Between packing for college, buying school supplies and recovering from sticker shock, parents may be too bogged down to remember to pass on some pointers regarding finances as their child leaves the nest. To help college-bound students build a foundation of sound financial habits, the Better Business Bureau of Minnesota and North Dakota (BBB) offers the following advice for parents to bestow on their freshman.
“College years are the time when many young adults establish habits they will carry with them for the rest of their lives and while it’s important that they tackle academics, it’s critical that they also learn everyday skills – such as how to manage their money – in order to become fiscally responsible,” said Dana Badgerow, President and CEO of the BBB.
The 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.
According to a U.S. Public Interest Research Group (U.S. PIRG) 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 $1301.
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.
U.S. PIRG found that more that 40 percent of college students who managed their own credit cards had paid bills late or paid at least one over-the-limit fee. Credit card companies often charge late fees as high as $40. Add to that any accruing interest, which can be upwards of 30 percent, and college students will quickly see how much can be lost by not paying a bill on time and in full.
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.
Young adults between the ages of 18 and 24 are one of the groups hit most often by identity theft. An annual survey by Javelin Strategy and Research 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. 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.
The mission of the Better Business Bureau is to be the leader in building marketplace trust by promoting, through self-regulation, the highest standards of business ethics and conduct, and to instill confidence in responsible businesses through programs of education and action that inform, assist and protect the general public. Our hours of operation are 8 a.m. to 5 p.m. Monday through Friday. Contact the BBB at bbb.org or 651-699-1111, toll-free at 1-800-646-6222. Visit our Centennial website at bbbis100.org.