Help your students avoid these common college financial mistakes
Football rivalry games and all-night study sessions. Meeting new people and being exposed to new ideas. Learning more about who you are and choosing a future career.
When high school students think about what college life may be like, they often picture an exciting world full of opportunities to meet new friends, make great memories, and generally have a good time. They may also be eager to study in their chosen majors, learn from accomplished professors, and prepare for their professional lives after college. They may even daydream about the independence college brings — about making their own decisions free of parental supervision.
But they may not think about one of the most important aspects of college life, one that results directly from that independence: managing money and making financial decisions for themselves. Sadly, this lack of financial forethought often continues well into the college years, with unfortunate results. These results are predictable, but all too common. If you don't study, you get bad grades; if you don't budget, you lose money.
Help your students avoid this scenario. Here are some financial tips to help them avoid freshman financial mistakes and start college on a sound footing.
- Avoid the credit card trap
Many credit card companies lure students with free gifts, but the T-shirts and pizza aren't worth the high interest rates and other fees. They also make it easy for students to spend more than they take in, getting them underwater financially before they even get their feet wet in a career.
- Budget before you buy
The first rule of financial literacy is really very simple: If you can't afford something, don't buy it. Having a budget — a plan for spending based on your income — allows you to follow this rule.
- Avoid high roller syndrome
Many students live beyond their means, a habit encouraged by the hectic pace and intense social demands of college. Too busy to cook? Order a pizza! Going to a party? Buy a new outfit! Students often end up using student loan money and credit cards to finance these spending habits, but they have to pay up eventually. Students should consider getting in the habit of looking for less expensive options like cooking, shopping for clothes on sale or at less expensive stores, and buying used books. When the bills start coming in after graduation, they'll be glad they did.
- Manage your credit history
It's never too early to start establishing a good credit history; credit scores affect students' ability to rent an apartment, get car insurance, and even land the job they want after graduation. Paying bills on time and refraining from overborrowing will help students keep their scores healthy.
- Save now
Even if they have part-time jobs, most college students have modest incomes. Saving is often the furthest thing from their minds. But getting in the habit now — even if they save just a few dollars each month — will provide a rainy day fund for unforeseen needs. This will make it easier for them to save when they graduate and have a more substantial income. And the earlier students start saving, the more their money will grow over time.