Freshman Finance 101

Going to college isn’t cheap. A combination of scholarships, loans and financial aid can reduce the cost of a college education, but there’s still the question of how to cover the rest of the bill – and other expenses related to college life.
With colleges and universities preparing to welcome an influx of students, financial experts advise that it might be a good time for parents to have a chat with their college-bound kids.
Alisa Wood of Tupelo has had one of those conversations and is in pretty good shape. All but $300 of her education expenses will be paid for. The Tupelo High graduate is going to Lee University in Cleveland, Tenn., and she’ll have a debit card at her disposal.
Her mother will deposit a certain amount each month into the account, but it’s up to Alisa to keep track of how much is in it. Her father bought her a car and is taking care of the insurance. So she’s off to a good start.
And she also got some valuable experience in high school.
She worked at Barnes & Noble during her junior year. Her load of advanced placement classes during her senior year kept her from going back, but she did get $50 once a week for allowance.
“I got it on a Thursday so I had it for the weekend, to get gas, go out,” she said. “But now I’ll be getting money just once a month, so I’ll have to be careful and budget.”
And budgeting is very important for college students, whether they’re freshmen or seniors, said Paul Golden of the nonprofit National Endowment for Financial Education. Not that budgeting is necessarily high on the priority list for students.
“There’s a lot to think about when you’re going to school,” he said. “You can’t plan for every possible thing that might happen. But budgeting is important. The key is to do a little planning.”
Parents, or responsible adults, need to take the lead, Golden said.
“Parents should help emphasize the difference between a want and a need,” he advised. “There should be some form of savings account set aside for those everyday needs, for example.”
Evan Blair, a Corinth High graduate headed to Mississippi State University, has a debit card but hasn’t worked out a budget yet.
“Luckily I’ll only be responsible for gasoline, recreation and food outside my meal plan while I’m at school,” he said. “I haven’t set any spending limits yet, but I’m sure I’ll need to once I start school. My parents encourage me to to keep up with my debit card transactions and don’t use it on any unnecessary things.”
Golden said the typical advice for most people is to have an emergency fund covering three to six months worth of expenses. But that can be tougher for college students. Having a Bank of Mom & Dad or a job helps, but not everyone is that fortunate. Nevertheless, students need an emergency fund of some kind.
“A semester of expenses for an emergency fund is good,” Golden said. “Even as little as $500. You have to prepare for the unexpected.”
Pizzas and Xbox games are not emergency expenses. A hard-drive crash, a flat tire and an unexpected dentist visit are.
Learning how to manage money may be more important than ever, given the uncertainty of the economy.
According to NEFE, college students haven’t been untouched by the recession. A 2009 study funded by the group and conducted by the University of Arizona showed that 95 percent of college students said the economic downturn has impacted their family’s finances and 93 percent have felt an effect on their own financial lives.
The study showed that budgeting increased 3 percent among students who felt the most impact from the recession. Researchers saw an “alarming” increase in debt among students, with credit card debt rising 60 percent and education debt up more than 85 percent compared to spring 2008.
But NEFE noted that parents are the first line of defense, sitting in the best position to help guide their children through economic uncertainty.
“My parents always remind me to use my money wisely and always put back a small amount of what I get in case I need it later on for emergency purposes, hard times, etc., “ said Claire Wilson, a Tremont High graduate headed to Itawamba Community College.
Wilson said several scholarships will pay for the chunk of her school expenses, and she plans to participate in ICC’s work study program.
And when it comes to spending money, Wilson said she’s “somewhat of a penny-pincher when it comes to most things.”
Experts say the more good financial advice parents can give their children, the better.
But, added Golden, “it’s also important for parents not to bail out kids at every moment.”
In other words, kids won’t learn responsibility – or consequences – if they know they’ll land softly.
“Parents are the No. 1 influence,” Golden said, “both positive and negative. So it’s such a critical time that everyone get together and talk.”
Jade Cobern, a South Pontotoc High graduate headed to MSU, has had some of those talks.
And it seems she’s off to a good start. Cobern has had her own checking account for about six months and she said she’s done well managing it on her own.
“I am very cautious about how much I spend and I always double-check my balance to make sure I know how much is in my account at all times. I rarely buy things spontaneously – I usually plan ahead what I am going to buy and how much it is going to cost.”
Cobern doesn’t have a spending limit, but “my parents and I do communicate about what I buy before I make the purchase.”

Contact Dennis Seid at (662) 678-1578 or carlie.kollath@djournal.com.

Dennis Seid / NEMS Daily Journal