Emergency Fund Vs Living Expenses: Finding Balance As A College Student

For most college students, it would might seem a bit of a juggle to manage their finances along with studies. Managing the increasing costs – of tuition fees, rent and everyday living (if they are living outstation) – with saving money for the rainy days in the way of an emergency fund could be a difficult task. But saving some funds aside for emergencies, including emergency medical treatment, or a quick visit home is important.  

So, here’s how they can manage to create an emergency fund with their limited money. 

Why An Emergency Fund Matters? 

An emergency fund is more of a financial cushion. The students are protected from using their credit cards (if they have one with their parents) or take up loans from friends in the case of an unexpected crisis. Even a very small fund will allow them to tide over a financial crisis without the need to borrow money in case of an emergency. 

Says Suman Ghosh, a student from Siliguri, West Bengal: “Saving may not be too easy with limited money at your disposal, but saving even a little money can work wonders in emergency situations. Last year, I had to travel home for a family emergency and was lucky enough to have some small savings to avoid asking my friends for a loan.” 

For most students, the concern is to balance their current expenses against the imperative to save. A student living outside the campus may need to pay rent and eat out and pay utility bills, such as electricity, gas and mobile. Such students often spend most of their money on rent, food, and utility bills, making it seem rational to give up on savings for emergency needs. 

However, it places them in a financially tight spot when an accident or some unexpected happenings leave them without any resources for survival. So, they often have to borrow money from someone until they receive their pocket money or stipend, and then the chain start all over again. This is the usual cycle in the absence of any emergency fund. 

Savings Goal 

The key is to have a saving goals, which are relatively small and achievable. One can start by saving even a percentage of income, say, 5 per cent of the monthly earnings or stipend.  

One can also use budgeting apps to track how one spends, and which areas to cut back on, such as dining out or entertainment. An alternative source of income could also come from taking on some freelancing or part-time work to directly contribute to one’s earning, and consequently, savings. 

Saving for an emergency fund does not necessarily mean sacrificing any current comforts. It is all about creating a cushion which allows the student to ride out setbacks financially without being forced to choose between education and one’s financial well-being.