating college was a 2016 Nissan Versa Note SV Hatchback car. It costed $9,500 but $10,400, all-in. I ADORED that car. It bought me to places and provided me reliable transportation. I’ve always been of the mind that cars are just used to go from Point A to Point B.
Nothing more and nothing less. If your family didn’t come from wealth where your parents can just give you a car out of nowhere, you should be saving money as a student. The first time that I started driving, it felt amazing. It was my first time behind the wheel and I truly felt independent.
It’s when I had the freedom to go to places that I wanted to go to without having to rely on Uber, public transportation, or any of my friends to take me. Not having a car is especially inconvenient. It may be expensive to own a car but it’s well worth the cost.
Why is it necessary to save money as a student? Cars will be one of the biggest purchases you make after graduation.
8) You Don’t Live Paycheck to Paycheck
Many recent college graduates are living paycheck to paycheck. Even after graduating college and entering a professional services job, some jobs don’t pay that well. Public accounting jobs after graduation in 2016 paid $55,000 per year. That was very low compared to other accounting jobs.
In my first job after college, there was a group of 24 of us who was paid $52,500 per year. I was the only one who saved 50% of income to the 401k. How was I able to do that on such a low salary? I saved up $40k in college already. I saved every summer job, internship, and school jobs.
As a result of saving so much over the years, I don’t have to live paycheck to paycheck anymore. Why is it necessary to save money as a student? It sets you up for future success. You think your future is so far away until the future actually comes. It’s going to come here sooner than you think.
Living paycheck to paycheck just doesn’t feel good. It made me feel so constrained. You want to avoid that.
9) Unemployment Happens to the Most Talented
A friend of a friend got laid off. He wasn’t untalented by any means. How do I know that? He went on to become the CEO of a major multibillion dollar oil and gas corporation afterwards. The most talented people gets laid off. Through no fault of their own.
If the company doesn’t make money, they have no choice but to lay you off. It isn’t anything personal, it just happens. In 2016, one of my recent college grad’s entire team got laid off except for him. They kept him around for some reason and gave him time to look for another job.
Why save money as a student? Recent college gras may enjoy some of the lowest unemployment rates in the country but that doesn’t mean the good times last forever. Many job offers were cancelled in the depths of the Great Recession of 2007 – 2009.
It just happens. There’s no business that can continue to provide steady employment for the rest of eternity.
Why is it Necessary to Save Money as a Student? Lots of Reasons
By now, you should fully understand why it’s necessary to save money as a student. People say they need about $624,000 of net worth in order to feel financially comfortable. You can’t have $624,000 without saving and investing money. The math just doesn’t work out like that.
The money habits that you employ as a student carries over to you in your life later down the road. You don’t give up the habits that you form. The money habits that I exhibit today is because of years of habits that I employed before.
It will take an obscene amount of time before saving money becomes impactful. Even after six years of saving money, I still don’t feel like my investments provide impactful returns to my life. However, I know that one day that it will. One day, everything will have been all worth it.
A $400,000 portfolio doesn’t feel impactful to me. It could be because we’re in a bear market of 2022. Or it could be some other reason. Whatever the reason is, that’s why it’s necessary to save money as a student. I can’t imagine just how less of an impact my investment returns will feel like if I was married.
Or any number of a hundred other reasons. Many of your peers just won’t get how important it is to save money as a student. You could be a part of the top 1% and save money and keep leveling up financially. You will be surprised at how much you can accomplish in just 10 years.
Why is it Necessary to Save Money as a Student? 10 Reasons Shortlist
- Save money as a student to compound money
- To set yourself to a rich mindset
- Self reliance
- Financial emergencies happen for students, too
- Save money as a student to live it up in your 20s
- Positions yourself to walk away from bad careers
- Save money as a student to buy a car
- You don’t live paycheck to paycheck
- Unemployment happens to the most talented
