Faculty Share Their Money Advice for College Freshmen
So your kid is no longer a kid. Your kid is an incoming freshman and going off to college, and you're trying to enjoy that last summer of having him or her around. Somewhere in the midst of this, you're probably not just spending money - on dorm room supplies, books, Kleenex - but hopefully also talking a lot about the green stuff. Because - however and whomever is paying for college - your soon-to-be student will be making a lot of financial decisions without your involvement. Here's what a handful of academics and college financial advisers wish incoming freshmen knew about money.
Think before you spend.
"Credit cards are not ATMs. Credit card balances are loans that have to be paid back-and the interest rates are often high so the balance grows quickly if you only pay the minimum. Only charge what you can pay for that month, and pay your credit card balance in full every month. ... Create a budget and keep track of how you spend your money. ... So many times, students spend money on low-priority things rather than on the things that really matter because they don't know what they're spending their money on, or they don't think about what they really want and don't realize that their wants are limitless and their resources are very limited. ... Keep student loans to a minimum. Borrow only what you must, and be careful about using loan funds to finance things like Spring Break trips. ... There will always be students who have more than you - don't try to keep up with their spending."
Mary Dixon, professor of economics at DePauw University in Greencastle, Ind. She received a bachelor's degree in economics from Southern Illinois University in 1983 and a Ph.D in economics from Southern Methodist University in 1989. Dixon says she remembers blowing it, from a money perspective, shortly after getting to her dorm room in 1979 and using the phone. "Long-distance service was provided by an outside service and was very expensive. I had a $100 phone bill the first month." In today's dollars, that would be $320.86.
[Read: 5 Financial Tips to Set You Apart in College.]
Walking doesn't just burn calories; it saves money.
"As difficult a concept as it may seem now, try not to have a car on campus. The cost of insurance and maintenance alone makes this a bad investment. If you live off campus, or if you have certain reasons, this may not be an option. However, for most students, all of your activities are on campus, and the need to leave campus is very rare. In those cases, there are other students who can provide a ride for you. A side benefit by not having a car is the urge for last minute coffee and meal outings become more difficult, so you will be more likely to remain on campus and save money."
Steve Booker, director of financial aid at Rollins College in Winter Park, Fla. Booker graduated from Rockford College in Rockford, Ill., in 1992 and recently completed his master's degree in business administration at Rollins. He says his money mistake was "eating too much all you can eat pizza at a greasy - but very tasty - place close to campus. I didn't have much to begin with, but went through all of my extra spending money plus gained the freshmen 15 very quickly. I had to get a job for my second semester in order to have spending money."
It's OK to be a hoarder if you're hoarding cash.
"I wish incoming freshmen knew the value of a dollar. What I mean by that is a recognition that a dollar is worth more today than in the future. To that end, they should recognize the value of making and then saving a dollar, and begin saving now to take advantage of the growth of that dollar."
Keith Fevurly, visiting instructor in finance at the Metropolitan State College of Denver. He graduated in 1973 from the University of Kansas and says he did "pretty well with money in college," but he admits he spent more than he saved - "particularly on unnecessary things like beer."
[See: 10 Ways to Save on College Costs.]
The money you (or your parents) are spending on college is an investment.
"Be aware of your return on investment. First, determine if the income potential of the career you would like to pursue will support the expense of the education you would like to obtain. Second, make decisions with your head and not your heart. Be realistic about what your family can afford to pay toward your education. Don't choose a college because your friends are going there or because it is the coolest school in the state. Don't let outside sources influence a sound decision. Third, know how much the education will cost and how much you will have to borrow. Estimating your student loan borrowing will allow you to estimate your repayment after graduation."
Tracey Richards is the director of the financial aid office at Montgomery County Community College, which has campuses in Blue Bell and Pottstown, Pa. She graduated from the University of Pittsburgh in 2000 and earned a master's degree at Penn State University in 2009. She says her downfall in college was using too many credit cards. "This was a very common problem among many of my peers as well. Credit card companies used to set up tables on campus and would pretty much approve anyone at the time. One too many pizzas, late-night diner trips and road trips were easily charged on my credit cards - a mistake I paid for, for many years after college," Richards says.
Ixnay on the credit cards.
"Continue to budget expenses while in college, save for emergencies and do not obtain or use credit cards while in college. You don't need to build credit while in college."
Shakeela Hunter, director of the Student Money Management Center at the University of Texas-Arlington. Hunter graduated from the University of Illinois-Urbana-Champaign in 2004. She wishes she had understood loans and budgeting better and hadn't applied for retail store cards. "I found myself with more debt than I could handle," Hunter says.
[Read: Credit-Management Tips for Recent College Graduates.]
Don't use your debit card (not much, anyway).
"Rather than use your debit card, consider withdrawing a certain amount of cash from your account per week or per month to help you stay within your budget. Studies report that people spend 12 to 18 percent more when they use cards instead of cash. Cash is useful for emergencies or to make small purchases. Pay attention to your daily cash outlay so you can see how much of your money goes to coffee or other small purchases over time. These can really add up - especially if you're not paying attention. And make the best budget for you. Don't compare your spending habits with friends, as students have differing financial situations. Your first step is identifying what you need (as opposed to what you want) and planning the finances necessary to meet your needs. Then you can figure out how to manage the remainder. Create a budget that allows you to have fun without spending more than you can afford."
Helen Nunn, director of financial aid at Susquehanna University in Selinsgrove, Pa. "I was so poor that I didn't make any monetary mistakes - had no opportunity to," Nunn says. Her father died in a car accident just before Christmas during her senior year of high school, and her mother had a job on an assembly line in a factory that made China. But Nunn scraped through college and earned a bachelor's degree at Grove City College in Grove City, Penn., and a master's degree at Indiana University of Pennsylvania in 1976.
Shakespeare, science, yes - but also, study money.
"One of the most important things students should learn is how to manage their money. Few colleges offer courses in this, but if a student fails to learn it, the consequences are even more serious than failing an academic course. Some students borrow heavily, spend lavishly and end up deep in debt. At the other extreme are students who avoid even reasonable loans, attend the least expensive college without regard to quality and take on outside work that interferes with the educational development. A balance is needed. College years are the time to develop the valuable habits of financial planning, record keeping and budgeting, and to be aware of the difference between investments that will pay off in the future and expenditures that waste resources or incur unnecessary debt."
John Rooney, an emeritus professor of psychology at La Salle University in Philadelphia and co-author of the book, "Preparing for College: Practical Advice for Students and their Families." Rooney graduated from La Salle College with a bachelor's degree in 1946 and earned his Ph.D. from Temple University in 1956. He remembers money being tight in college. "If I had to do it over, I think I would have waited to get married until I completed my graduate study," Rooney says. "There was considerable time pressure and financial pressure on both of us during those early years. Then again, we were young and in love."
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