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Across the country, families are preparing their college-bound students for what will be an exciting time in their lives.
As you pack for dorm life, make sure scholarship and financial aid paperwork is in order and pick out the perfect laptop—don’t forget to talk with your freshman about money and financial responsibility.
“For most young adults and college students, it isn’t typically a single event that leads to financial crisis, but a lack of basic money management skills—skills they won’t likely learn in school,” said Daru Burdge, regional president for CredAbility. “Parents need to take the lead in providing them with the information and hands-on practice that will lead to sound financial management down the road.”
CredAbility offers six things every college freshman needs to know about money:
• How to create a priority spending plan. This is the foundation of any sound financial plan. Start with the basics — help them analyze their spending habits, create financial goals and set spending priorities. Work with them to develop a written plan budget, estimating their monthly income from jobs, financial aid, allowance, etc., and monthly expenses — everything from entertainment, gas and insurance costs, cell phone, and other expenses that they are responsible for.
• How to safeguard their identity. Identity theft is widespread, and students can easily become victims. Teach them not to share their Social Security number or other personal information, to shred bills and other documents that contain this information and to keep receipts and other important papers in a safe place.
• How to understand their student loans. In 2009, the average student graduated with $24,000 in student loan debt.Staggering unemployment rates have made it difficult for new graduates to find jobs to repay these loans. Students need to understand that they have an obligation to repay the loan under the agreed upon terms and that failure to do so can have long-term effects on their credit record and their ability to borrow money in the future.
• How to use their student status to their financial benefit. Students can enjoy discounts on movies, restaurants, book stores and more, just by showing their student ID card. There are also great savings opportunities on computers, software and other retail items.
• How to save. Encourage your freshman to save money from his summer job, as well as part of any other earnings while at school. Talk about setting savings goals and having emergency funds available for unplanned expenses.
• How to avoid the dangers of credit card debt. The temptation will be there. Be sure to talk with your child about how and when they should use credit and what the terms are for the credit card they have currently in their possession. If you feel your child is not ready to use a credit card, talk with them about your concerns. Consider getting them a debit card that can be used as a credit card but is tied to their checking account. This can help them learn the importance of spending within their means.