Some financial tips for new freshmen

September 24, 2006|By Humberto Cruz | Humberto Cruz,Tribune Media Services

For many college students, this is what life on campus as a freshman was like:

Unprepared to handle money, they overspent on fast food and partying with friends without much thought as to how to pay the bills.

When they couldn't pay them, many skipped meals, or sold or pawned their possessions. Others bounced checks or fell behind on their credit card payments.

Even those with a better handle on their finances felt the stress. Nearly 1 in 4 students said they felt very or extremely stressed about their financial situation, and only 10 percent felt stress-free.

These are among the disquieting findings of a nationwide online survey of 1,000 college upperclassmen who were asked about their financial experiences their first year in college, and the advice they would give freshmen today.

"We're hoping the peer-to-peer, been-there-done-that perspective will help convince incoming freshmen and their parents of the importance of sticking to a budget while at school," said Andrew Will, an executive at KeyBank Corp., a Cleveland banking and financial services company that commissioned the survey, conducted by Harris Interactive.

I am hoping so, too, considering:

More than 40 percent of the students said they skipped meals at least a few times because they ran out of money, including more than 4 percent who did so several times a week and an additional 7 percent who did it once a week.

More than 10 percent sold or pawned possessions to make ends meet or to have money to go out.

More than 14 percent missed at least one payment on their credit cards, including more than 4 percent who did so more than three times. (Considering that nearly 29 percent of the students in the survey did not use credit cards, that means about 20 percent who did use them missed at least one payment.)

Nearly 18 percent of all the students, a figure that represents 20 percent of those who used checks, bounced at least one.

"A lot of these things are sort of a rite of passage," Will said. "When you go off to school, you are learning so many things, and you have to handle your finances on your own."

Will and I agree, however, that many of these financial mistakes can be prevented - and the stress the students suffer alleviated - if parents have a heart-to-heart talk with their children.

"Talk about the `Big Four' with your student," said Will said, referring to what he calls the four basic categories of financial need:

Transactions - including options available for making payments, such as checks, debit cards or electronic transfers. The focus for students should be on avoiding needless fees, Will said.

Saving and investing - putting money aside beyond what's going to be spent this month, and projecting future needs.

Credit and borrowing - understanding different borrowing options, such as credit cards and lines of credit, and their pros and cons, including cost.

Protection - from a bank safe deposit box to health, auto or other types of insurance.

"Every person, whether a student or affluent adult, has needs in these four areas," Will said. "The best thing parents can do is have a conversation" with children about them. If you don't feel qualified to do so, find a trusted professional, such as a banker, to advise you, he said.

For example, 30 percent of the students surveyed acknowledged they were unprepared to manage their own money their freshman year and that three-quarters admitted making mistakes.

The three biggest: overspending on food, overspending on entertainment and charging too many purchases to their credit cards.

Their advice to incoming freshmen includes:

Avoid eating out with friends too often or spending too much on fast food or food outside the allotted meal plan.

Don't forget to track debit-card transactions.

Use credit cards either for emergencies only or as long as you pay off the balance each month.

Buy used textbooks whenever you can.

Make sure your bank has a branch on campus or your bank doesn't charge you an extra fee for using another bank's automated teller machine.

Walk or take public transportation instead of driving.

Limit cell phone usage.

Humberto Cruz writes for Tribune Media Services.

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