Why college freshmen should take Finances 101
August 30, 2011
Even before your college student steps foot in the lecture hall, it may be time for him or her to take a crash course on something that will pose a test for the rest of his or her life: finances.
While your student's spending and budgeting skills can have a profound effect on your own checking account and might tempt you to keep their financial activities under your wing, it's important for young adults to build a credit history of their own.
That record will be important when they graduate and need to rent an apartment, buy a car or even get a job--since many employers now check credit histories when making hires.
Having students acquire their own checking accounts, money market accounts or online savings accounts has a number of advantages. For instance:
- They learn to shop around, finding out that while some banks are charging monthly fees for a checking account, others are still offering them for free.
- They learn how to balance a check book, making automatic deposits into savings accounts and the value of direct deposits from that part-time campus job.
- You'll have a chance to talk through the advantages and disadvantages of having overdraft protection, which can prevent the embarrassment of a declined purchase but can ultimately cost a great deal in late penalties and fees.
We've all heard a lot about the dangers of credit cards for college students, but the Wall Street Journal notes that getting a student credit card with a low credit limit can help a student build a good credit rating, as well as providing funds in emergencies.
Students can also use their cards to build up rewards, although there is the obvious danger of overuse. The Credit Card Act of 2009 restricts campus-based promotions on student credit cards, and students younger than 21 now have to have a co-signer.
If you're reluctant to co-sign, you can also add your son or daughter to be an authorized user on one of your cards. This may give you a few "teaching moments" as you see how your child is using the card, and it will help him or her build a good credit rating.