A new crop of college freshman are about to step across that bridge from childhood to adulthood. It’s an incredibly exciting, nerve-wracking time for both child and parents. I’d like to offer a few suggestions to help you make the most of what will hopefully be four memorable years.
5 Money Tips for College-Bound Kids
Many dream about attending college, and I hope it’s everything you imagined. One thing most kids do not spend much time thinking about is money. Yet I would encourage you to follow these tips so you leave college with both a degree and money smarts to take you to the next stage of your life.
Follow a Budget
I know budgets may not seem glamorous, but they will keep you honest and help you avoid spending money you don’t have. Don’t look at your budget as being your substitute Mom who tells you what you can and cannot do. Budgets can actually represent freedom. Set aside the money needed to cover your monthly obligations (cell phone, car insurance, etc.) and the remaining money you can choose how to spend. Just spend it wisely.
Pay Your Bills on Time
Right now you don’t really have much of a credit history, if any, so it’s very easy to move the dial towards excellent or poor and you want to maintain the best score possible. Your credit score may not mean much to you today but it will after graduation. Your credit score will determine whether you can get a loan and the interest rate. Your ability to rent an apartment or sometimes even get a job. Keep it healthy by paying your bills on time.
Use Credit Cards Wisely
I’m not going to tell you to not get a credit card because the lure of your own credit card is most likely going to be too enticing. And in the end, it doesn’t really matter how old you are when you get your first credit card—it’s how you use it that matters. I want you to use it wisely and to your advantage.
Credit cards are NOT free money. They are NOT tools that allow you to live beyond your means nor are they an extension of your annual income. The aforementioned credit score will take a significant downturn if you abuse your credit card privileges by maxing out your card or not paying your bill on time. If you use your card, you must pay your balance in FULL every month. This is a habit you must form quickly if you want to use credit cards wisely. If you find yourself unable to do so or only making the minimum monthly payments, then stop using your credit card and go back to cash only.
Get a Job
School is a priority but a job will help put a few extra dollars in your pocket for both fun and to help offset the cost of college. There are plenty of on-and-off campus jobs and having some work experience under your belt will only be helpful when you’re looking for a job after college.
Don’t Play Keep Up with the Joneses
College will expose you to people of various socioeconomic backgrounds. You may have friends who receive a generous monthly allowance or choose to use their credit cards unwisely to fund a lifestyle beyond their means (and yours too). Don’t fall into the trap of needing to keep up with them. I know it’s easier said than done, but you are only setting yourself up for trouble if you live beyond your means.
This is the biggest mistake college students make: They don’t want to miss out or be left behind, so they turn to credit cards to fund that lifestyle. Don’t do it. In the moment, it will be fun, but you can never outrun debt. You will have to pay it back with interest. Those four years of fun can turn into 5, 10, 15 years of lost opportunities and dreams when you cripple yourself with significant consumer debt.
Remember—You are a $60,000 investment
The final amount may vary, but the fact remains you represent a significant investment. Fun is certainly allowed but at the same time don’t be a underperforming investment either. We don’t send you to college for no reason. We expect to earn a positive return in the form of you making a successful transition into adulthood, which includes working hard, getting a good job and becoming a thriving member of society.
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