Between packing for college, buying school supplies and recovering from sticker shock, parents may be too bogged down to remember to pass on some financial words of wisdom as their child leaves the nest. To help college bound students build a foundation of sound financial habits, Better Business Bureau offers the following advice for parents to bestow on their freshman.
Last year alone, approximately two million students graduated from high school and headed to college. While most were equipped with bedding and books, many were ill-equipped on the subject of financial literacy. According to a 2007 survey by Charles Schwab, fewer than half of teens considered themselves knowledgeable on how to budget money (41 percent), how to pay bills (34 percent), or how credit card interest and fees work (26 percent).
BBB recommends that before parents wave goodbye to their college bound students, they sit down and discuss four key rules for managing personal finances:
Be responsible with credit cards.
While having a credit card is an important first step for a college student to start building a credit history, parents need to stress the importance of using credit responsibly. This includes having a minimal number of credit cards, paying off the balances every month and keeping a reign on spending.
Start saving money now, even if it’s just a small amount every month.
Developing good saving habits early on will help a college student reap the benefits throughout his or her life. 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.
Pay your bills on time.
Aside from the immediate benefits of paying bills on time – specifically, reducing needless spending on fees and interest charges – it is an important way for college students to begin building a healthy credit report.
Guard your personal information.
When comparing the age demographics of ID theft victims, young adults between the ages of 18 and 24 were the second highest age group at risk for fraud according to an annual survey by Javelin Strategy and Research. Javelin also found that, in cases where the victims knew how their ID was stolen, 79 percent of the time it was stolen by someone they had contact with; therefore, 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.