Between packing for college, buying school supplies and recovering from sticker shock, parents may be too bogged down to remember to pass on financial words of wisdom as their child leaves the nest. To help college-bound students build a foundation of sound financial habits, the Better Business Bureau offers the following advice for parents to bestow on their freshman.
Be responsible with credit cards.
According to a U.S. Public Interest Research Group survey, two out of three college students report having a credit card, of which about two-thirds are responsible for paying their monthly bill. Overall, freshmen responsible for their own cards had average credit card balances of $1,301.
Parents should stress the importance of using credit responsibly, which includes keeping a minimal number of credit cards, paying off balances every month and keeping a reign on spending.
Start saving money now, even if it’s just a small amount every month.
Aside from the inherent benefits of saving money, starting early means taking advantage of what Albert Einstein described as one of the most powerful forces in the universe: compound interest.
If a freshman saves $50 every month and puts it into a savings account or money-market account that earns 5 percent interest, by graduation, they’ll have saved more than $2,660 including dividends. If they continue to save $50 every month at 5 percent interest, in 25 years, they’ll have saved nearly $15,000 and reaped another $15,000 in dividends.
Pay your bills on time.
U.S. PIRG found that more that 40 percent of college students who had paid credit bills late or paid at least one over-the-limit fee. Late fees as high as $40 plus accruing interest can quickly damage a student’s otherwise healthy credit report.
Guard your personal information.
Preventing ID theft is important both online and offline. Parents should encourage their students to shred unnecessary documents that include personal information such as Social Security or bank account numbers and keep a close watch over credit and debit cards and checkbooks.