5 Financial Facts Your College Freshman Doesn't Understand
Should a college freshman get a credit card? Is credit good? How are bank accounts accessed online? What’s a pin number? What does a college freshman do when the cash runs out? These questions have obvious answers to you as the parent. But for most college freshmen, these questions are troubling. Frankly, they don’t know the answers.
Freshmen college students enter college with little to no work experience. The responsible high school student maybe worked a part-time job or two. Little work experience means little financial experience. Your college freshman will probably feel too embarrassed to ask about these 5 financial facts.
5 Financial Facts College Freshmen Don't Understand
1. They don't know how to use a bank account.
What is his username? What is her password? Does he know his pin number? What does she do if her card is lost or stolen? These are all good things to explain to your college freshman before he enters college.
More importantly, she needs to have control over her own bank account. By giving over control, you are allowing your child to take ownership for his finances. You may still keep your access to her account, but let her pay her own bills. Let him see money going in and out. Having control over her finances is an important step toward adulthood.
2. They don’t know how to budget.
Budgeting is a no-brainer for you. But your college freshman doesn’t get how much life costs until it comes out of his pocket. You want to go on a weekend trip with friends? That’ll cost you $30 for filling up your car, $60 for food and $10 for your morning coffees.
The idea of a budgeting is a completely foreign concept to someone who has never had control over her own finances. A simple assessment of what money is coming in, tuition cost, room and board and other expenses will help put things in perspective.
Thankfully, many banks provide an assessment of debit card purchases. You may need to step in as a parent and provide some help. Your child may be entirely clueless to this concept. And honestly he probably won’t get this advice from anyone else.
3. They don’t understand credit.
Credit card companies target young adults. You know that. Building good credit is important for young adults. Whether it’s buying a car or a house, you don’t want to harm your child’s future by saying “no credit cards” ever.
Side note: Some banks offer a low interest-rate credit card to college students. These cards have a low borrowing limit and interest rate but allow your child to build a good credit score.
Assess the maturity of your child to handle a credit card. A mature college freshman may have no problem using self-control. But another college freshman probably would struggle to limit spending. You know your college freshman. Advise carefully.
4. They don’t understand loans.
What is FAFSA? What does unsubsidized mean? What does subsidized mean? What are the payments options? These are all great questions. These are all questions I had as a college student. Thankfully I got good advice but I never truly felt like I understood what I was agreeing to when signing those papers.
Be sure your child is fully aware of the ramifications of getting loans. She needs to understand when she can start paying them off and how. You as the parent can be a helpful guide.
5. They don’t realize how much college costs.
Colleges and universities vary in their requirements for class attendance. Some schools or classes are fairly strict while others do not record attendance. The temptation for a college freshman is to skip class when he’s not prepared or doesn’t feel like it.
She doesn’t have an accurate assessment of the cost of each class period. Depending on tuition costs, a class period costs somewhere around $50. Yes, $50. That adds up very quickly. If he makes $10 an hour, he would need to work 5 hours to earn the money back. Putting this concept into perspective will encourage your child to attend class and get the most out of her money.
Your college freshman may be pretty clueless about finances when entering college. That’s ok. You can help him realize the ramifications of his financial decisions. Let your college freshman take ownership of her finances. Help him become the financially responsible adult you know he can be!
