Off to College? Read This First
Again this year, new and returning college students face health threats from Covid-19, raising concerns about vaccines, masks, crowded events, dorm living and so forth. But something else to be concerned about is financial health, often jeopardized by poor financial habits, scams, and super-sized student loans.
Although they’re often legally adults, most college students are still adolescents at heart and may not be as careful with money as we might hope. Many also lack some essential “adulting” habits, so PIRG Education Fund’s Consumer Watchdog Teresa Murray has compiled a checklist of lessons for parents to consider discussing with their children before they go off to college.
Financial literacy 101
1. Learn how to budget — and how to distinguish needs from wants. Make sure you cover your required expenses (rent, food, utilities) first. Only then should you use extra money on discretionary spending. Many bank apps offer cool tools to track expenses on your credit card or debit card so you can get a better feel for what you spend your money on.
2. Learn to save. If you have a job, or even if you don’t, try to save a few dollars a week. You may say that will never amount to anything, but it’s not about the amount; it’s about developing the habit. Once the habit is ingrained, you can increase the amount you save in the months and years ahead. That’s how you build up enough cash to make a down payment on a house, car or other necessity.
3. Protect your personal information. That includes things such as not spraying your information all over social media; not using a credit card or debit card at shady places; and not providing your Social Security number on every job application or to every dentist’s office. It also means recognizing attempts to trick you or steal your information through phishing emails and imposter phone calls and texts. Young people can be too trusting with information that can be used to steal their money or their identity.
4. Keep your receipts, car maintenance records, leases, bank statements and other key documents, through whatever system works for you. You can store screenshots on your phone or laptop. You can store papers in a shoe box or organized color-coded file folders. Whatever works for you, because you’ll need some of them later. For example, the IRS says you should keep your tax returns for 3 to 7 years.
5. Read what you sign. Don’t sign anything you don’t read or understand. This is particularly important once young people turn 18 and their signature becomes legally binding. As an adult, if you agree to something bad that’s in writing, no one is going to sympathize with you if you failed to read and understand it before signing it.
6. Think about all the tasks adults deal with every day. Know how to make doctor’s appointments within your insurance network, fill a prescription, book a flight or hotel and make appointments for oil changes and other car maintenance.
7. Learn how checking accounts and savings accounts work, as well as checks, debit cards and credit cards.
8. Understand debt. Learn about loans and credit cards, and understand compounding interest and how to manage repaying loans or credit cards — and, when it comes to the latter, you should try to pay the balance in full each month.
9. Pay your bills on time and build a solid credit history. Recognize how a credit score affects not just your ability to qualify for loans or credit cards, but also to rent an apartment and qualify for lower auto insurance rates.
10. Check your mailbox. Young people often forget that important items can come in the “snail mail.” Besides birthday cards with gifts and formal invitations to friends’ weddings, the mail is how you might receive checks, speeding tickets, replacement credit or debit cards, tax notices and other important documents that should not be ignored.
11. Learn about income taxes and how to file tax returns (maybe with some help the first few years).
12. Know when to ask for help. A lot of financial paperwork can be very confusing, even to experienced adults. If you have a document, get a piece of mail or receive a phone call you don’t quite understand, ask a trusted adult for help. If you have a fraudulent or erroneous charge on your bank account or credit card, ask someone to help you understand your right to dispute it. If you’ve never bought a car before, take an older, experienced person with you. If you’ve never rented an apartment before, ask someone who has rented before to look over the lease agreement. If you get an overdraft fee and you don’t understand why, ask someone to help you. In very confusing or financially perilous circumstances, it may be worth hiring a lawyer for help.
Pledge week for scams
Scam artists are getting ready to “rush” students, just like frats and sororities, the Better Business Bureau warns.
Crooks aren’t as picky as fraternities and sororities about who they choose, either. If you’ve got a pulse, they’ll happily welcome you into their group of those who have had their money and/or their ID ripped off, the BBB cautions.
Here are some active scams to be avoided:
Employment scams. Students have reported receiving legitimate-appearing emails that look as though they are sent from university officials or specific professors. The message will often encourage the student to apply for an easy, flexible, part-time job with good pay. Without an in-person interview, these fake university officials or professors will “hire” the student, according to the email.
Before any actual work is done, a check will follow along with instructions on how to deposit it. Students are told to buy things like gift cards and prepaid debit cards, and to send part of those purchases back to the “employer.”
Eventually, of course, the check will bounce, and the student is stuck with the consequences. The scammer makes off with the student’s money and personal information.
Fake credit cards. Many students are tempted to sign up for their first credit card as they begin their college education. BBB recommends extra caution before doing so. Many first-time credit card holders have found it too easy to overspend, and in the process, to become stuck in a tangle of debt.
There is an additional hazard as well: some of those credit card offers may be phony, simply aimed at acquiring one’s personal information. Crooks may call, text or email “offers” that are complete fakes. They lure with unusually low rates and may request an upfront charge (which is always a tip-off of a scam). Remember: you cannot trust your phone’s caller ID or an email that uses logos which appear to be legitimate. Fakes are easy to produce. Check up on any offer yourself by separately contacting the business and inquiring about it.
Apartment scams. Students seeking housing can find themselves scammed by ads such as those on Craigslist. Online “offers” may claim you should act now due to high demand. Students will then send in their credit card information to lock in an apartment without seeing the apartment. Never seal a deal without first physically viewing the place advertised. Your money could be gone forever, and that great apartment could be complete fiction.
A habit worth cultivating. The beginning of the college years is the perfect time to start a lifelong practice: regularly checking on your credit report. It’s free and available by visiting annualcreditreport.com. Many have uncovered unusual activities this way, which could have snowballed into a credit nightmare that would take months or even years to straighten out.
Check regularly with BBB’s ScamTracker at bbb.org/scamtracker to keep up with the latest reported rip-offs.
Go easy on the student loans
As everyone knows by now, students have run up a massive amount of student debt ($1.7 trillion and counting) and many are having trouble paying it off. It’s one thing to graduate from law school or medical school with $150,000 in loans, but it’s quite another to get that MFA in art history or doctorate in musicology with a six-figure loan to pay off. Nothing wrong with art but it often doesn’t pay very well.
Give careful thought to spending a few years at a community college, then transferring to a four-year school. Or tone down your dreams of Harvard or Stanford and take a look at state schools in your state. Yes, the friends you make at Harvard may come in handy later but the ones you make at an in-state school may be even more helpful in the future, since they’re more likely to live and work in your area.
It’s great to go to school with a future president but it’s OK to know the governor too.
Tips for Hispanic families
Hispanic students and their families often face special financial challenges in education and other aspects of their lives. Recent data shows that 15% of Hispanics have no credit history and still experience challenges in the personal finance space.
To help overcome this issue, CreditCards.com created a guide to help Hispanics prepare for their financial future.