It may seem like just yesterday you were dressing them in big kids clothes and bringing them to their first day of kindergarten, but now you're sending your child off to begin their college years. You probably have a backpack full of worries and concerns, and if your kids are anything like mine, a lot of you wish you could still choose their school clothes.
You won't be there to make sure they study. You hope they keep the family values you have instilled in them. You can't see that they get enough sleep. By the way, forget what they're wearing -- you'll be ecstatic if their clothes get washed once before they come home for Thanksgiving. There is one major area over which you not only can, but should retain your hands-on supervision: money.
You have spent years teaching your kid to be financially literate -- you have given them an allowance, taught them how to create and adhere to a budget, you have diligently reinforced the difference between need and want and you have shown them the importance of giving back through charity. They have the fundamentals, but the lessons continue. This is a critical juncture in your child's path to financial maturity and independence.
College is a busy time for young adults. With classes, research projects, part-time jobs and dating, most college students are more concerned with their GPAs than their credit scores. It's pretty easy to make some really dumb mistakes that can harm their all-important credit score, which can cost money later on when it's time to get a car loan, mortgage or even a job.
91 percent of college undergraduates have a credit card and the average credit card debt of an undergraduate is $3,173. The average senior will graduate with $4,100 in credit card debt. With student loans and credit cards, more than 7 percent of college students drop out due to debt and/or financial pressures. The lesson to be culled from these numbers is: no credit card for your new freshman.
In 2010 the landmark federal legislation that overhauled the credit card industry, went to college. The laws began reaching into college campuses to protect students from "unfair or deceptive" practices by issuers. Credit card companies can still market cards on campus, but they can no longer offer gimmicks or "come-ons" such as t-shirts, coffee mugs or even concert tickets just for filling out a credit application. A key part of the legislation requires students, under 21, to have a co-signer and proof of income. Also, that student is not allowed to obtain a credit limit increase without the co-signer's permission.Do:
- Before your kid begins the process of applying to schools, be transparent. Openly discuss your family's finances, and how much you are able to contribute to the total cost of college.
- Give your kid a refresher on budgeting and wise spending.
- Send your kid off with a debit or pre-paid card into which you can make regular deposits and monitor spending. Make sure the student knows what that money is for and how long it is supposed to last.
- Require your kid to report, weekly or bi-weekly, how he is spending. Hold him accountable so the money doesn't magically evaporate on "stuff."
- After the first month of settling in and analyzing costs, work with your kid to set up a realistic budget.
- Save money by purchasing used textbooks where available. The average college student will spend $655 a year for textbooks, but that number can soar to over $1,100.
- You don't want your kids to pile on the debt, so don't allow him to have a credit card. Think of the pre-paid card as a financial vehicle with training wheels. Having a credit card is a privilege that comes with serious responsibilities and has to be earned.
- A meal plan is usually required for freshman -- you're paying for it, your kid has to use it. Don't accept: "I got up late and had to rush to class. I missed breakfast so I had to buy some in the food court or I'd starve." No extra money for dining out, pizzas in or high-priced specialty coffees. Those costs add considerable expense.
- No hiring a moving truck to get your kid's belongings to school. Don't over-buy and over-spend. Have them check with roommates in order to eliminate duplicate items.
- You're going to miss your kid, but don't use that as an excuse to forget all your good money rules. Remember, money doesn't buy love and they're going to be thinking about you whether you believe it or don't.
- Don't bother to send too much laundry detergent -- it won't help!
We'd like to hear your money stories about sending your kid off to college. Please share with us in the space provided.