For many university students, freshman year is their first time living away from home and making daily spending decisions without much supervision or guidance. It may also be the first time they have access to their own credit card or use a debit card regularly.
Some of the best advice we’ve heard on this topic came from a college orientation presentation:
“Live like a college student while you’re in college so you don’t have to after you graduate!”
Our college financial planning experts will tackle some of the most common mistakes families make and offer tips for handling this transition smoothly (or at least with fewer bumps in the road!).
Jayne Deutmeyer, CTFA, is a Certified Trust and Financial Planner and a mother who has helped two of her own children navigate education and career decisions beyond high school.
Brent Landrum is a Personal Banker who recently graduated after returning to school as a non-traditional student paying his own way as an adult.
They have both personal and professional experience that can help make this process easier.
Setting Your Child Up for Success
By Jayne Deutmeyer, Certified Trust & Financial Advisor (and mother)
When it comes to managing money as your child leaves for their first year of college, my advice falls into two general areas:
- Things parents need to do themselves.
- Things the student should do (perhaps with a little help).
For parents, this may be the first time you need to take a distribution from the CESA or 529 college account you so diligently used to save for this big day. Here’s some guidance for paying that first tuition bill from your college savings account:
- Don’t wait. Every 529 Plan and Coverdell Education Savings Account (CESA) is different, but be prepared for processing to take at least 1-2 weeks. Don’t wait until the payment deadline to request funds from your account.
- Forms may be required. If this is one of your first payments to the school, you may need to sign a form to keep on file in order to have the check sent directly to the school. Each investment company varies on what is required.
- Gather info and documents. Information you—or more likely, your financial advisor—will need to process the distribution includes: dollar amount, name of the payee (owner, beneficiary, or school), Student ID number, and the mailing address and telephone number for the college.
For students, you may need to think about how you’re going to use money and access funds while you are away at school. Consider the following:
- Talk to your local bank. Many children already have a savings account established locally by this age. Connect with your bank to find out all the ways you can access your money when away from home. They may have options you haven’t thought of yet.
- Set up a secondary account near school. There may be times when restaurants, renters, and others will only accept a local check. Additionally, you may be able to avoid ATM or other processing fees by using a local institution. I believe every student should have more than one option (bank account) for accessing your funds.
- Always know what’s in each account. Use apps to keep track of how much money you have—or don’t have—available in real time at all times.
- Give Mom and Dad access. Set up Parental Power of Attorney so your mom and dad can have access to your accounts in case you need them to handle a transaction. I don’t recommend joint ownership of accounts because there’s a risk that either party’s financial situation can impact the other negatively.
- Consider Health Care POA, too. This one doesn’t have a direct financial impact, but I also recommend establishing Durable Power of Attorney for Health Care at the same time.
- Apply for ONE Credit Card. I recommend one credit card—not five—with a low limit, such as $500, for emergencies. Once your child turns 18, you may notice they will start getting hit hard with credit card offers. Explain the importance of establishing good credit and using a credit card in a pinch, not for fun.
In the end, having an open conversation with your child to set expectations and help them understand the reality of their financial situation is key to avoiding major mistakes. Remember, all aspects of going to college are a learning experience…including learning to manage their money effectively.
Tips for Saving and Budgeting
By Brent Landrum, SBCP Personal Banker and recent college graduate
The start of a college semester can be overwhelming for both the student and parents. The expense of education comes with living and textbook costs, as well as many other items you may not be prepared for. Let’s look at costs and how you can be fiscally responsible:
- Meal Plans: Take advantage of plans offered. Schools typically have dining and convenience store-style options for students to eat meals and purchase other grocery items. If you’re already paying for the plan, use it up versus ordering pizzas instead.
- Off-Campus Dining: If you are not living on campus and opt not to have a meal plan, then preparing your own food can be an economical option. Cook food that can provide for more than one meal and plan for leftovers. Groceries can seem expensive but will save you money when you are dining out less.
- Textbooks: More and more schools are offering students the chance to rent textbooks rather than purchase. This can save you hundreds of dollars each semester. However, if you do have that one book you must purchase, research used options on campus and online. Not only will you save money, but you may also get the previous owner’s notes as a bonus!
- Entertainment: Don’t splurge on the weekends because you think you have “free” money from student loans. Schools provide plenty of on-campus activities, such as sporting events or movie nights, that are either free or discounted.
- Excess Loan Money: Take the loan money not used from one semester and apply it to the next. This affords you the opportunity to take less loan money overall.
- Furniture: If you are living off-campus and needing furniture, shop at garage sales, estate sales, and other discounted venues. Occasionally, schools will sell old dorm room furniture you could capitalize on. With all the moving you will do during these years, don’t invest great sums of money into furniture. Save where you can!
Budgeting can be hard to get a handle on, but these banking products can help:
- Savings Accounts: Use a savings account as a primary account. This product has federal regulations that stipulate you can only withdraw money six times per month, so it can help you budget when you take money out.
- Debit Card Limits: These cards have various limits depending on the type of transaction you are doing. Set your limits low to prevent over-spending and to help you save.
Take some time to learn your spending habits and determine what your budget should be. Save when and where you can. And finally, if you don’t need it now, put it away for a rainy day!
Watch for more information on planning for college expenses each month in this newsletter. If you would like help in planning appropriately for college tuition, contact email@example.com or call (608) 798-5233.