by Robyn Stewart, former financial aid officer at College of the Holy Cross
Some things have changed since my time on a college campus but many have not. A walk through the Campus Center still provides several opportunities for students to drop some cash. Parents need to prepare their student financially, as well as academically, otherwise we are setting up this new group of undergraduates to fail.
Many young adults arrive at college woefully ill-prepared to handle money. As a former financial aid officer I was struck by how many students blew through their money—whether earned from summer jobs or gifted by the bank of mom and dad—before the semester was even over. They had no knowledge of how budgets or spending plans worked or how to manage credit.
Thinking back to my time as an undergraduate, I knew how to choose healthy snacks from the store and I knew to visit the sale rack at the book store for a new sweatshirt. I was less confident in my ability to make an informed decision at the credit card offer table. Thankfully, the Credit Card Act of 2009 tightened regulations pertaining to 18-20-year-old borrowers, but that doesn’t mean all students wouldn’t benefit from some financial literacy lessons before they head off to college this fall.
A Budget is Not a Bad Thing
It’s time to have a chat about money, specifically how a budget or spending plan can be a tool to help accomplish goals. Help your student map out sources of income (work study job, monthly deposits you make into their account, savings from summer employment, etc.) and create expense categories that capture all the costs that they may incur (transportation, laundry detergent, entertainment, etc.) Learning to live within their means is a lesson that will help them successfully get through the year.
Carefully Consider Consumer Debt
Many parents add their student to a credit card as an authorized user. Continue their education about consumer debt and make sure you talk about what is considered acceptable credit card use. Be as specific as possible and do not leave what constitutes an emergency to the imagination of your student. Explain how building good credit starts today. A strong credit foundation helps secure an affordable rate down the road for future financing on a new car or qualifying for a home mortgage.
Not All ATM Machines are Created Equal
Bank fees add up! Make sure that your student understands that withdrawing money from an ATM that isn’t associated with their bank’s network will add a surcharge. If your student must withdraw money, the best way to minimize the fees would be to make a larger withdrawal rather than a series of smaller ones. Make sure they understand to monitor all transactions and to always take their receipt when they are done at the machine.
Protect Your Information and Assets
Young adults seem to know exactly where their phones are at all times. It is important to convey that they should also know where their wallets, cash, and credit cards are, too. Don’t use easy to guess account passwords and never share login information with friends. Help them to develop consistent habits that will help keep their valuables safe. Review your current homeowner’s policy to confirm that coverage will extend to the dorm or off-campus housing; it is possible to purchase additional coverage to safeguard valuable items that are travelling to campus.
Save for the Future
Can you live like a college student and still save money? Yes! Encourage your student to make savings goals and to pay themselves a percentage of every paycheck. A future goal could be to pay down interest on a student loan or save up a deposit for an apartment after graduation. There are some great online, goal-based savings goals calculators to help track progress and see the impact of how small amounts of money can add up over time. Sites like America Saves offer a comprehensive list of resources and articles that will help your student stay on track financially and build strong money habits. If apps resonate more with your student, check out this great list of money saving apps.
College marks a time of transition and growth for students, but living away from home and making decisions independently can be tricky. As you create back-to-school packing lists, make sure your student brings along a sense of responsibly about finances.