Top 10 money moves for todays college freshman
REBECCA WARREN is a certified financial planner and certified senior adviser in Mesa. She can be reached at (480) 357-8380 or by e-mail at rebecca@ warrenfinancialservices.com.
Send your college freshman off to school with a 10-point plan on how to best manage their money:
• Take baby steps with credit. 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. Most important: Parents should do whatever it takes to make sure the child doesn’t sign up for any credit cards.
• Bank smart. Kids generally should set up a checking account on campus, but talk to them about debit options and how banking fees (particularly for overdrafts) can eat away at their money. You want your child to be independent, but if necessary, make it a joint account and check those balances online.
• 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 and mochas are not an emergency.
• Put the student in charge of maintaining her 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. File the form whether or not you think your child may be eligible. Your child should be searching for scholarships at all times.
• Make them budget. If they’re leaving for college with a computer, consider giving them personal finance software to track their everyday expenses. Work together to determine necessary realities about 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 spending 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 review of their budget figures and their first credit reports, which can be ordered from www.annualcreditreport.com.
• Help them open their first IRA. If your 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 on campus or in a dorm or roommate environment. Tell your child to keep all paper records in a safe place and introduce passwords to keep their digital information safe.
• Get them networking. Encourage them to research internships and jobs in their chosen field during summer breaks in their 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.
