For new college students who don’t know financial basics, Money 101 classes are easy. The homework, though, can be a killer — a credit killer, that is — if you don’t practice your lessons.
Overspend and run up too much debt, and you’ll flunk. And it will go on your record — and stay there for a long time.
But mastering these lessons will not only get you through your college career, they’re also going to help you long after you graduate.
Lesson 1: Track your expenses
“I spent how much?” asks any college student who runs out of money by the weekend.
“The first step to savings is understanding where your money is going,” says Todd Pietzsch, spokesman for BECU, Washington state’s largest credit union. BECU recently launched an online and mobile app called Money Manager. Money Talks News partner PowerWallet offers a similar service.
With these or other free aggregating apps, you can view all of your checking and savings accounts in one place. They let you set up budgets and track your spending by category. You’ll learn quickly that in the absence of home-cooked meals, a couple of pizzas and those Taco Bell runs really do add up.
Making a plan for your money before it’s deposited into your bank account reduces the risk of money mismanagement. Discipline also is required to make a budget or spending plan work for you. But these tools will help avoid spending sprees that you cannot afford.
When you do shop, look for stores, theaters and concert venues that offer student discounts, which may require your student ID. When you sign up for an apartment lease, a gym membership, a cellphone contract or a spring break vacation package, be sure to read all the terms to avoid a ripoff.
Lesson 2: Pick the right bank
Look for banks or credit unions that offer low or no fees for college-student account holders. Also, you may need a bank that has branches at home and at school — or at least one with free ATM service in both places.
Joining a credit union has many benefits. As member-owned, not-for-profit institutions, they may be more customer-oriented than the big banks. Unlike many banks, credit unions frequently offer free checking accounts with no minimum balance requirement to maintain each month.
Credit union benefits may include:
- Higher return on a savings account.
- Lower interest rates on loans.
- Less stringent loan qualification criteria if you’re already a member. But don’t rack up too much debt.
Lesson 3: Debt is not your friend
Don’t borrow any more than you absolutely have to on student loans. College is expensive, even before you start paying interest on borrowed money.
The average price of attending a public undergraduate institution in the 2013-14 school year was $12,894; for a private nonprofit, $24,433, according to figures from the National Center for Education Statistics.
In 2010, outstanding student loan debt surpassed credit card debt, and the gap continues to grow. Outstanding student loan balances totaled $1.19 trillion at the end of the first quarter of 2015, up $78 billion from a year earlier, according to the New York Federal Reserve Bank.
While it’s important to establish credit by getting a credit card, think before you borrow. Don’t use new credit unless you can pay it off or if it is an absolute emergency (which does not include the urge for late-night pizza or lattes).
Know this: Nearly 900 colleges have lucrative debit and credit card partnerships with financial firms, according to the U.S. Public Interest Research Group. The deals enable banks to target and profit from over 9 million U.S. students.
A typical trap: A popular sub shop near campus partners with a major credit card issuer to offer a free combo in exchange for signing up for a shiny plastic card that could take years to pay off if misused.
Credit card debt can lower your credit score, limiting your chances of obtaining loans or other lines of credit. A poor score can even get you rejected from an apartment rental.
Lesson 4: If money is tight, get a job
If you work a part-time gig while going to school, not only will you make money, but you’ll have less time to spend it.
College is likely to be the only time you can afford to explore career options without putting yourself into too much of a financial crunch. So pick up a part-time gig, work-study job or internship to find out which fields interest you. A low-level job in the accounting department may pay peanuts, but it may enable you to shadow professors and get a feel for the industry.
Lesson 5: Keep an emergency fund
Even if it’s just a little bit, an emergency fund will give you a cash cushion when things go wrong — and they will. A cash stash may be all that separates you from debt.
Among the unanticipated situations you may face:
- Delayed financial aid payments: Mistakes occur, and they can hold up the process.
- Auto repairs: If your car breaks down and you rely on it for transportation to school, you’ll need the cash to get it back up and running.
- Medical expenses: Unless your insurance coverage comes with a low deductible and small co-pays, expect to fork over a nice chunk of change if you need medical care.
Lesson 6: Don’t be stupid
“Keeping up with the Joneses, trashing your credit, spending money you don’t have. It only takes a few seconds to blow it, and it takes years to fix it,” advises Stacy Johnson, Money Talks News financial expert.
Written by Jim Gold of MoneyTalkNews