GOING TO COLLEGE: Learning the basics of money

The Houston Chronicle
August 14, 2004

WHEN Yolanda Brown went on a shopping spree in college, she was armed with her choice of credit cards.

Four years ago, she had everything from Visa to a Victoria's Secret credit card. Now 26, she graduated from college with seven cards total and $ 8,000 in credit card debt.

"It was just having that credit card and knowing I could have what I want," said Brown, who expects to pay back the debt by next year. "I guess they call that power."

Brown's situation illustrates a worst-case scenario that some parents who'll be sending their students off in a couple of weeks may envision. With college tuition up this year, the total cost for the school year can be daunting.

Fortunately, there are a few tips students can follow to ensure that the price of college doesn't eat away at their finances.

Credit or debit?

Financial planners say the safest way for parents to manage their student's money is by giving them a debit card that draws money from a checking account. Parents can transfer money into the account on a monthly basis or whenever needed.

Students and their parents should also decide on a monthly allowance before the student leaves for college. But they should realize that the amount could change once the student gets a better idea of the cost of living.

"It's sort of going to be a trial and error sort of thing," said Jared Dubin, who will attend the University of Texas this fall. His parents will give him anywhere from $ 200 to $ 400 a month.

Even managing a debit card can be dangerous for some students if they are in a new city. Kelly Rote, spokeswoman for Consumer Credit Counseling Services, recommends that students keep track of all their receipts and log their expenditures onto a computer so that they don't overspend.

If you dare venture into the credit card realm, do it wisely.

"Too many times people learn about credit through the school of hard knocks," Rote said. "They don't understand how important it is to pay everything on time and that could affect their credit dramatically."

Any negative credit will stay on your report for seven years, she said. She advises parents and students to pick just one credit card with a spending limit and no annual fee.

It will also help if parents choose a bank with locations near the university, says Debra White Stevens, a certified financial planner and a member of the Financial Planning Association.

That way, the student will also have access if needed.

She says college students should veer away from the credit card companies that bombard them with offers when they hit campus.

The offers can be tempting at the time, but they could come with hidden fees or high interest rates.

Planning for out-of-staters

If your child is leaving the state, managing your money is going to be a bit more challenging.

One way is to start looking early for plane tickets. You can also look into flying out of nearby cities that have cheaper airfare. Susie Levin's daughter Lauren will be leaving for the University of Arizona this fall. She says Lauren may fly out of Phoenix rather than Tucson because the ticket to Houston costs less.

You can also try to hold down shipping and storage costs by waiting to purchase certain items in the city in which your son or daughter will attend college.

"I'm not so much concerned about the finances," Susie Levin said. "I'm more concerned about the smooth transition on her part. The finances are not going to go away."

Even if you plan out a budget, in the end, it's up to your son or daughter about how much they'll spend on the extras.

This includes food, clothes, and expenses that come with going out on the weekends.

Stored value card

Most universities offer a stored value card for that which can be used in cafeterias and laundry rooms on campus. Students can check their balance online at the university's Web site.

You can also limit the cost of health and automobile insurance for your child by keeping them on your policy.

It's easy to get caught up in the excitement of being away from home.

The important thing for college students to remember, financial planners advise, is that even though mom and dad aren't there, they are always watching - even if it's by checking your account balance online.

And parents should know their children may make some mistakes.

"The average student going off to school isn't fabulous with money yet," White Stevens said. "If you are trying to protect them from consequences, you are cheating them out of a lesson."

. . . FINANCE 101
Here are some simple tips to help college students control their finances.
Students should:
1.Prepare a monthly budget before leaving for school.
2. Avoid the credit card companies that are making offers on campus.
3. Stay on their parents insurance policy.
4. Look into plane tickets early if going to school out of state.
5. Watch the incidentals. This includes food and entertainment.