Some students in the next month will be getting some money from the school. After their tuition and books have been paid, there may be left over scholarship and grant money. Some students will get money back from student loans.

The tuition refund is a great way to start an emergency fund. It’s not the most fun way to spend the money, but it’ll benefit you the most. Since college students tend not to have large incomes, this is a way to quickly set up a financial cushion.

Put the money in a high yield savings account.

There are several options for high yield savings accounts to place your money. I use ING Direct for my emergency fund. Check out the different rates (as of 8/2008):

• ING Direct offers 3.00% APY.
• HSBC Direct offers 3.50% APY.
• FNBO Direct offers 3.50% APY.
• AmTrust Direct offers 4.0% APY.
• Washington Mutual offers 3.75% APY.
• E-Trade offers 3.0% APY.

Use it ONLY for emergencies.

I’m not taking about using it for regular groceries or for concerts. I suggest not touching for the whole year. If you run into a real emergency, then pull just enough out to cover it.

If you have a refund from student loans, I would pay the principal back. There is too much temptation to use money and plan on paying it back. Keep the interest you earned.

If you have a refund from grants and scholarships, then allow the money to grow. Keep it at the high yield savings account.

I’m not saying you can’t have some fun with money. If you maintain your scholarship and grant requirements, you can most likely continue to get refunds each semester. After you have your emergency fund set up, split the money 50% saving/50% fun.

Use your small windfall and build for the future. Be smart with your money. Does anyone have good ideas on what do with tuition money if someone already has savings and no debt?

Photo Credit:  Jeff Belmonte

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