Everyone has heard of the dreaded Freshman 15, those extra pounds that tend to show up when mom’s cooking is left behind for multiple trips to the cafeteria using an unlimited meal plan. But what about the troublesome Freshman 27? Never heard of it? Twenty-seven dollars is the average cost of an overdraft fee, which can add up quickly without a budget.
Whether your student is beginning their freshman year or heading back for another year of classes, creating a budget can help students focus on the only numbers that really matter…their test scores.
What Things Really Cost
Before you send your child off to college, try this little experiment. Ask them to make a list of everything they’ll need during the first semester and what they think these items and activities will cost. They’ll probably write down books, bed sheets, and maybe a new backpack. But, you can ask them “What about parking permits, haircuts and the occasional off-campus meal?” Compare what they think these costs are with real numbers. They’ll likely be surprised, and it can be eye-opening for you as well. This will especially come in handy if they plan to get involved in Greek life, which often involves dues and social outings. The gap between their thoughts and reality are a great basis for collaborating with them on a plan for financial success.
Together, you and your student can create a realistic budget that accounts for both the necessities and extra expenses, all while managing their expectations. Use a spreadsheet or online tools such as BudgetMath to get started. Don’t forget to encourage them to put aside money for emergencies, such as a medications or an unplanned trip home. For some, a credit card may be a source of emergency funds, but students – and their parents – should approach a line of credit understanding this isn’t free money.
The activation of the Credit CARD Act of 2009 introduced changes in how students can apply for credit cards. The act prohibited using samples of freebies as enticements and created tighter restrictions for pre-approved cards. Also, and most importantly, the act requires that any person applying for a credit card under the age of 21 have a parent, guardian or spouse as a co-signer. If you are thinking about signing your student up for a credit card, know that you’ll be creating a joint account. If your student fails to make their payments, your credit will be affected.
Credit cards are not all bad, especially when used smartly. If your child only has one and pays it off each month, it can actually be beneficial. This would help them establish a good credit history for future purchases such as a new car or their first home.
Talk to your credit union or bank about low-limit student cards. Connecting their credit card through your financial institution makes monitoring expenses simple and credit card payments easier with online access. Also, if necessary, parents can share a login to monitor the finances. With an increase in mobile and online banking options students no longer require a nearby branch to take care of business.
Before your child heads off with their new plastic, be sure to teach them the importance of responsible lending, and of course, steps to avoid identity theft. Tips like installing a password on their mobile device, researching websites before making online purchases and reporting suspicious charges are priceless- literally.
There’s An App for That
If your student is like most teenagers, they’re pretty much glued to their phone. Take advantage of that focused attention and encourage your student to use an app to help them create and use a budget. Here are some popular options:
- Mint: This app allows your student to connect their savings, check and credit card accounts for an easy-to-navigate look at their expenses.
- Learnvest: A neat function of this app is that it allows students the functionality to set a financial goal and gives advice along the way to help them achieve said goal.
- Left To Spend: This simple app connects to your account and does just as the name implies. A quick glance and your student can plan to spend or save.
- Square: This app allows students to send and receive money quickly, and without paying any debit card or checking account fees like other services.
No matter how your child sets up his or her budget, the important thing is that they find a system that works for them (and you). With the costs of college rising and student loan interest rates in the news, getting in the habit of smart financial management means your student will have one less concern after graduation. And a platform for a much better financial life!
Life after college is its own adventure. Next week, we’ll discuss steps you and your student can take now for loan repayments later. For more advice on navigating financials or saving for higher ed, click here for friendly advice from the CommunityAmerica Credit Union Savin’ Mavens. This post was written by Maven Amy Grothaus.