Off to School You Go – Part 2
Financial Tips for Your Freshman
I received a lot of great response to last week’s blog post that talked about some financial tips to help your new college freshman succeed at school. I did some additional research and found a few more helpful strategies that I thought I would pass along, as well.
If you missed last week’s post, here is a quick summation: There are millions of young people headed off to college this fall and there are several “financial” things that should be discussed before packing up the car.
Here are a few more:
Discuss Bank Fees
As a former bank manager, I can still vividly remember having a father and his daughter come into my office to discuss bank charges on her Student Account. She had been away at college and went out one evening with some friends to Taco Bell. She spent $7.18 at Taco Bell. This little transaction hit her account and then snowballed into a monster of overdraft fees. She stopped at an ATM earlier in the day and did a balance inquiry. It showed that she had a little more than $20 in her account so she thought she was fine. Little did she know that there were several other “pending” transactions that had not yet been posted to her account. After enjoying her burrito supreme, the other transactions started to hit her account – book purchases, gasoline purchases, student activity fees and others. Before it was all done, the Taco Bell run cost her about $250 in overdraft charges. We worked with her and refunded most of them but it was costly lesson to learn. The balance inquiry may not actually be your real balance. Keep a register and track EVERY expense.
Explain Debt and the Long-Term Impact
Several years ago, some parents asked us to sit down with their son to discuss student loan debt and the impact that it would have on him over the long haul. The son had been given a full ride scholarship to a local university but really wanted to go away to school where he did not have a scholarship. He would have to take out student loans to pay for school if he didn’t take the financial aid. We calculated out the amount that he would need to borrow over four years and then did a rough estimate of payments. We also asked him how much he expected to earn after he graduated and then calculated out a simple budget for him after he received his diploma. I remember watching his jaw drop as we discussed payments and the impact of interest rates. This might seem a little excessive but it had a tremendous impact. He decided to take the scholarship for his first year and see how he liked it. (Side note: He graduated after four years from the school that offered him his scholarship without ANY Student Loan debt!)
Start Saving for Retirement
Again, this may seem totally ridiculous and an unnecessary topic to discuss with your 18 year old but I sure wish someone would have had this discussion with me! Saving a little bit of money every single week will set you on the path to being a millionaire and experiencing real financial freedom even if you don’t have a high paying job! The laws of compounding interest are phenomenal and – even in a low interest rate environment – consistent savings balances will explode over time. If you were able to save just $50 per week over 45 years, you would be a millionaire. Doing ANYTHING for 45 years seems crazy but starting the habit of saving a little bit every week, is a tremendous practice and one that can have a generational impact on a young person.
Obviously, this is – again – not an “all inclusive” listing but it is a tremendous start to an authentic discussion before your young person heads away to college.
Do you feel uncomfortable having this discussion with your son or daughter? We are always happy to help. Want some help? It is what we do – every single day! We help families navigate through the “financial” piece of their lives. We are always happy to help.
If this makes sense to you but it just seems impossible or overwhelming, give us a call and schedule an appointment. We are experts at it and will be happy to offer you some basic direction and advice. It is what we do at Hollander & Associates.