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You and Your Money: Top 10 money decisions for today's college
freshmen |
With average college tuition up
35 percent from only five years ago, money management is a bigger
issue than ever on college campuses. That’s why the time for parents
and students to start working together financial planning is during
their senior year of high school so they’re ready for freshman year
of college.
Put credit on training wheels: It’s one thing for a teenager to use
their parents’ credit card while they’re still living at home. It’s
quite another when they get their first taste of freedom hundreds of
miles away. Parents may co-sign the student’s credit card, but keep
it in the student’s name. That way, parents will know when financial
missteps occur, which will be a strong incentive for the student to
keep his credit rating clean for the next four years. Most
important: Parents should do whatever it takes to make sure the
child doesn’t sign up for any credit cards on campus.
Bank smart: Students need to get some familiarity with the banking
system before they head to college. Kids generally should set up a
checking account on campus, but talk to them about debit options and
fees, particularly for overdrafts. Also, request your child ask the
bank about direct-deposit options if you’re planning to deposit
money for their tuition or agreed-to spending needs.
Work with them to set up their first emergency fund: A young person
should get used to the idea of savings and reserves for unforeseen
events such as emergency trips home or related expenses. Make it
clear that late-night pizza is not an emergency.
Put the student in charge of maintaining their financial aid: Each
year, the FAFSA (Free Application for Federal Financial Aid) is due
in June. State applications are due earlier. While parents need to
run the financial aid process, students need to be equally aware of
how their education is paid. Everyone should file the form, whether
you think your child may be eligible, and your child should be
searching for scholarships at all times. It might also makes sense
to take your child to your tax preparer to make sure you’re taking
advantage of the child’s “tax capacity” and other income tax
opportunities. It will be a good learning experience.
Make them budget: If they’re leaving for college with a new
computer, consider giving them personal finance software to track
their everyday expenses and make sure the computer has a security
password. (Keeping track of spending by calculator is fine, too.)
Work together to determine necessary everyday expenses, tuition and
financial aid. Then tell your kid that when he or she comes home at
Thanksgiving, you will sit down again to review those figures and
make reasonable adjustments. You obviously need to trust your kids,
but you might want to do this for as long as it takes them to
develop solid and consistent money habits.
Schedule a holiday budget and credit check: When the triumphant
freshman returns home for the holidays, schedule some R&R, home
cooking and the first reading ever of their fall budget figures and
their first credit reports. Since credit reports can be ordered
online, parents and student should sit down with each of the child’s
three credit reports from Experian, TransUnion and Equifax and
review them for activity and errors. Since everyone is entitled to
one free report from each of the agencies each year, go to
www.annualcreditreport.com for theirs.
Help them open their first IRA: Get some advice on this from a
trusted financial planner, but if your 18-year-old child is earning
wages by working part-time at school, at home during breaks or for
your own company, have them open a Roth IRA in a growth fund. Make
sure they understand this is essential to their future savings so
they don’t cash it in.
Discuss identity theft: Personal financial data left on laptop
computers, cell phones and other electronic devices can be readily
stolen in a campus environment. Tell your kid to keep all paper
records in a safe place and introduce passwords to keep all their
digital information safe.
Get them networking: Internships and jobs in their chosen field
during summer breaks can give your student a head start on their
career path. Encourage them to research these opportunities during
freshman year so they’ll be in the front of the line when it’s time
to apply.
Handle mistakes the right way: Most kids will make money mistakes
in college. If they overdraw a checking account or overdo it with
their credit card, make the criticism constructive but firm and
always come up with a corrective plan you’ll work on together. |
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From Aug. 8, 2007,
Newberg Graphic
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