What Every Freshman Needs To Know
Mon, 25th Aug, 2008If you're about to start your freshman year in college, you're likely fretting over the homework load and how to avoid embarrassing yourself in front of your classmates.
Meanwhile, your parents' fears as you take this major step toward adulthood are running as rampant as their imagination will allow.
But now that the first tuition bill is paid, the one thing likely neither you nor your parents is focusing on is money. You should. Here's one reason why: Almost one-fourth of undergraduates had credit-card debt in excess of $3,000, according to a study of students' credit histories in 2004 by loan provider Nellie Mae.
That's a chunk of money to owe on an entry-level salary, and worse if you're paying off student loans, too.
To start your adult life on the best financial footing possible, consider these 10 rules while you're in school.
1. Be specific. Talk with your parents about who is paying for what, and how. When David Robinson, who teaches a personal-finance class at the University of California at Berkeley, asks students who is paying, for instance, for their semester of study abroad, many college students have no idea.
Not knowing details can lead to unrealistic expectations. Parents, if you're struggling with your own finances, discuss your situation with your student. Don't worry about looking bad. She already knows you're not perfect.
2. Create a budget. Come up with categories, estimating a monthly spending amount for each. Note to parents: Help your kids with this, but don't be judgmental. "It's really helpful for them to come up with their categories," says Susan Bruno, a personal financial specialist in Rowayton, Conn.
Your budget may change once you're on campus, so revise as needed. Send a weekly email update to your parents -- it'll help you track spending.
3. Set up accounts. And pay attention. Create a checking and savings account -- even if the balances are low -- to get the hang of balancing a checkbook. Once a week, before your daily visit to Facebook, visit your accounts online. Check to ensure that transactions are yours -- sad to say, but identity theft happens, and young adults' "friends" often do the stealing.
4. Learn from mistakes. It's inevitable: You will trip up with your finances -- just ask your parents! -- and those errors may cost you money. Don't beat yourself up. Figure out where you went wrong and move on. Credit-card late fees are a common problem.
Gerad Soman, a senior at Loyola University, Chicago, solved it by setting up automatic payments from his bank account.
5. Practice with plastic. First off, realize that it's possible to live without credit cards. Many people do. That said, if you decide credit cards are a good idea -- for emergencies or to create a credit history -- then start slowly. Craig Watts, spokesman for Fair Isaac Corp., creator of the FICO credit score, says his three teenagers started with gas cards (the type that work only for gas). "They had to pay those bills. That teaches kids in a hurry," he says. Or, become an authorized user on a parent's account, with an agreed-upon maximum limit. (Note that the latest FICO model gives fewer "good credit" points to piggyback users, Mr. Watts says.) Or, get your own card with a low limit to ensure you don't overspend. Pay your full balance monthly.
Source: http://online.wsj.com/
