A college education holds the promise of a great career start for many students. The excitement of choosing a college, getting accepted, and actually starting classes will eventually die down. Then your student is likely to encounter some financial lessons that won’t be taught in the classroom. Lessons like:
- How continuous spending can take a bank balance to zero and then the bank piles on additional service fees
- Or how spending on small things like getting a pizza or a school sweatshirt can quickly add up
Here are three time-tested financial tips to help students develop habits that will serve them well during college years and into their adult life.
Keep Track of Spending
If you don’t know what you are spending, you don’t know what is left or what you can afford or not afford. The key is to create a spending plan for necessary purchases like food, gas, and cellphone service before spending on discretionary items. Take the guesswork out of budgeting by using an online tool like Mint.com to automatically categorize transactions.
Don’t Underestimate the Importance of Managing Debt
While credit cards are great for convenience and emergency situations, be wary of running up a balance that you cannot pay off every month. Use the plastic cautiously. Establishing good credit during college will make it easier to apply for a car loan, rent an apartment, or even purchase a first home. If student loans are needed to fund college expenses, take the time to read the fine print. Don’t take more than you need today because piecing together student loans for 4 or more years can add up. Your student may not realize they are easily signing up for substantial payments for twenty years or more after graduation.
Think Twice before Lending Money to a Friend
Everyone has had an experience where a friend comes up short and says, “Can I borrow some money? I promise I’ll pay you back!” Recognize that lending money is a risk, even if a friend is completely trustworthy. Just because your friend is asking you don’t have to say yes. Many of life’s lessons your student will have to learn on their own, but if they think carefully before they lend, are cautious of debt, and track spending, they can avoid some common financial mistakes.
Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.
Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served. A14-025160