College: Money lessons for freshmen
Hey, incoming college students, “your finances could use a freshman orientation, too,” said Erin Lowry in USNews.com. Between the stresses of making new friends and attending all those parties, getting your financial house in order is probably the last thing on your mind. But plenty of college graduates wish they could go back in time and tell their 18-year-old self to take better care of the bank balance. Keep financial regrets to a minimum by setting a monthly budget, which will help prevent overspending and “expensive and annoying overdraft fees.” Even students who use loans to cover living expenses should set budgets “in order to take on the minimum debt necessary.” And while it may seem “absolutely insane to tell a cash-strapped college student” to save money, “it’s an important habit to develop early.” Setting aside even $5 a paycheck from a campus job will make it seem more natural to opt into an employer-matched 401(k) and to build an emergency savings fund later in life.
This might seem obvious, but “you will need a good bank,” said Jill Schlesinger in Time.com. Shop around to find a bank with ATMs near campus, “or an online account that lets you use ATMs without paying a fee,” to avoid racking up out-ofnetwork charges when withdrawing cash. It’s easier to keep spending in check with a debit card rather than a credit card, but college is a good time to start building a credit history, which can make it easier to rent an apartment or buy insurance after graduation. Because of the CARD Act, students under 21 need either proof of income or a co-signer to get a credit card. For parents who aren’t comfortable tying their credit history to their kid’s, a secured credit card with a deposit might be the way to go. Be wary of credit card sign-up offers aimed at students, said Susan Tompor in the Detroit Free Press. Pay special attention to how long the introductory zero percent rate will last. “The deal might only be good for six months or 12 months. Then, some rates can climb above 20 percent.” Whatever card you get, make sure you pay the balance off in full every month, otherwise the credit-building exercise will be in vain.
Parents, be aware that financial mistakes will occur, said Jean Chatzky in NBCNews.com. But “mistakes are great teachers, maybe even better ones than parents.” Help your freshman learn about saving by encouraging him to put money aside to pay for something he really wants, like a concert ticket or a spring break trip. If he doesn’t stick to the plan, there should be consequences: Not enough savings means no Kanye West concert. But if a bailout is totally necessary, “make it clear that the money is a loan—with interest.”