College freshmen arrive on campus excited, eager and unfortunately already a target for financial institutions.
“People are going to try to sell them checking accounts, savings accounts, credit cards and countless other products,” said Nick Clements, Co-Founder of Magnify Money.
Which is why Nick Clements of Magnify Money says it’s important for parents to school their kids on some money lessons before they fly the coop. Take for instance, the ins and outs of checking. He suggests shopping around for an account that doesn’t charge hefty overdraft fees since mistakes are bound to happen.
“And unfortunately as college students learn their way into financial responsibility they tend to go overdraft and pay a disproportionate amount of the fees. So you want to have an account that doesn’t charge you $35 for that $6 latte,” said Clements.
Credit cards are another tool that can prove helpful or hazardous depending on how they are used. On the one hand, college is the perfect time to start establishing credit.
“Make one, at most two purchases per month, pay it off in full every month and at the end of your four years of college you could have a credit score in the mid-600s and that could set you up in wonderful stead for going forward,” said Clements.
On the other hand, it’s easy for a student to get overwhelmed with debt and start missing payments and that can have long term implications.
If you plan to send your child money, use it as a learning tool. Schedule deposits and force them to make that money last, a skill that will serve them well when they start earning a regular paycheck.
“A lot of times parents might say, “oh whenever you run out of money I’ll just add money there.” I think the randomness of it or the “I’m in trouble, give me money”, sets up a bad scenario, not just for the parent but later on, that bail out is going to be the debit card, it’s going to be the credit card,” said Chris Dlugozima, Community Relations Coordinator, GreenPath Debt Solutions.
Which brings us to the most important financial lesson a student needs to learn — how to create and stick to a budget.
“If you track your expenses, if you plan accordingly, it’s going to be that much easier to manage your checking account and manage the potential credit card or even the student loan that many of them take out as well,” said Dlugozima.
To that end, students, take advantage of technology and choose an app that will help you stay on top of your pizza money. Oh and since your phone is in your hand, don’t forget to call your parents once in a while.