Money management for soon-to-be-freshmenJuly 24th, 2014 by admin.capstone
One of the biggest new responsibilities for college freshman is learning how to manage money—without being able to easily reach into Mom or Dad’s wallet when they get into a jam.
Yet, because so many families are squeamish about talking about finances, many new freshmen go off to school with serious gaps in their financial knowledge.
Think about this, parents. Does your child know how to write a check or check her bank balance online? Does she understand how much a single “insufficient funds” notice can cost, or the value of paying off credit card balances each month? Can he draw up a budget—or better yet, stick to one?
If you’re mostly answering no, you need to have some frank money conversations before you drive away from that dorm in a few weeks. Students who go off unprepared are the ones who will blow through their first month’s spending money in the first week, and it’s much better to have these discussions now—when you’re not angry about an unexpected request for a cash infusion.
First, talk about a budget. It may take some guesswork, especially if this is your first child to go off to school, but start with the basics, including laundry, haircuts, personal care items, and meals that won’t be covered by the meal plan. Then discuss what is reasonable for extras—and whether that includes movie nights, a morning latte, an occasional pedicure, or a Friday night pizza.
If your child thinks he will need $400 in spending money a month, but between his savings and your contributions, you can only come up with $200, separate needs from wants. Then, using that list, you can come up with strategies to avoid overspending, whether it’s setting aside a special emergency fund or realizing that the daily Starbucks stop may need to be a once-a-week treat.
Next, help your child start establishing credit. At a minimum, she needs a bank account, with a debit card, to cover incidentals. It’s also a good idea to open a credit card while the student is still at home, where you can monitor the terms and set a reasonable limit, such as $1,000. College campuses are flooded with credit card offers, some with outlandish terms, so help them avoid temptation by choosing a card that will help them build a credit history without running up a big debt.
Once those accounts are opened, help them understand how to manage them. Set up online access and payment schedules. A student may not realize that writing overdrawn checks can cost $35 or more apiece – and how fast that adds up. They also may not realize that missing a credit card payment by even a day can sink your credit rating and add late fees and interest to even a small monthly bill.
Finally, discuss what will happen when you get that “Mom, I need money” call. I can almost guarantee that you will get it. You may decide you’ll bail him out if there was truly an emergency—a case of the flu that required a doctor visit and medicine, for instance. And you may decide, privately, that you’ll help the first time, or two, or even three times, that your child overspends her budget.
But whatever you decide, try hard to stick by it, and don’t just write your child a blank check. Learning to handle money wisely now will pay off for your child in the years to come—especially when you’re no longer footing the bills.