The summer of celebrating milestones is nearing its end and as the days become shorter, and the night air becomes brisker, the countdown to commemorating another touchstone continues. Thus, whether your child has chosen to partake in the college experience or has decided to embark on a year-long journey of self-discovery, praise should be bestowed. When examining students and their first-year collegiate experiences further, it is no secret that families will be battling a rollercoaster of emotions, no matter if your child will be attending a 2 or 4-year institution close to home or attending an institution hours away/out-of-state. Therefore, if your child will be leaving the nest, every moment leading up to Move-in Day is precious, which means that every minute of the bus, car, plane, or train ride to campus will be equally sacred. For families excitedly driving their child to college, you are aware that time spent on the road will be unevenly divided between discussions on life lessons turned into lectures, the silent treatment due to technology, and casual conversations with bursts of laughter.
Thus, without notice, the hours have passed, and you have finally arrived at your destination – the parking lot of your child’s new dwellings for roughly the next 4 years. Upon arrival, you will begin unloading suitcases, and other miscellaneous items, from the car, which will be a family affair. Furthermore, unloading these items will be done at a rapid pace so as to ensure that every task on the day’s itinerary will be met. As such, tasks will include, but are not limited to: retrieving dormitory keys from the housing office, becoming acquainted with your child’s roommates and their families, enthusiastically meeting with first-year Resident Assistants (RAs), and finally helping your child unpack. Similar to unloading the car, unpacking your child’s suitcase, or trunk, will be a family affair as well. Thus, as clothes are neatly placed into closets and drawers, and sheets are fitted onto their bed, emotions will again intensify. And so, the day concludes, with hugs, kisses, and parting words plentiful, as you return to your car for a pensive ride home. As conversations and interactions start to replay in your mind, you begin crossing off items on your mental checklist for you are confident that you have covered all of the basics. Such basics include equipping your child with the necessary survival skills for the first semester, which entails proper money management. Surviving, and ultimately thriving, during the first semester of college will be one of many goals for your child as they navigate academic and social complexities. As such, their first semester will be an adventure chock-full of memories and tales that will be recounted for years to come. Thus, within twelve weeks, your child will experience the following: New Student Orientation, meeting new friends, completing the first week of classes, midterms, slowly losing friends, basking in the glow of Thanksgiving break, and closing out finals with a bang. Throughout this jam-packed journey, your hope is that your child continues to practice, or begin to adopt, feasible fiscal habits that complement their budding independence, which will hopefully eliminate the borrower-lender relationship. Economically, the borrower-lender relationship is defined as one in which a financial institution acts a lender granting a borrower a loan with an established agreement of repayment (interest included) in a timely manner. Now, under the guide of kinship, the parent or guardian acts a lender granting the borrower, the child, with requested funds. However, the child does not have to repay the funds. Therefore, to eliminate this potential relationship, the hope is that all of the earned income from after school and summer employment has been adequately saved. Yet, because life is not without complications, it is more than possible that your child will struggle financially during their first semester of college. As a result, intervention is required. Should your child’s checking and saving accounts need replenishing, there are a myriad of opportunities available for exploration. The first option to explore is Federal Work-Study. Federal Work-Study is a component of federal student aid, which provides both full-time and part-time students employment opportunities to earn income. Income earned can subsidize costs and additional financial needs. Moreover, the amount earned through employment cannot your total work-study award amount. As a result, your employer, or financial aid advisor will take both your class schedule and academic progress into consideration when assigning weekly work hours. If you are unsure if you qualify for federal work-study, check with your institution’s financial office. The second and third options to explore are that of on-campus and off-campus employment. Similar to work-study, on-campus employment allows students to work for the institution with hours work, and subsequent rate, in accordance with academic schedules. However, on-campus employment is not a component of financial aid and as such is not classified a student aid. Furthermore, when employed off-campus, students are working for a public agency, or private non-profit organization, “where