An Open Letter to the Student Starting College in the fall
Congratulations! This is a very exciting time in your life and this summer before college may be the last
time you get to truly act like a kid. It’s a big deal, but you can actually use this time to prepare for what
these next few years in college are going to bring. Sure there will be a lot of new experiences and
learning, but there will also be challenges to your budget. College students may be known for their
ability to live off ramen noodles and skimp wherever they can, but the truth is that they are making all
sorts of money decisions that can affect them for the rest of their lives. The most important is how they
choose to pay for their college tuition, housing, and living expenses.
First off, I suggest you get a job. If you currently have a job, keep it. Work up until the time you leave for
school, and SAVE as much as you possibly can – you’re going to need it. If you don’t have a job right
now, try to find a seasonal summer job or a babysitting gig and (you guessed it) save money! When you
get to school in the fall, consider looking for a part-time job that can work with your school schedule.
You may find that the most flexible ones are on-campus jobs or fast food. (Remember this isn’t a career,
it’s a way to earn extra money and get some work experience.) When you get to be an upper classmen
and get to start applying for internships, you will be really happy that you have that experience and
money in your savings account.
I’m sure the topic of scholarships has been shoved down your throat many times during the last year,
but it’s definitely a good idea to apply for as many as possible. Scholarships mean free money for you to
go to school, and you don’t have to pay them back. It’s a win-win situation for everyone! If you’ve
missed the deadline for some scholarships for this year, keep an eye out for next year. There are some
that are offered to individuals who join certain organizations and some scholarships aren’t even offered
to freshmen. Be sure to keep an eye out for those during the year, and get your applications in on the
due date.
If scholarships, working, and your parent’s contributions still aren’t enough to pay for all of your school
costs, your last alternative is usually student loans. If you have to take out student loans to pay for
school, you’re certainly not alone. Over 40 million Americans have student loan debt, with the average
borrower close to $30,000 in debt. The problem with student loans is that they are easy. Like super easy.
You don’t have to have good credit to get them. You don’t have to be a good student to get them. You
just have to fill out a form and click accept. This is good if you really need them to pay for your tuition,
but I wouldn’t suggest taking them out to pay for late night fast food runs or spring break trips. Tell your
school’s financial aid office that you only want the amount that you need, otherwise you may really find
yourself regretting it when you get out of school. If you are working during school, try paying at least
$25-$50 a month on your student loans. This will help cut down on the interest that you will pay over
the life of the loan, maybe even saving you a few thousand dollars during your repayment. Grants are
also a possibility for those with lower incomes; even if you don’t want student loans, be sure to fill out
the FAFSA to see if you qualify for a grant. Like scholarships, grants are free money for you to go to
school. As long as you complete the classes that your grant pays for, you won’t have to pay back that
money.
I strongly suggest starting to build your credit now. While many college-aged individuals have failed
miserably with credit cards, starting a small (very small) credit account can help build your credit so you
graduate from college with a good credit score. Check into getting a secured credit card. With as little as
$300 you can open one up at Education Credit Union. We will hold your money in a share savings
account and give you a credit card with a limit that matches the amount in your share savings. Then you
use the card to build your payment history and your credit score. When you’re ready to close the card (I
suggest waiting AT LEAST a year), you get your $300 back. Building your credit now can really help save
you money later on utility deposits, car loans, and mortgages.
Good luck to you all! I hope college is all you hoped it would be and your last summer is amazing.
Remember to make good choices because they will affect you later on.
Keep calm and college on.
Until next time…
Don’t Buy Stuff You Can’t Afford”
It’s amazing how simple this statement is and how often it is ignored. When I speak to kids about
budgeting, I always tell them that the secret to budgeting is to not spend more money than you make.
They look at me with this “DUH!” stare like I just said the stupidest thing that they have ever heard.
When you’re a kid, your options for getting money to buy things are limited to using the money you
already have, finding a way to make money, or the classic (and my personal favorite when I was a kid)
asking your parents for money. Next I tell kids about credit cards. Most of them have heard of credit
cards and know that you can use them to buy things, but don’t know exactly what that entails.
As adults, we understand credit cards pretty well. We use them to buy things and pay the credit card
company back when the bill is due. If we don’t pay the full amount by the due date, we’re probably
going to get charged interest. Depending on the rate, that interest can add up quickly. Avoiding credit
card debt can be tough when emergencies, medical bills, and other unexpected expenses pop up, but
the real issue lies when people use credit cards to buy unnecessary wants that they really can’t afford.
I recently watched the SNL sketch “Don’t Buy Stuff You Cannot Afford”, which you can check out here:
http://www.nbc.com/saturday-night-live/video/dont-buy-stuff/n12020. As simple and as silly as the
video is, it makes a great point.
If you want something and you don’t have the money for it, don’t buy it. Wait until you save up for it. If
you want a new outfit, buy one you can afford. Don’t try to order a steakhouse meal on a fast food
budget and don’t try to buy everything today and mess up your tomorrow. Here’s the thing: You know
today what your situation is. Job – no job, debt – no debt, house – no house, you don’t know exactly
what you will have in the future. There are some times in life where it’s just better to avoid “buy now,
pay later” and instead go with “save now, buy later”. Credit cards can be good for earning rewards,
building credit, and emergency use. Anything outside of those realms should be evaluated on whether
or not that purchase is worth it. If you don’t trust yourself with a credit card or have had bad
experiences in the past, it may be best to stick with your debit card or cash for a while just to be safe.
The hard thing about saving up for purchases is that it takes time and patience. For those of us that
don’t have a lot of time or patience, this can be quite difficult. If you’re looking to get out of credit card
debt, start first with not adding any more credit card debt. While paying off debt and waiting to save
before buying that new TV might not be fun, I promise that “Future You” will thank you for the sacrifice.
Until next time…