Do you have kids who are heading off to college? This can be an intense and exciting time for them. It's a taste of independence, freedom ... and all too often, financial difficulties.
It's not just getting into debt that's the problem: Academic and psychological risks are part of the issue here, with some students even dropping out of classes because of a high debt load.
Instead, help your kids start their careers and their adult lives off in the right direction, by sharing these money-management tips.
1. Open sesame. A checking account is essential. However, before you decide on an account, assess how many transactions you'll make each month, and how you'll make them (i.e., paying bills in person or over the Internet, cash withdrawals from ATM). Then look at the accounts your financial institution offers, to see which one covers those transactions for the lowest service charges or monthly fees (look for a college student plan -- they may provide lower fees). When you withdraw cash from ATMs, use the ones offered by your bank. Other ATMs can charge hefty service fees.
2. Debit wisely. Using debit cards (which take money directly out of your account) can be a wiser move for keeping budgets on track than credit cards (which can rack up big debts in a short amount of time). But they do come with security risks. Scammers who observe your card number and your password can create their own cards to access your accounts. Always be aware of who's around you when you're using the card. Shield your password with your hand when you're entering it, and report lost cards immediately.
3. Keep it balanced. Online banking makes checkbook balancing quick and easy. Simply opt for one of the free or low-cost money managing software programs, and enter in all of your transactions. At the end of the month, click on "reconcile" or "balance" and the program picks up the information from your financial institution's online banking program and makes the calculations for you. Keeping those accounts balanced means that you'll never mistakenly overdraw your account -- and you'll also know if scammers have attacked your account.
4. Breaking the budget. Budgets are all about avoiding nasty financial surprises. Add up all your expenses, from rent to food to transportation to entertainment. (College welcome packages and online resources will often include examples.) Then look at the money coming in. The difference between income and expenses should be positive (as in, money left over) -- if it's not, figure out how to make your budget at least break even (boosting income, for example, or reducing expenses). Check your budget regularly -- if your projections weren't accurate, change them. Make your budget work for you.
5. The right kind of credit. A study found that almost two-thirds of college students held at least one credit card -- and one in five of those had four or more cards. College students often use credit cards because they've run out of cash. Consequently, they don't have the money to repay the debt, which then increases every month as interest charges mount up. The best way to use credit cards is to keep track of all the expenses that you're putting on them and to make sure that you can pay them off in full every month, to avoid interest charges. Always check your credit card statements -- verify that all the purchases listed are valid ones, and let your credit card issuer know immediately if there's a problem.
Stanley J. Kershman is a leading authority on solving financial disasters, he has helped people get out of debt for more than 25 years. He's also the author of Put Your Debt on a Diet: A Step-by-Step Guide to Financial Fitness (Pepper Pike Press), a practical handbook that walks you through the process of improving your money management skills.
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