Thursday, 7 May 2015
Your baby is finally heading for college. But they shouldn't be a baby any more — especially when it comes to financial responsibility.
Unfortunately, most college freshmen aren't equipped to make sound financial decisions. The National Financial Capability Study found that 89 percent of college freshmen surveyed scored a "C" or lower on a test of basic money skills, including the importance of a credit score, what "net pay" really means, and typical paycheck deductions.
That's the bad news. The good news is that it's never too late to learn basic money skills. Before moving your student into their new dorm room, make sure they're equipped with these essential financial management tips:
Help your student outline how much they'll need for monthly expenses: housing, utilities, food, transportation, insurance and entertainment. Create another budget for less frequent expenses, like textbooks and traveling home for the holidays.
Your student may have had a seasonal job before, but going to college is a good time to reiterate how we pay taxes.
A full 70 percent of Americans aged 18 to 29 have no retirement savings, according to this Bankrate survey, and 30 percent of all Americans have nothing socked away for old age. Retirement may not be a priority now, but it's critical that young people understand the perils of living without a financial cushion.
College students who graduated in 2013 averaged nearly $30,000 in student loans in 2013. Whether choosing a savings account or financing a university degree, students must understand the so-called "miracle of compound interest."
College is a good time to begin establishing a credit history. Explain to your student the importance of a high credit score: it helps get favorable interest rates on loans for a home, car or business, getting their own phone plan, and even applying for a job.
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