This was originally published on Monday, April 22, 2019, in the Pacific Daily News. Click here to subscribe to the PDN.
College students face many difficult financial decisions when it comes to managing their money. Often, they do not realize that their financial performance in college will impact them long after they graduate.
Decisions they make on using their credit cards, financial aid and spending can impact their job search, their credit score and their ability to pay back what they borrowed. As young adults they need to figure out how to pay for college, earn some spending money and still go to class and get good grades.
- College is the best time to start thinking about being financially sound and getting into the habit of creating and using a budget. A student’s financial responsibilities are still simple and manageable. It will not take long to create a budget.
It’s easy to lose track of spending and having a budget ensures that they will know exactly where their money is going. Today’s technology makes it easier with apps that they can use directly from their smartphone.
- Credit card debt.Credit cards are a convenient way to pay for college necessities and can play an important role in establishing a college student’s credit history. Schools sometimes allow financial institutions to come on campus during open house or orientation. The financial institutions usually offer credit cards for college students.
Because students may not have favorable credit yet or do not have income, these credit cards have high interest rates, unfavorable terms and allow students to spend more money than they earn. At times, the financial institution may require parents to be a co-signer.
If the student only pays the minimum monthly payment, they may be stuck paying their credit card debt years after they graduate. In worse scenarios it could affect their credit score and that of their parents, if they are co-signers.
Teach college students how to use credit cards wisely, paying the bill on time and only charging what they can afford to pay in full. Inform them of the consequences if they pay late or do not pay off their debt in full.
- Peer pressure.Living on their own without parental supervision leaves students open for all sorts of peer pressure. With their newfound independence, some students can get into financial trouble trying to keep up with their friends, who may not be financially savvy or have a larger spending limit from their parents. They may be pressured into eating out more often, buying more clothing than they need, going out on the weekends or planning a costly vacation during their breaks.
- Failing classes.For many years your child has attended school and followed a strict schedule. Even their after-school activities and homework are carefully monitored. College is very different from what they have been accustomed.
Some professors may not expect students to be in class every session and, depending on their course load, they may have a lot of time that they may consider free. Socializing is also a big part of the college experience. This new freedom could lead to academic troubles and financial troubles.
Dropping classes may result in forfeiture of the tuition and retaking classes is expensive and could prolong their time in college. If it becomes a trend, they may be put on academic probation or, worse, expelled. There may be fees associated with failing a class and loss of scholarships and/or grants. Being accepted by another college will become difficult.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 25 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at firstname.lastname@example.org and read past columns at the Money Matters blog at http://www.moneymattersguam.wordpress.com.