College Freshman Finance 101
First-year college students have a lot to absorb beyond the classes, labs and lectures theyll attend. At college, your recent high school graduate will also…
First-year college students have a lot to absorb beyond the classes, labs and lectures theyll attend.
At college, your recent high school graduate will also learn lessons in a core life skill: financial responsibility. For many it will be their first experience budgeting for an increasingly complex lifestyle. Your child or grandchild will have to account for college expenses such as books, supplies, and leisure costs and rent, food and utilities if they live off-campus.
Here are some suggestions to help guide first-year students toward gaining independence and managing money on their own.
Draw up a budget. Tracy Green, CFP, vice president, Tax Financial Services Group at Wells Fargo Advisors, recommends beginning with a compre-hensive tally of the students expenses.
Include tuition and the cost of room and board and textbooks. If he or she will have a car on campus, make a provision for gas and parking. Students who live off-campus will want to include the cost of taking out renters insurance on valuables such as computers and televisions.
And, if your student plans to join a fraternity or sorority, you might want to factor in dues.
Next, pool sources of income. Green notes its important that young adults see how much their education costs and the steps youve taken to save. Add up scholarships, financial aid and savings from 529 plans and other savings accounts.
Budgeting is an exercise in give-and-take: Your student will learn this firsthand, including whatever sacrifices he or she will have to make.
Map out responsibilities. Its equally important to set ground rules. Be clear about what expenses you and your budding scholar should each cover.
You can hurt students by not assigning any responsibility to them, says Green. The worst thing parents can do is give their kid a credit card without limitations or stipulations.
Set ground rules for what you will contribute and be clear how much you expect your child or grandchild to chip in toward transportation or extras such as concert tickets and restaurant meals.
Discuss the possibility of the student getting a part-time job and talk about the role that income will play in his or her monthly budget.
Dont overlook the unexpected. Surprises car repairs, for instance do crop up. Green recommends you clearly define what constitutes an emergency and what youre willing to foot the bill for to prevent the last-minute dinner with friends showing up on the credit card bill.
Set up accounts. Next, youll want to set up the right financial accounts. Open a checking account at a bank with branches you and your child or grandchild can access. Also, make sure the student knows how to balance a checkbook an essential skill, even in the era of the debit card, says Green.
A credit card is also indispensable. Open an account before your first-year student hits the books. The reason: College students find themselves barraged with credit card offers that often carry very high interest rates. Green recommends you establish an account on good terms before school begins, especially since it comes in handy for emergencies and unforeseen expenses.
Start the orientation now. Timing is everything. If you havent started mulling over finances with your high school grad in preparation for his or her first semester, do it now.
If your student is going off to college in the fall, you should start to get serious in June when the graduation celebrations start to die down; look to have it all done by the beginning of August, says Green.
Earning money and keeping up with bills for books, gas and other costs can motivate college students to excel in class while they pick up practical skills that will help them succeed on the job as well.
The more responsibility you give them for paying for expenses, the more your kids will be invested in their education, says Green.
And remember: Emphasizing the importance of balancing income and expenses doesnt have to conflict with academics. After all, thats the main reason your son, daughter or grandchild is in school.
This article was written by Wells Fargo Advisors and provided courtesy of Terry R. Campbell and Susan Paolo, Financial Advisors in Chardon at 440-286-2553.
Investments in securities and insurance products are: NOT FDIC-INSURED / NOT BANK-GUARANTEED / MAY LOSE VALUE
Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.
