Saving money is daunting, especially with the ebbs and flows of the Block Plan, and the endless possibilities of being a responsibility-free college student. Rent, groceries, weekend ski trips, Tony’s Tuesdays and gas money can consume a majority of a monthly budget. A long-term “pay your future self” bailout is the 80/20 saving method.
The Federal Reserve conducted the Report on the Economic Well-Being of U.S. Households in 2024, where adults were asked how they would cover a hypothetical $400 expense. 63 percent of all adults claimed they would cover the cost with cash, savings or a credit card to be paid off at a later date. Notably, the report stated, “13 percent of all adults said they would be unable to pay the expense by any means.”
One of the most effective and accessible frameworks for avoiding this outcome is the 80/20 saving rule. 20 percent of your income is allocated to savings while you live on the remaining 80 percent.
The act of consistently saving a set percentage, even if the amount saved is cut from your student wages, can feel insignificant. But it can foster a mindset of acting intentionally with finances. Research from the National Bureau of Economic Research finds that early financial habits significantly influence long-term wealth accumulation, such as not impulsively spending money, something that is just so hard to avoid in college.
Many individuals attempt to save what remains after spending, rather than before, which often results in inconsistent or negligible savings. It can also encourage you to tap into your savings when it should be left untouched.
The 80/20 rule prioritizes saving as an expense, essentially paying your future self rather than categorizing a portion of your paycheck as off limits. The Financial Harmony Podcast, hosted by Dr. Preston Cherry, an Investopedia Top 100 Financial Advisor, states that “accumulation isn’t excess,” he continued, “it’s often preparation for volatility and long-term uncertainty.”
Savings contributions over time are far more likely to meet long-term financial goals than those who rely on unrestricted savings or fail to save entirely.
While 20 percent is ideal, the underlying principle is consistency. For students with tighter budgets, beginning with a smaller percentage can establish the same habit.
Building savings during college also provides a form of autonomy that is overlooked during this period of responsibility-free living. The financial flexibility the 80/20 rule allows for students to partake in block break trips without financial anxiety, pursue unpaid opportunities that offer potential career value and make post-graduate plans with less dependence on each paycheck.
This is particularly relevant, considering that student loan balances in the United States have surpassed $1.78 trillion, according to Student Loan Debt Statistics, placing greater importance on early financial planning.
Financial literacy is about implementing systems that encourage unintimidating, financially aware decision-making, so you can say yes to Mexico for spring break, or that all-inclusive resort in Las Vegas for Block Break. The 80/20 rule allows you to partake in the fun and have money in the reserves to avoid the financial anxieties of living paycheck to paycheck.