the work performed provides the public with goods and services” (www.studentaid.ed.gov). Thus, with the aforementioned options at your child’s disposal, working towards a powerful, and prosperous, financial future can occur. Moreover, with the positive fiscal habits cultivated during the first three month of the semester, the path towards to an overall successful first year has been paved. As the research first first-year funding options intensifies, I am confident that your child will discover an infamous source of funding: credit cards. Before unpacking the nuances of a credit card, it is important to define what exactly credit is. Credit is the money that a lender (financial institution, often a bank) makes available to a borrower (in this example, your child) with the understanding that the borrower will repay the money, with interest, in the future. Thus, compact and easy-to-use, a credit card will enable your child to make quick purchases (a meal before class, groceries, or a Spring Break plane ticket) without hassle. Additionally, these purchases, and more, can be made so long as they are in line with credit limits, and monthly balances are repaid with 25-30 days. When a payment is not made within a given timeframe, interest, the percentage of what is owed plus the total amount owed, is added. Over the years it has become widely-known that credit card companies heavily seek out first-year students in the hopes that they sign up for a credit card. Therefore, should your child be excited about the prospect of signing up for one, their excitement should be supported. However, before signing on the dotted line, your child should memorize, and comprehend, credit card terms and definitions. Thus, the first term to learn is Annual Percentage Rate (APR). From credit cards to loans (auto, mortgage, and student loans alike), APR is the yearly rate of interest. To illustrate how APR is calculated further, Discover provides customers with the following detailed explanation: Let’s say you have a balance of $1,000 on your credit card with an APR of 18 percent. If you hold that balance over a year, the total interest paid annually is $180. You would pay that $180 divided over 12 months, resulting in a monthly interest payment of $15. Another key term to learn and comprehend is fees. Fees are the charges made to your account. Charges to an account often include annual fees, balance fees, cash advance fees, late payment fees, and overdraft fees. While the research surrounding credit cards (terms and definitions included) is exhaustive, the information is necessary. Thus, once your child has become better acquainted with terms, they can begin researching which credit card is best for their needs. Alongside researching the various credit card companies, have your child examine the advantages and disadvantages of possessing a credit card. A previously mentioned advantaged of having a credit card is the ability to make purchases sooner, rather than having to save for an unspecified period of time. Another advantage is that utilizing credit helps to eliminate the needy to carry cash. Furthermore, using credit can help establish a “credit history”, which can make it less expensive to use credit in the future. Essentially, individuals with an above average credit history (having made payments on time) will be able to borrow money at lower interest rates than individuals with a poor credit history (having made payments late). Conversely, one disadvantage of credit is easy mismanagement of funds. Because obtaining credit is fairly easy, and making multiple purchases without tracking expenses is common, meeting monthly repayment requirements is difficult. As a result, debt is incurred and rapidly increases resulting in long-lasting and serious damages to one’s financial life. Another disadvantage of credit is the failure to repay the minimum balance on loans, which can result in the garnishment of income tax refunds, wages, and more. Moreover, where we learned that having an above average credit history lowers the interest rate on future loans, having a poor credit history can raise interest rates. Therefore, your child can avoid these scenarios by tracking all purchases and consistently making monthly payments. Your family’s mission to minimize first-year debt can be achieved so long as feasible financial habits are adopted and regularly enforced. Thus, whether your child created a budget, and adheres to it, utilizes technology to download the various free money management apps (BillGuard, Dollarbird, Goodbudget, Mint, Personal Capital, and Wallaby to name a few), and applies financial theories learned to their everyday life, the outcome will be rewarding. Although financial blunders are bound to occur, having a solid foundation to serve as a guide can significantly decrease the level of financial chaos.
1 Comment
Jerry
9/29/2018 16:13:14
I can attest to work-study jobs being an essential resource for surviving those years of college. It helped me pay for books, transportation, lunch, etc.
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WhitneyEducation enthusiast whose mission it is to see Financial Literacy receive well-deserved shine. Archives
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