Money do’s and don’ts for new college students and their parents
If you know students who are headed to campus this year, do them a favor: Tell them now what they probably will wish they’d known when they left home. Make sure they understand how to track their spending and manage their finances before setting foot on campus, say Credit Union National Association Center for Personal Finance editors.
College life comes with many extra expenses — books, tuition, room and board, bills, groceries, parking, and entertainment costs — and some students turn to credit cards as a way to spend now and pay later. According to Sallie Mae’s recent National Study of Usage Rates and Trends, college students are swiping credit cards more than ever before. Consider these statistics:
- Undergraduates carry an average of $3,173 in credit card debt
- Eighty-four percent of students had at least one credit card, and half had four or more
- Ninety-two percent of students charged textbooks, school supplies, or other education expenses; 84% charged food; and 70% charged clothing
Although data suggest that many students spend outside their means, there is good news: A large majority of those surveyed expressed interest in more financial literacy education either before or during college.
“The biggest surprise was how fast expenses add up in college,” says Hannah Gaskins, a student at the University of Wisconsin-Madison. “I never had to worry about money before getting to college. Learning how to balance a checkbook, use credit, or manage spending would all have been useful skills to know.”
PERSONAL FINANCE DO’S:
DO MAKE A SPENDING PLAN.
After accounting for all the big expenses–such as tuition, books, and room and board–you will find the small daily purchases can add up quickly. If you buy a $4 latte before class five days a week, that’s $80 a month. Then there’s dining out with friends, going out on the weekends and other entertainment expenses. Know your income stream each month and align that with your spending. If lattes are important to you, plan for them in your budget.
USE PERSONAL FINANCE SOFTWARE OR WEBSITES.
Sites such as mint.com, quicken.intuit.com and buxfer.com are tools to keep you organized while you track your spending, pay bills, and take better control of your finances.
GO EASY ON CREDIT.
While credit cards are an important financial tool, they are best saved for emergencies or big-ticket items, not groceries or clothing. If you must use one, try to pay off the balance at the end of the month. Credit union cards typically carry the best rates–don’t give in to campus credit card solicitors.
KEEP CREDIT HEALTHY.
You need good credit to get car loans, a mortgage, the lowest interest rates–and a job. Roughly 50% of employers now check the credit of possible hires, according to the Society for Human Resource Management (MarketWatch July 30). To keep a good score while in college, pay all bills on time, keep low balances on credit cards, regularly check accounts for unusual activity, and pay parking tickets and library fines. Also, order a free credit report from annualcreditreport.com to track your credit history and check for errors.
PROTECT YOUR IDENTITY.
Be careful where you provide your personal information, such as your Social Security Number and credit card number. Verify that Websites and emails are legitimate. Change your passwords regularly. Don’t fall for scams. If the offer is too good to be true, it probably is.
VISIT YOUR CREDIT UNION.
The professionals there are available to help you set up accounts or offer personal finance advice, so stop by with any questions.
PERSONAL FINANCE DON’TS:
DON’T SAY “I’LL JUST PAY FOR IT LATER”
Plastic in your pocket can be very dangerous. Use cash as much as possible. Studies show that we are much more careful about spending when we use cash. Because once it is gone, it is gone. Credit and debit cards are convenient and great for emergencies, but instill an overconfidence that can come back to bite students when collection day arrives.
DON’T RELY ENTIRELY ON MOM AND DAD.
College is not just about learning biology and literature. These years are a real-world education in how to live. And these lessons will last a lifetime. Students and parents must work together to work out responsible financial habits. You may plan on moving back in with your parents rent-free after school, but they may have other ideas.
DON’T DIG A DEEP FINANCIAL HOLE.
Student loans will need to be paid back. That’s one BIG debt that you will have when you walk out of college. Your degree will HELP you get a job, but you may not walk into that dream salary you expect. But you will still have the loan payments. Don’t get in the mindset that money will be rolling in after college. Plan carefully and make good decisions about your borrowing.
DON’T RUIN YOUR CREDIT BEFORE YOU BEGIN.
As noted above, you might have some big debts when you pull off your cap and gown. Don’t make things worse by ruining your credit with big credit card debts and late payments. If you do, you’ll just start your career in the red and have to play catch-up. Getting a credit card with a low rate and few fees helps build your credit score, but you need to use it carefully and responsibly, or it could damage your credit. Be careful about your expenses, and check your credit report annually.
DON’T FALL FOR THOSE FUNNY ANNUAL CREDIT REPORT COMMERCIALS.
Yeah, those ads are funny. Don’t fall for it. You can get your credit report free once a year from the three prominent credit bureaus ONLY at www.annualcreditreport.com. If anyone wants to charge you for this free service, decline immediately. Get your reports from all three at the this site and check them carefully. They do make mistakes and you need to correct them immediately. If you need assistance, ask your credit union for a free consultation.