Financial Literacy 101
Today's frosh orientation guest lecturer is Kathryn Mullaney, vice president of finance at St. Lawrence University in Canton, N.Y.
Following the arrival of that coveted fat envelope from the college or university, students and parents typically sit down to figure out how to pay the tuition, room and board.
But your college financial planning shouldn't end there. Managing the money students have to spend at college is just as important as figuring out how to pay for the education itself.
First, come up with a budget
Separate the tuition, room, board and fees from your on-campus, day-to-day expenditures. This is usually an eye-opener. Parents and students might want to work on it together, brain-storming the kinds of costs that are going to come up, such as books; local and home-bound transportation; toiletries; extra food and eating out; laundry; telephone; entertainment; and parking or vehicle registration. Most colleges' Web sites have information about what you can expect to spend for those things, so use that resource. If you have friends attending the same institution, ask for their input, too. If you are set up to do your banking online, look around that Web site as well. Many banks have features to help you set up budgets. So do software programs, like Quicken.
Open a checking account at the same bank where parents have their accounts. Then parents can make deposits to a son's or daughter's account from home. Banking electronically and having online access to the student's account allows you to make transfers more or less immediately, should there be a need for emergency cash.
Research ATM availability on campus
Using a "foreign" ATM can be costly. Both the home bank and the bank near the college can charge you a fee. A one-dollar fee from both banks on each $10 withdrawal amounts to 20 percent! If the parents' bank doesn't have a branch in the college town, it may be wiser for them to open an account at a different bank, so students can get at their cash without paying those fees.
Be cautious about all kinds of fees
Fees can add up before you know it. Find a free student checking account, if at all possible. Overdraft fees range from $35 to $50, so even if a parent has to be on the account, it might be worth it to have overdraft privileges and avoid those charges.
Learn to balance a checkbook
Practice balancing a checkbook before going off to college, on paper or using software. When transactions are entered into programs like Quicken, it reconciles them automatically. And if parents want to show their son or daughter how to do it on paper, they should use the format displayed on the reverse side of their paper statement -- it really works.
Debit vs. Credit
Consider whether or not a debit card is the right choice. A debit card can be used for a purchase where the student can't get to a 'home" ATM for cash, and he or she can use the card for transportation or emergencies, while avoiding those ATM fees. It's safer than a credit card, which can be seductive, especially with students who have not fully matured. If parents give their student a credit card, it should be for emergencies only, and parents should define what an emergency is. Then parents should track transactions carefully online, before the monthly statement arrives in the mail. Some colleges have a card system that allows parents to deposit funds in an account and issue a debit-type card that gives your student access to the account. Some can only be used on campus, but many are being extended to local merchants. This type of system limits the student's spending to the funds available in the account and to certain types of expenditures.
Look for even more advice
There is a lot of help online, especially for those unsure of how and where to start. A good one is www.mappingyourfuture.org, which includes calculators and money-management advice and tools.
Campus Overload is a daily must-read for all college students -- especially soon-to-be freshmen. So, make sure to bookmark http://washingtonpost.com/campus-overload. You can also follow me on Twitter and fan Campus Overload on Facebook.
August 3, 2010; 11:01 AM ET
Categories: College 101 | Tags: Frosh Orientation, St. Lawrence
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