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Money Tips for Your College-Bound Student

Thousands of students will start college this fall.  Before you move your son or daughter into the dorm, it's important to have a frank discussion about financial matters and a clear understanding of your expectations regarding money management.  The college years are a great opportunity for parents to introduce effective and responsible habits for budgeting, savings and accumulating wealth.  The following concepts, adopted alone or in combination, can be a roadmap for both parent and child in establishing financial goals.

 

Graduate your student from an allowance to an expense reimbursement plan:

Rather than a monthly or weekly allowance, introduce an expense reimbursement system. In this way, you engage your child in discussions as you establish clear expectations, encourage ongoing communication with you about financial decisions and require formal expense tracking before reimbursement.

An expense reimbursement plan:  

• Is an alternative to an allowance
• Encourages discipline, planning and communication
  

Simple steps include:

1. Eliminate allowances
2. Identify what you will reimburse
3. Require an expense statement

 

Encourage savings with a Family-401(K) account:

A recent survey indicates that the U.S. personal savings rate is negative 0.5%. You can encourage your child to open a savings account and establish a regular savings pattern by agreeing to “match” all or a portion of the savings above a certain threshold amount.  Remember:

• Encourage saving 
• Match a portion
• Consider high-yield online savings account

 

Banking 101 (…with a safety net):

40% of young adults don’t understand the terms and conditions when they open a bank account.  Partner with your child in finding the right financial institution by discussing important considerations such as branch locations, # of ATMs, costs, services, fees and product offerings.  You can provide oversight by including yourself as a joint account holder.  Most banks encourage on-line banking and have interactive sites for you to transfer funds, set electronic limits, avoid overdraft fees, etc.

 

Remember:

• Open a joint account
• Discuss costs and services
• Set electronic limits

 

Smart spending equals savings:

In a recent survey commissioned by HSBC, about 1/3 of respondents, aged 18 to 24, stated that they overspend and have problems paying bills.  Remind your child to learn to live within a budget and that smart spending doesn’t mean you have to give up your social life – be creative! 

Reinforce: 

• Learn to live within your budget
• Seek less costly entertainment options
  1. Rent a video and invite friends over
  2. Eat in rather than at a restaurant
• Shop Smart – Compare before you buy

 

Treat your credit score like your GPA:

It’s vital to understand your credit score!  Approximately 50% of consumers open their first credit card account during college years (18 - 22 years of age).  Remind your child that it’s important to establish credit early and a healthy credit score is integral to your ability to achieve many of your future goals (from renting your first apartment, entering your chosen profession and buying the home of your dreams). 

It’s important to have discussions about:

• Finding the right credit card
• Understanding and managing your credit score
• Using credit responsibly

Three things to remember:

1. It’s good to establish credit early
2. Use credit responsibly
3. Credit doesn’t have to equal debt!

 

Don't lose your identity:

In 2006, almost 15,000,000 consumers were victims of identity theft.  If you become the victim of identity theft or fraud, it can be a lengthy, costly and time consuming process.  It’s important to protect yourself against fraud and identify theft.  

Do…….

• Shred receipts and financial documents
• Protect personal information (DOB, DL#, SSN, Account Numbers, Passwords)
• Make sure on-line shopping is conducted only on a secure web-site

Don’t…….

• Discuss private financial matters in public or on cell phones
• Don’t write passwords and/or PIN on the back of bank ATM or credit cards
• Mail bill payments from your home mailbox

 

 

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