Your Life, Your Money
Diane Webster
August 26, 2008 03:49 am With college tuition up 6.3 percent at private schools and up 6.6 percent at public schools this year, money management is a bigger issue than ever on college campuses. It's good to send your freshman off to school with a plan on how to best manage his or her money: Take baby steps with credit. It's one thing for teenagers 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. Bank smart. Students need to get some familiarity with the banking system before they head to college. Talk to kids about debit options and how banking fees can eat away at their money. Also find out about direct-deposit plans if you want to deposit money for their tuition or spending needs. Set up an emergency fund. A young person should get used to the idea of reserves for unforeseen events, such as emergency trips home. Make it clear that late-night pizza and mochas are not an emergency. Put the student in charge of his or her financial aid. Each year, the FAFSA (Free Application for Federal Financial Aid) is due in June. While parents need to oversee the financial aid process, students should be aware of how their education is paid. You should file the form whether or not you think your child may be eligible, and your child should be searching for scholarships at all times. Make a budget. Work together to determine necessary realities about everyday expenses, tuition and financial aid. Consider giving them personal finance software to track their everyday expenses. Then when he or she comes home at Thanksgiving, sit down to review the figures and make reasonable adjustments. Schedule a holiday credit check. When the freshman returns home for the holidays, schedule some R&R, home cooking and the first reading ever of their credit reports. Since credit reports can be ordered online at www.annualcreditreport.com, parents and student should sit down together and review them for activity and errors. Help them open their first IRA. If your 18-year-old is earning wages by working part time at school or at home during breaks, have them open a Roth IRA and contribute up to the allowable limit. Discuss identity theft. Personal financial data left on laptop computers, cell phones and other electronic devices can be readily stolen on campus. Tell your kid to keep all paper records in a safe place and use passwords to keep all their digital information safe. Help them start 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. Dianne Webster, CFP, is a registered investment adviser with Integrated Financial Strategies LLC of Amesbury. She offers securities through Commonwealth Financial Network, Member FINRA, SIPC. Questions to be considered for future personal finance articles may be sent via e-mail to dwebster@ifslegacy.com.
—
Copyright © 1999-2008 cnhi, inc.