For many students, college is the first time their spending is not under a parent’s watchful eye. The temptation to buy more of what they want-rather than what they need-may get the best of them. And it is this kind of habit that can spell disaster after college, says Wake Forest University business professor John Dunkelberg.
“The spending habits students form during college helps determine their ability to handle money throughout their lives,” he says.
Parents and their college-bound children can use the next four years as a financial training ground, says Dunkelberg, who specializes in financial issues and teaches in the Calloway School of Business and Accountancy.
“It’s a time for students to get used to living within a budget and handling financial temptations, such as credit cards.”
Dunkelberg says the responsibility of managing money falls upon all students. “Whether they’re sent money from their parents each month, have a job, or receive money from scholarships and loans–they still need to be wise about their spending.”
With the school year about to begin, Dunkelberg offers a few tips to help students develop sound financial habits during college.
Pack a budget along with the linens, pens and posters. Students and their parents should work out a budget together, so there is a clear understanding of the expenses the student must pay.
Just like a class schedule, the budget may need some adjustment. Try it out for a month or two. If it still doesn’t work, the student should try jotting down their expenses. Spending too much on “wants” rather than “needs” might be the problem.
Parents who plan to give their child a monthly allowance during college should send a set amount and try not to deviate. Students should think of the money as a paycheck and be expected to cover all agreed upon expenses.
Build a good credit history. Students should apply for a major credit card. If a student cannot get a major credit card, one can be issued in their name from their parent’s account. The student should still pay for their own charges. Other options include cards from department stores and gasoline companies. These are relatively easy to get and will help build a credit history.
Get used to handling credit. Barring unexpected emergencies, students should think of a credit card purchase as a cash purchase-only charge what you know you can pay off when the bill arrives. Also, avoid using a credit card to get cash from an ATM (automated teller machine) since additional charges may accrue.
While learning to balance study time and play time, students should also balance their checkbook, keep up with ATM transactions and track their credit card purchases. It’s important for a student to learn how these financial options work together.
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