So you are about to send your sweet baby out into the real world. The one they call college. Let’s be honest, college is NOT the real world. It’s the world where it seems we make the most of our mistakes and learn from them so that we can actually succeed in the real world. Some mistakes are fixable either with an apology or with time. Some are a little more difficult to move past, especially when it comes to making choices with money.
No matter what the situation may be-credit card from the parents, limited funds, a job, full ride, etc.-teenagers need to be educated about finance and the scams or pit falls out there. You can’t be there to hold their hand every step of the way. They are going to come across someone in the quad who wants to get them hooked on a high interest credit card by way of a free sandwich and coke.
In the age of instant gratification, give them tools that may keep them from making some of the biggest life mistakes possible. Here are some quick tips to hopefully get your free bird off on the right foot.
Credit card education
Credit card companies LOVE new college students! They loved me into a bad credit score when I was in my early 20s. Fortunately, I learned my lesson and took control.
That little piece of plastic isn’t actually invisible money. It’s money that needs to be paid back. I’ve met parents who told their kids to avoid credit cards and others who gave them one with unlimited spending. If you choose to support your kids while they are away, they should still learn about limits.
Give them a card with a limit or better yet, a prepaid card. If they choose to put more money on there that they have earned, then they have that option. Spoiling your kids with unending financial support doesn’t teach them to take care of themselves, and this is a key time in their life for that lesson.
Check out these tips on for dealing with credit and credit card companies on campus.
While maxing out your loans and just paying it all back later might sound like a fun way to furnish a new apartment or dorm room with all things IKEA, it isn’t necessary. When accepting what you have been awarded, be sure you teach them to only take what they need.
The Project on Student Debt found that college graduates were weighed down with an average student loan debt of over $27,000, while unemployment for the same group was at a whopping 13.3%. Now, with rates on federal student loans taking center stage in the media, it's clear that borrowing today is a pricey proposition.
Sometimes some extra cash is needed, but if you don’t need it, don’t take it. Overspending today could just mean a less than comfortable lifestyle after graduation.
Make sure to check out these repayment calculators to see what your cost will be when you finally start paying the loans after graduation.
If your college student hasn’t already learned how to manage a bank account on their own, this is a prime time to teach them. Whether you'll be helping them with expenses, or if they have a job during their schooling, then they will need a bank account to work with. This is the time to teach them about floating checks, overdraft, and how fees can eat away at their hard-earned cash.
Some schools push student to open an account with a specific bank. While it isn’t clear what the college is getting out of the exchange, be very careful and aware of what your student is signing up for. Ultimately the rule of thumb is to go to a credit union, or a bank that doesn't charge checking account fees.
Many credit unions have programs to get your student on the right track. Here are tips on how to open a student bank account.
This is, of course, the most important step. Planning how you need to spend your money -- especially when you've never been forced to look at the big picture -- can be difficult. Not everyone is great at budgeting, present company included. If you educate your child early on, there will be less painful mistakes to deal with later on.
Explaining the differences between spending money vs. bills and want vs. need will help them understand how to categorize and prioritize expenses. Compile together a list of all of the expenses they will be faced with once they leave the house -- even if you plan on paying for some or all of them.
If you need a budget outline, try this one. It will help with both long-term as well as short-term planning.
The need for things like textbooks can still be budgeted and saved on. Be sure to have them look into different places for text books like online textbook sites and even large book sites like Amazon and Barnes and Noble. They can also consider renting text books, buying ebooks instead of hard copies, or sharing books with classmates. Also, they can recoup some costs at the end of the semester by reselling them. (Sites like Cash4Books and Barnes and Nobel buy back textbooks.)
Shopping for affordable apartment and dorm wares can easily be found anywhere such as thrift shops (within reason of course), discount stores such as Ross, and even shops like IKEA. Whether you love it or hate it, IKEA has a lot to offer for affordable college décor.
What financial knowledge do you think is important for new college students to have?