Monday, August 22, 2011

Simple Money Advice For The College Student

Photographed and uploaded by user:Geographer. ...Image via WikipediaMy wife and I just got back from taking my step-son back to college. He is starting his 3rd year and has taken a lot of my advice on how to be smart with money. I have seen many of his friends fall into the easy trap of getting into credit card debt. So far he has heeded my warnings and stayed away form credit cards.

When the student is away at school and not under the influence of mom and dad all those great lessons learned can be forgotten. A little independence can sometimes short circuit good money lessons. So before leaving for college it's good to plan ahead.

A budget is necessary for managing your money. A written budget or one done online at personal finance websites like Mint.com can help in managing a budget and also track spending. It's important to put in the budget items that money will be spent on every month. Budget items like food, entertainment, clothing, gas, and essentials. It's important to track spending to see if the amount budgeted is adequate, we don't want anyone broke by Thanksgiving.

Getting a job. There are two good reasons for getting a job while at school. The first one is that the money earned will contribute to providing necessary funds to help support the student. It shouldn't be all up to mom and dad to support junior. Also the lessons of showing up for work on a regular basis is necessary in instilling the work ethic. A job teaches the responsibility of taking care of one self. Also having a job during the summer is important to maintain the students responsibility toward his own money needs.

Saving money. Just because the student has a job it doesn't mean all that money is to be spent. Some of that money should go into a savings account for unexpected or future expenses. It is thought by some students that their money goes toward all the fun things in life and the parents money goes toward paying the students school and living expenses. This is wrong because it teaches an entitlement mentality. Connecting the lesson that work = money is a life lesson all students need to learn.

Checking and Savings accounts. Setting this up before hand is critical to setting up a ground work for spending and is essential to staying on budget. The account should be one that would allow the parents to deposit money into it as needed. It doesn't hurt to use the joint access, of a checking account, to keep an eye out on what the student is spending money on. Once you check out the spending habits of the student and see everything is working well you usually won't have to check very much. This ability to take a peek at the account will be a natural incentive to the student to stay on track because they know the parents are looking in from time to time.

Credit Cards. This is one way students can get into trouble. The excuse to have a credit card for the student is that what if there were some unforeseen emergency. With the checking account mom and dad will be able to deposit money into it if any emergency arises. Another excuse for the card is the students are told that to build your credit score you must have one. The debate, if that is true or not, can discussed another time but for the student today, they can wait for when they graduate to build their credit. There is no need for a credit score while they are in school.

But if you insist on having a credit card you do not have to have it in the students name. The parents credit card company can issue a card for the student to use if necessary. This way you can monitor it's use. If the card must be used, it can only be for emergencies and with the consultation of the parents.

With a little planning and communication the finances of the college journey can be easily planned and carried out. This can give the parents a worry free school year and the student can concentrate on their studies.


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