Consumer Voice - August 2006

Five Financial Lessons to Review Before Your Child Leaves Home

It may surprise you to learn that many students have not received, nor will they receive, financial education in school. If your child is leaving home for college this fall, you may want to consider spending some valuable time reviewing a few important financial lessons.

College students face numerous credit card offers and with the tempting list of must-have gadgets and clothing growing longer everyday, it is all too easy for young people to get into serious financial trouble today. Having a credit card is often viewed as a "status symbol" on campus, in spite of the fact that most students are broke.

We encourage you to cover a few important financial lessons before your child leaves for college. Doing so may dramatically impact a college student's ability to have a stable financial life while in school as well as after graduation. The most important message for you to get across to your child is to communicate with you about their finances to help ensure their success.

The five lessons you can review before your child leaves home are:

#1 Choosing and using a financial institution

Every student needs to have an account established with a financial institution in order to cash checks. There are many things to consider when choosing and using a financial institution for a college student:

What fees are charged? Every dollar counts for a college student and sometimes "free checking" isn't totally free. Some financial institutions charge customers to interact with tellers, for example. Ask for a list of fees. Be sure to ask about ATM fees. Many colleges have affiliated credit unions that offer low rates and easy access for students right on campus.
Where are the ATM's located? Easy access to an account can help a student to maintain control over their spending. If physical access is not important, you may find that using a financial institution that has Internet banking or direct deposit available is a good choice. This way, your student can move money around quickly and easily.
Does your student need access to loans? If so, compare loan rates.
Make sure your child knows how to balance a checking account every month and what to do if they find an error.
Bouncing checks can be extremely expensive and can cause legal problems and affect credit scoring. Don't assume that your child already knows this fact. Emphasize the need to keep an account register and not to rely on checking with the financial institution to find out what the current balance is in the account. Make sure your child knows they need to account for checks that have not been cashed.

#2 Budget for "incidentals" and emergencies

When money is tight, it would seem that a budget would have very few line items. But that may not be the case. Other than food, shelter, and tuition, students need to learn how to budget for incidentals, entertainment or emergencies. Establishing a method for this can help keep your child from relying on credit. We recommend the following:

Sit down with your child and establish a written monthly budget. Discuss how each item in the budget will be paid and what is expected from your child.
Set aside an established amount of money each month for incidentals such as toiletries, parking fees, etc. Advise your student to keep track of the amount of money that has been put aside for this category whether they use the funds in a given month or not. Entertainment and emergencies can be handled the same way.
Use a special savings account or pre-paid card to pay for these items instead of cash to help keep track of spending.
Discuss a clothing budget and set a limit. Impulse buying can wreak havoc on a budget. Remind students they can keep a "wish list" of clothing items (or gift cards) they would like to receive as gifts instead.

#3 Pay Bills on Time

One mistake can cost a lot of money. When bills are not paid on time, late fees are added and a person's credit report can also be impacted. Help your child establish a system for paying bills on time:

Set up automatic bill-paying through your financial institution.
If automatic payments are not feasible, set specific dates when bills will be paid, such as the 1st and the 15th of the month, depending on due dates.
Set up calendar reminders on computers or cell phones to remind your child to pay bills. Students lead very hectic lives. It is easy to forget to pay a bill.
Organize bills and keep a log of when they were paid.

#4 Use Credit Responsibly

Some parents don't realize this, but college students and anyone age 18 and over can receive credit cards without parental authorization. That is why it is important for you to discuss this with your child and to find solutions to the need to sometimes have access to credit in case of emergencies. Here are a few tips:

If your child already has several credit cards, consider closing all but one account.
Many credit card companies offer pre-paid credit cards that are used just like credit cards except that the limit is established by the amount of funds deposited. Debit cards and gift cards are also good alternatives. Another alternative is to add your student to one of your accounts. This way, you can help to monitor spending.
Be sure your student understands the cost of using credit if he or she does have a credit card.
Tell your student about the pitfalls of check cashing stores and payday loans. These loans carry excessive fees that could put your student in a financial crisis very quickly.
Have a discussion with your child about when it is OK to use a credit card and when it is not.
Make sure your child understands how long it takes to pay off debt.

#5 Protect Your Identity

It takes very little information for someone to steal your identity and open credit lines in your name. Students need to:

Be careful about who you allow to "walk off" with your credit card. Many bars, for example, require a person to leave a credit card with a waitress in order to run a tab. Pay cash instead.
Think twice before putting your social security number on anything. Always ask if the social security number is necessary. Many times, something else will work.
Don't flash your credit card around. Some identity thieves now use cell phone cameras to take pictures of credit cards.
Be cautious when using public computers. If you use one to do financial transactions, make sure you clear the cache before leaving.
Be cautious when using public computers. If you use one to do financial transactions, make sure you clear the cache before leaving.
The state of Colorado has a new law that allows you to put security freeze on your credit report. The freeze prevents any creditor from accessing your credit report without your permission. Check our link to information about putting a security freeze on your credit report for more information.

