Just as how your college student’s choice of study will affect his or her future career, so will the spending decisions he or she makes now affect his or her financial future.
Research by federal debt consolidation firm Consolidated Credit on how students today rely on credit cards found that 63 percent of college students say they’ve made a purchase without having the funds to pay the bill.
With students already facing high costs of tuition, doing what it takes to have a sound financial future is more important now than ever.
Here are five money mistakes college students make and how you can best advise your incoming freshman to avoid them:
1. Overusing A Credit Card
The best advice for your college student is to simply avoid credit cards.
If you do decide to give your freshman a credit card “for emergencies” make sure that he or she fully understands that it’s meant to be used for only that.
On the other hand, your child might want to begin establishing credit – which is okay. Advise your child that if he or she has a credit card, it comes with the greatest of responsibility.
You might also want to consider a debit card as a safer alternate. Just let your child know that college students tend to get hit with overdraft fees more than the average American. Again, pass on your own wisdom about responsibility here.
2. Falling To Peer Pressure
There might be students your freshman makes friends with who either have more money or who aren’t listening to the advice in this post, that pressures your child to spend, spend, spend.
From eating out with friends to having a posh dorm room, overspending because of peer pressure can quickly add up and put your college kid in some serious financial trouble.
Advise your child that he or she can always say no to pressure. Doing so is an act of self-respect as your child won’t let peer pressure hinder his or her future.
3. Not Having A Plan
It’s important that your new college kid has a financial plan for two reasons:
To learn and apply the art of money management (learning this now will help tremendously for your child’s future).
To graduate on time (50 percent of college students do not graduate within four years).
The first thing your child should understand is his or her expenses. Have your child make a list of his or her fixed expenses – like tuition, books, car payments, food – and a list of variable expenses – like clothes and entertainment.
From there, you can help your child create a budget that will help him or her avoid money problems in college.
4. Missing Out On Scholarships
Just because your child is no longer in high school, doesn’t mean the scholarships end. There are plenty of scholarships available to college students.
Advise your freshman to talk to his or her academic advisor or financial aid officer to learn about the scholarships that he or she can apply for.
Even a few small scholarships will make a big difference on the cost of your child’s education.
5. Buying Whatever He Or She Wants Rather Than Needs
Your freshman will most likely be exercising his or her newfound independence in college and that might mean overspending on Starbucks.
Teach your child that every penny really does count and that sticking to a budget will help propel his or her goals forward.