If you are considering purchasing a car for your student, ask the question: Why does he or she need a car?
In many cases, students leaving home for the first time are inexperienced in managing money and it is their first taste of financial independence. Parents can help prepare their children to spend wisely. There are a number of controllable expenses that can have a significant impact on the cost of your child’s college education. Read on for tips on cash management and how to cut college costs.
The advice given here about obtaining and using a credit card may seem overly cautious or protective, but abuse or overuse of a credit card is a very dangerous pitfall. Such abuse may lead to a bad credit record that will cause serious problems later in your child’s life, e.g., when attempting to rent an apartment or buy an automobile. It can also limit their ability to obtain an alternative loan in the event that you choose that option to finance a portion of the tuition bill. Opening a credit card account can help your child become more financially independent. The key to having a credit card is to be responsible and exercise restraint.
- Instruct your child to stay clear of card companies that come to college campuses offering free water bottles, T-shirts, or other promotional gimmicks.
- Help your child select one credit card before you leave home and discuss it with him or her. You might also consider tying the credit card to your account to help prevent late payments and allow you to monitor expenditures.
- Establish a modest limit, in the range of $500-$600.
- Look for a low interest rate and no annual fee.
- Instruct your child to pay the bill on time to avoid late charges, and pay it off in full each month to avoid paying interest.
Leave the Car at Home
This simple decision could save you and your child literally hundreds and even thousands of dollars. If you are considering purchasing a car for your student, ask the question: Why does he or she need a car? Yes, it may be convenient, but is it really a necessity? At many colleges, students who bring cars pay a parking fee from approximately $100-$500 annually, and in reality the parking fee is simply a hunting pass to find a parking space. There will also be additional costs for gas, oil changes, maintenance, insurance, and repairs.
If your child must bring a car to campus, make sure that you notify your insurance agent in order to avoid the possibility of no coverage if he or she has a claim. Also, note that premiums may either increase or decrease depending on your child’s on-campus or off-campus address.
Check Into Checking Accounts
Your student should consider applying for a checking account at a bank near the college. These lending institutions have experience with students who have low monthly balances and in most cases steadily declining balances from the beginning of the academic year. They should look for an account with no monthly service fee, no minimum balance, and no or nominal fees for use of an ATM machine. Also worth considering: Linking your child’s checking account with your credit card to cover any potential overdrafts.
Preventing Identity Theft
During college, students typically reside in close living quarters while on campus. Be sure your child safeguards his or her Social Security number, monthly bank statements, computer passwords, driver’s license number, credit card numbers, and other personal identification numbers and records. You may want to consider purchasing a small safe to keep in your child’s dorm room or apartment.
Excerpted from Financial Aid for the Utterly Confused by Anthony J. Bellia. Copyright © 2007 by The McGraw-Hill Companies.
© 2011 McGraw-Hill Financial Communications. All rights reserved.