Welcome back to Money Moment, with Dr. Jennifer Hunter. In Episode 15, Jennifer discusses talking to your college student about money.
Do you have a son or daughter who is college-bound this fall? Before heading off to college, young adults should have a basic understanding of money management. College may be the first time that they will be responsible for managing their own money. Even if Mom and Dad are still paying the bills, they will not be around to help make every day spending decisions. Overspending and poor use of credit while in college can have lasting effects on financial success after college. Talking to your children to help them develop a plan for handling money and expenses once they get to college is very important.
In this episode, I discuss money tips to help you get your student on track financially for their college career.
Be aware of financial peer pressure
Students can be tempted by credit card offers or feel peer pressure to spend more than their budget will allow. Financial peer pressure is a very real thing on a college campus.
Students, especially freshman, often feel the need to say yes to invitations to do fun things, regardless of if it fits within their budget or not. They’re still in that exploratory stage where they’re trying to make new friends and find their niche in college. Making your student aware that financial peer pressure does exist, and helping them develop some strategies for how to handle it, is a good conversation to have prior to leaving for school.
Encourage your child to establish a checking account.
Often universities are affiliated with a credit union or local bank that offers student accounts. A local bank will provide easy access to cashing checks, making deposits or ATMs. Have your child set up text and email alerts to notify them when their balances are low.
If your child has bills such as cable, internet or other utilities, stress the importance of paying the bill on time. Help your child set up on-line banking or automatic bill pay reminders to make the bill paying simpler.
Urge your child to avoid getting a credit card
Often college students, as well as parents, feel the need to get a credit card in case of emergencies or to help their student build their credit score. However, the credit card often becomes a temptation that leads to non-academic debt. I have had many conversations with graduating seniors that are trying to figure out how to manage their credit card debt. When asked why they got a credit card in the first place, their answer is normally either ‘for emergencies’ or ‘to build their credit score’. However, when they have used their credit card irresponsibly, they’ve not accomplished their goal of building their credit score. So it’s best to wait until your student is a few years older and really has a knack for how to manage their finances prior to encouraging them to get a credit card.
Help your child establish a spending plan
If your child receives a lump sum of money at the beginning of semester from scholarships or student loans, help them make a plan to stretch the money throughout the semester. We all know that this can be a difficult task. One of the best ways to develop a spending plan is to track expenses during the first few weeks of school. After the first month, review where and how money was spent.
I often give an assignment in my introductory freshman class to track all of their expenses for 7 days. It’s important to track our expenses on the weekend as well as during the week, because all of us, especially college students, spend a little differently on the weekend than they do during the week. After they track all of their expenses, I ask them categorize expenses into food, entertainment, academic related expenses, living expenses and so forth. Finally, I ask them to identify those expense categories where they feel as if they may have overspent. Then, develop a plan for the next week to get their spending more in line with their income or available money. This is a great exercise for everyone, not just college students.
Remind your child about the difference between wants and needs
Wants and needs was covered in more detail in episode number 10, but it’s not a topic that can be talked about too much. Helping your child prioritize spending based on needs such as tuition, room, board, and books before spending money on wants is a way to help them stretch their dollar throughout the semester.
Remember the 3 Rs: reduce, reuse, recycle
As you help your college-bound student prepare for classes and move into the dorms, remember that they can reduce, reuse and recycle to help them save money. Reduce the amount of stuff you buy by only buying what you need. Dorms are limited on space. Take inventory of what you currently have before shopping. Talk with roommates to divide the purchases of large items such as a microwave, mini fridge and TV. Purchase supplies that have a minimal amount of packaging to reduce waste.
Reuse items such as backpacks and binders. Look for used text books and consider renting your books online or through the university bookstore. Finally, recycle. When you do purchase items such as paper, look for the items made with recycled content.
Preparing for college is a very exciting time for both you and your student. Helping your college student prepare prior to getting on campus, especially how to manage their money and prepare their finances, will help them be a better student once they arrive.
Be sure to join us for the next episode about home emergency preparedness.