Give Students a Crash Course in Personal Finance Before College
It’s back-to-campus time and, chances are, your student has a complicated financial life, little experience managing money and not enough of the actual green stuff.
The typical student juggles a college loan, a checking account, a savings account, a credit card, an ATM card, a debit card, a prepaid phone card and a stored-value student identification card, according to a survey by Student Monitor, a Ridgewood, N.J., research firm.
At the same time, students might not have experience paying bills or covering their living expenses, especially on tight budgets.
It’s easy to mess up.
Nevertheless, college students generally do a better job managing money than they are given credit for.
Most--three of five--pay off their credit cards monthly. Most carry just one credit card and work at part-time jobs during the school year or breaks, according to the Student Monitor survey.
But they could do better.
The survey found that 81% of students think they are the first of their friends to buy new products. Only 30% like to buy things when they are on sale, and most admit to impulse buying.
Here are some tips for campus-bound money managers.
* Get one credit card. . It’s hard to book plane tickets, shop online or do much of anything in this society without a credit card and a decent credit rating. One card, in the student’s name, with a moderate limit of $500 gives a student the space to learn how to manage plastic. More than one card gives new card users the opportunity to get into more debt than they can get out of easily, and also sets them up to juggle one card against the other.
One card, offered by the College Parents of America (www.collegeparents.org), gives parents oversight of their child’s account. That might be good for students who already have proved they need help learning to handle credit, but it does compromise their independence a bit.
Parents who want to give their children more room should remind them that a credit card is more properly viewed as a convenience, not as a loan.
* Learn to balance a checkbook. Develop the habit of entering withdrawals while standing at the ATM machine waiting for your cash.
* Beware the debit and stored-value cards. They’re convenient, but if lose them, you’ve lost a lot. For the most part, stored-value cards such as gift cards are not replaceable. Besides, small amounts of money left on the card aren’t always usable.
If you lose a debit card linked to your checking account, you’ll eventually be protected from loss. But a thief could empty your account before you straighten it all out.
* Keep track of spending. The average student goes through $200 a month in discretionary spending. All the tried-and-true money saving tips work: Read library books, rent movies with groups of friends, buy a few clothing items you really love instead of lots of items that will clog the dorm room or apartment.
* Put less on your campus food account than you think you’ll need. Most students underuse their dining hall budget and overuse the pizza and wings joint down the street. Be realistic about what you’ll really eat on campus and don’t pay for more.
If you live in an apartment, cook. Big meals with friends are fun and far less costly than the convenience store snacks that are the biggest drain on most student budgets.
* Shop for travel deals. One of the best opportunities students have for saving money is on the trips back and forth to visit family or to sultrier climes for spring break. With those speedy campus Internet connections, it shouldn’t be hard to find good deals on flights. Know your calendar so you can book busy times early, when sale fares might apply.
* Share. Come home at Thanksgiving and trade sweaters with your high school friends. Share a grill or a vacuum cleaner with friends in nearby apartments. Sell back or pass along textbooks you’re done with.
* Take advantage of that student ID. Go see everything, and give yourself credit for the bargains you’re snagging. It will be 40 more years before you get discounts for plays, concerts, sporting events and more because of your age.
* Invest. Given the current state of the market, the twentysomething who manages to stash some money in stock mutual funds right now will look absolutely brilliant in 10 years, when the kids and house down payments start coming along. Parents who can afford to should match their child’s salary in a Roth IRA account every year.
