By Michelle Sandoval, Program Manager, G1DPR
During the spring semester, after all college applications have been turned in and students are anxiously waiting for acceptance letters, I transition the focus of our workshops to themes related to students’ financial management. Money plays an important role throughout life, so it is important for students to understand how to manage what they have appropriately.
Last month, I reviewed how to read financial aid award letters. This month, I am covering money-savvy tips that are useful for any teenager or young adult transitioning to college. Here are some helpful tips:
Track Where Your Money Goes
This is a simple, recommended activity that can have many positive benefits. Grab a notebook and start listing any money spent, including the date, total amount spent, and what was purchased. At the end of the week or month, add up your purchases by categories (coffee, eating out, snacks, movie dates) and see where the majority of your money has been spent. Then you can come up with easy alternatives to any bad money spending habits, such as staying in for a movie night versus going to a movie theater, or a potluck gathering with friends instead of dining out.
Establish a Credit History
Sometimes students think they are being “smart” by waiting until they graduate from college to apply for credit cards. This can come from a multitude of reasons, but the most common that I’ve heard is because their parents taught them not to owe money, so they avoid credit cards altogether. However, waiting until you graduate college to start looking for a credit card means you’ll most likely be only offered ones with very high interest rates or denied altogether for not having any credit history.
To start establishing credit history, I recommend that parents consider adding the student as an authorized user to one of their credit cards. Parents don’t have to physically give the card to their child. The purpose of adding the child is to help the child begin a credit file. Once your parents have created a credit file or you have opened a credit card in your name, it’s important to get into the habit of checking your credit score. Sites like Credit Karma are free and great for this!
Start a Checking and Savings Account
Opening a bank account can teach students how to make regular deposits, keep track of money, and prevent their account balances from overdraft charges early on in life. Online banking and smartphone apps developed specifically by banks also make account management easier for the younger generations who are used to using their phones for everything. As you begin to work and start saving money, a checking account becomes a good option as a place to hold enough money that you will be using to pay your recurring payments and fees; for example, cell phone payments, car payments, book purchases, etc.
With a checking account, and money coming in and going out, you will need to know how to write a check, especially if the school you are attending uses checks for scholarship awards or reimbursements. Here is a very easy to follow activity that will help you know exactly where to write what. http://www.themint.org/pdf/activity_Writing_A_Check.pdf
Similar to a checking account, a savings account is also a great place to keep your money. The benefit to a savings account is it sets aside money separate from what is allocated for recurring payments, and most savings accounts earn interest on the amount of money saved in the account.
Ways to Save Money
Use your Student ID. As a college student, you can get discounts for a lot of purchases you may not have previously considered. For example, Amazon Prime waives the annual membership fee upon proof of college enrollment. Anytime you buy anything – on and off campus, and even online – ask if there is a student discount.
Another great way to save is to utilize coupons or mobile phone applications (Target’s Cartwheel app is a great example of this) for everyday purchases that you can find at lower prices. Sometimes a simple online price comparison or knowing that items are on sale in upcoming days might mean having to wait longer to make purchases but usually means scoring bigger savings.
Learning how to manage money and maintain a high credit score will become increasingly important as you make your way through college to independence. In fact, many employers will run credit checks during the hiring process. This means that similar to checking your work history, college education and personal references, the employer will run a credit report and may factor in that score as they consider you as an employee. Additionally, establishing good spending habits and credit history throughout college will create many great benefits for you in the long run, especially when making large purchases such as a car or first home.