It’s no secret that going to college can be expensive. Some of us can’t even fathom the thought of actually getting money back as a result of registering for a few college classes. On the other hand, if you get financial aid and attend community college, you have a good shot at getting money back because financial aid awards tend to exceed the cost of community college.
I was in this situation when I first started attending my local community college to earn an associate’s degree and I wish I would have used my refund money more wisely. Here are 4 smart things to do with your college refund money
1. Add it to Your Emergency Fund
I didn’t have an emergency fund in college. Hence why every time an unexpected expense popped up or my car had problems, I freaked out because I knew I couldn’t afford it. If you get a refund in college, consider it a sign that you need to save and add to your emergency fund. Even if you depend on your parents financially, it’s still good to stash some money away for the unexpected because you never know when you’ll need it.
You can open a high-yield savings account for your money so it can earn a little interest over time. My favorite online bank with a high-yield savings account is CapitalOne 360.
2. Save It Up for Future Semesters
Once you head to a university after attending community college, your chances of getting a refund from financial aid will be slim. This is why it’s so important to explore your financial options when attending college, especially when you are trying to avoid student loans.
If you are receiving more financial aid than your need while in community college, it makes perfect sense to save up some of that extra money so you can use it when you don’t have enough financial aid anymore. The extra money can come in handy for books, tuition, your living expenses or all of the above.
3. Invest It
The younger you invest money, the better off you’ll be later on in life. If you choose to invest your extra refund money into a retirement account, mutual fund, or a artificer of deposit (CD), you can earn money on your investment over time which will leave you with more than you started out with.
I know this option is somewhat boring, but it’s better than graduating with tons of student loan debt and no retirement funds or investment nest egg. Investing while your young is the way to go because you often have less needs and financial responsibilities.
4. Pay Off Debt or Take Care of a Need
If you have debt already, consider your refund money as a viable way to get out of debt. Debt like a car loan or credit card debt can hold you back financially if you have a high interest rate or a low income. I didn’t have a car loan but I remember using some of my refund money to take care of some much needed car repairs.
In my area, you need to pass an emissions test every two years in order to drive and my car failed miserably. Instead of buying a new car, I chose to put $900 into my current car to fix it. It was hard spending all that money, but overall I’m grateful I had the money to spend thank to my refund because I needed to keep my car for transportation.
You won’t always get a refund in college, but if you do, it’s important to optimize it so you can improve your finances and prepare for the future. Then if there is anything left, you might be able to squeeze out a new pair of shoes or a concert ticket. There’s nothing wrong with having a little fun as long as you don’t blog all your money.
Have you ever received refund money from college?