College budgeting: Tips for students and parents.
You’re sending your children off to college, and you’re a little nervous about their ability to manage finances. We’ve assembled a few tips to help students and parents get smart about college budgeting.
Credit cards: Are you ready?
A credit card company is giving away free t-shirts or candy bars in the student union to anyone who fills out an application. Even better, two weeks later, you get a magic card that lets you buy whatever you want, no questions asked. What could possibly go wrong?
Plenty, of course. While college is a great opportunity for your child to establish good credit habits that will make applying for loans, jobs and insurance a breeze over the next few years, it can also lead them into debt that haunts them throughout their adult lives.
To guide your child in the right direction, help them understand how to appropriately manage their first credit card.
Tips for students:
- Create a budget. Create a realistic set of situations in which it would be appropriate to use a credit card. “I want that new sweater right now” or “My friends are going out” should not be on the list. Thinking about needs versus wants will provide a better understanding of what a credit card is for.
- “Keep a record of where you spend your money each month and where you can cut costs,” Brian Jurkowski, SVP, credit card department for Northwest, says. “Review your account online regularly so you are not surprised by the total amount you have spent. By keeping track of where you spend your money, you can better decide how much you can afford to charge each cycle.”
- Learn the card’s terms and conditions.
- Take note the payment dates, fees, credit limit, annual percentage rate and late policy and organize a spending schedule. Understand the impact that violations of these terms can have on the ability to rent apartments, buy cars or take out loans.
- Start small. Part of building good credit means showing you can make payments on time, so don’t feel discouraged from using the card completely. A game plan of certain expenses and a realistic repayment schedule is actually a great exercise.
- “Put regular expenses, like groceries and gas, on your credit card.” Jurkowski says. “These items are easier to pay off each month than large purchases.”
Tips for parents:
- Give your children a small allowance. If you can afford it, of course. If you already pay some or all of your child’s expenses, consider giving them the lump sum each month with the expectation that he or she will now be responsible for getting the bills paid on time. If your kid can effectively budget to increase their allotment of pocket money, it’s theirs to keep.
- Re-evaluate your own expenses. Practice what you preach! Take a look at where you spend your money and find areas you can cut. Do you have a gym membership you never use? Magazine subscriptions you never read? Season tickets to a sports team that you find yourself giving away? Maybe it’s time to cut the cord on some of these extras if they bring you no value.
- Help your child fill out their FAFSA. Many families believe they won’t receive any tuition assistance because they make too much money, but they often forget about the merit-based aid many colleges offer. This aid, which is based on achievements and extracurricular activities, still requires an accurate, completed FAFSA form. Help your kids look for scholarships in the area, which are often rewarded based on community involvement and academic success.
- Don’t forget about retirement. If you only have the money to save for retirement or pay for your child’s education, choose retirement. To avoid this, be proactive and plan ahead for your child’s education by setting up a 529 or other savings account.
- Consider investing the equity in your home. Your home’s equity is valuable and can be re-invested in big-ticket items like a college education. Talk to a financial advisor to see if this makes sense for your situation.
To learn more about safe credit card options and savings programs, call Northwest today at 1-877-672-5678.