Read Related Articles on This Subject:
Prepaid Cards: What They Are and How They Work

Last-Minute College Financing Options for Undergraduates Still Available

For first- time college parents, prepare to expect the unexpected

College Students Need to Learn Credit Card Lessons

Students Urged to Protect Their Identity

Survey Reveals Majority of College Students Breaking Even or Flat Broke While in School

We all try our best to plan ahead for pricey back-to- school expenses like clothing, shoes and school supplies. But between growth spurts, summer vacations and unexpected expenses, August often catches up with us before we know it, leaving the family budget in a pinch. Here are some tips on making the most of your back-to-school money:

Save on Clothing & Shoes

There are some tried and true methods of saving on clothing and shoes, such as shopping at thrift stores and consignment shops. You may find those gems that were passed over by other shoppers if you can spend time searching. While these are valuable resources, many families just do not have the time to spend trying to find these deals. Furthermore, gasoline prices can impact your ability to travel from one store to another. If this is the case for you, try some of these tips:

Know what you need. Before you do anything, make certain you know what clothing you need now. Have your children try on all of the clothes they currently have. Take into account that they may be in the midst of a growth spurt and buy only what you need now.
Hand-me-downs are hot. Talk to friends and family to find out if their older or larger children have any clothes they don't need anymore.
Shop alone. Whenever possible, do not take your children with you when you buy school clothes to avoid being pressured to buy certain items.
Make a wish list. It is OK to leave your children wanting something. The holidays will come soon enough. Have your child start their wish list now.
Kick around shoes. Buy an acceptable, but less expensive pair of extra shoes in addition to the ones your child feels they must have. Have your child wear the extra pair of shoes on bad weather days, on certain days of the week or for kicking around in the dirt. This way, the other pair will last all year and you won't be faced with buying another pair of expensive shoes in December.

School Supplies

School supplies can be extremely expensive, but there are still ways to save money:

Comparison shop. School supply lists often show quantities that are the most expensive option. Analyze the list carefully and compare packages at the store.
Buy in bulk. If your Parent-Teacher Organization sells school supplies in packages, you will save money and a lot of time buying them instead of shopping for individual items.
Spend to save. Backpacks get a lot of abuse. It may be much more cost effective to buy a more expensive and well-made backpack that can be used year after year. A good tailor can also fix backpacks if the zipper is broken or seams are splitting. You may also find great deals on backpacks at garage sales.
Recycle. Re-use old glue bottles by combining all of those partial bottles.
Bargain shop. Check the dollar stores and overstock clearance stores before going to conventional stores.
Save your swag. Throughout the year, save pencils, pens, and folders you receive at conventions or as swag from businesses. Put them in a special box marked "school supplies."

Read More on This Subject:

Back to school savings guide5 Tips: How to get deals on books, computers and more

Helpful Tips For Back-To-School Spending "Avoid credit based purchases," Says the ICFE

Kids need to have style and parents need to have money. Within reason, these two needs can work together if you take the time to shop smart and set boundaries with your children.

Parents already know that designer and brand name clothes are expensive. While we would like to prevent our children from getting caught up in these expensive fashions, we all remember what it was like to go back to school and want to fit in. Nobody wants to relive those embarrassing middle school years when you wore straight-leg chords or utility pants and everyone else was wearing bell-bottom jeans.

If you are dealing with a "branded" kid, here are some tips for meeting somewhere in the middle:

Dress for less, surf the Internet. Many stores only exist virtually. For example, if your child is an "Emo" style kid (skateboarders who wear very snug spandex-enhanced jeans), there is one Internet store that carries their own brand of Emo pants. While name brand Emo jeans run $50-$75, this store has acceptable Emo pants for $29.99 Local storefront skateboarding stores also have their own brands, which cost about $40-$45 Also, you can find remarkable deals through Internet stores that sell overstocked items. You will also find out which local retail stores may carry the exact clothing you are seeking.
Alter other clothes. Sometimes you can purchase clothing on sale that is close to what you need but not exactly right. If you can do simple alterations, it might be worthwhile to buy the lower-priced clothing and alter them.
Let's make a deal. There is nothing wrong with making deals with your children. One may be that if your child wants brand name clothes, they must use part of their own money to pay for them. This is a great opportunity for your child to learn about money management and priorities. Show them a comparable, non-brand product against the brand name and give them a choice. Another strategy is to tell your child you will buy only a limited number of brand-name items.
Shirts vs. pants. Shirts cost much less than pants. Buy more designer shirts and less designer pants or bottoms. That way, your child will have at least part of the "look."
A patch or iron-on could do the trick. Many brand name companies carry embroidered patches and iron-on logos that can be put on clothing. For example, if your child wants a hooded sweatshirt (hoodie) with a brand name logo on it, buy a plain hoodie and sew an embroidered patch on it. You could save at least $20 per hoodie doing this. Iron-ons can be put on virtually any clothing to get the desired look.
Get crafty. Today's trends are all about details- embroidery, stencils and beading-that add up to one expensive item of clothing. Let your kids get creative with clothing by having them do a back-to-school craft project. Look at magazines for inspiration, then let them work with inexpensive embroidery thread, beads or fabric paints to recreate the look. A few stitches or beads can give your child's clothes one-of- a-kind appeal for a fraction of the cost of designer items.
Shoe Fetish. Many second-string department stores that clearance name brands also carry shoes. The selection is limited but you may find exactly the right shoes for a lot less than other shoe stores.
Accessories. Sometimes the right belt or buckle or funky beads is all a child needs. Before you indulge in a full-scale purchase of a name brand outfit, find out what else might exist to satisfy the need.


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