Financial 101 for College Freshmen

Welcome, freshmen. Your college adventure is about to begin and so is a whole new phase of your financial life.  Are you ready? This guide will help.

First checking account – Choose a no-frills, free checking account. A free checking account means you’ll pay no monthly fees, regardless of how low your balance goes. Some banks and credit unions even offer special accounts for students. So be sure to ask.

It’s a good idea to choose a bank or credit union near your college or university. Is there a branch or ATM near campus?

Be sure to stick to your own bank’s ATM when withdrawing cash. Use another bank’s ATM and you could be charged as much as a $3 fee. Your own bank may charge you a fee as well. So be loyal to your own bank’s ATM.

Another way to avoid ATM fees is to use your debit card at the grocery store and ask for cash back at the check out counter. You can also get cash back at the post office and many drug stores.

First debit card – One of the best things about getting your very own checking account is having a debit card in your own name. These cards let you withdraw money at ATMs and make purchases just about everywhere – from fast food joints to coffee shops to grocery stores to the campus bookstore.

Paying by debit card is an easy way to pay. Just be sure to keep track of all the transactions you make. All of those small purchases can really add up fast.

Overdraw your account by even a couple of dollars and you could be hit with an overdraft fee of as much as $35. Keep on paying with a debit card when your account is overdrawn and the fees will mount, and fast. Let’s say you let your checkbook go unbalanced for a couple of weeks and your balance slips below zero. The next day, you spend an additional $20 with your debit card, making four small purchases over the course of an afternoon. Each of those four small purchases would add another $35 fee to your account – that’s $140 in fees.

Steer clear of hefty overdraft fees by staying on top of your account balance. Keep your check register up-to-date. Make note of every ATM withdrawal, every debit card purchase, and every check you write as you make them. At the very least, record your daily transactions at the end of each day.

Sign up for online alerts. When your balance slips below a certain limit, say $20 or $30, you’ll receive an email from your bank or credit union. And you’ll know it’s time to add more cash to your checking account ASAP.

First solo credit card – Once you turn 18, the offers from credit card companies will be headed your way. Signing up for a credit card in your own name during your college years is a great opportunity to build up your credit history.

Use your card and pay your bill on time each and every month and you’ll establish a sound payment history by the time you graduate. Paying your account in full each and every month is a good goal. Do the best you can. For bigger purchases, try to pay off your balance in two or three months.

Not sure what credit card offer to choose?  First check for an annual fee. Is there one? If so, how much is the fee? You may want to look for a card with no annual fee. Next, what’s the card’s annual percentage rate? The higher this rate, the more you’ll pay in finance charges if you should carry a balance from month to month. You’ll also want to check out a card’s late fees. This is the fee that you pay if your payment should arrive even one day late. Some credit card companies charge late fees as high as $39, and some cards will increase your interest rate if you pay late. It’s all in the fine print of the offer, so be sure to take a look.

Once you’ve studied an offer or two, you can pick a favorite and apply. Don’t forget to check for card offers at your bank or credit union. They may have special deals for students.

First financial aid – For many college students, financial aid is a fact of life. Many students rely on federal Stafford loans to pay for their education. Others use a combination of federal and private loans. Still others rely on a combination of scholarships, grants, and loans to finance their education.
 
The particular mix of financial aid is distinct to each student. It’s important to stay organized.  Make note of every loan, grant, and scholarship that you’ve received. When will the money be available? Do you need to submit any documents or paperwork after the initial application?

For help, contact your college or university’s financial aid department. Fill out all required forms promptly. This money is vital to financing your college education. Be firm, polite and persistent.

First spending plan – Financial aid money comes once or twice a year, so learning how to live on a spending plan is absolutely essential. Blow all your money in the first month and you’ll be in for an awfully miserable semester.

Start by making note of your income. Are you paying for school with student loans? Scholarships or grants? Money from your parents? Your savings? 

Will you receive a check at the beginning of each semester? Or will you have to make a loan or scholarship check last for the entire school year?

Once you assess your income for the semester and school year, you can set up a monthly budget or spending plan.

Make a list of your monthly bills and due dates. These include credit card bills, utility bills, rent, cell phone bills – any bill you absolutely have to pay every month. Next, estimate the money you spend on groceries and eating out expenses. Not sure how much you spend on food each month on food? Track it for a month and see.

Don’t forget about personal care expenses such as hair cuts and all those supplies that keep you looking good.

Does your student loan cover all your tuition? What about books and supplies? By the time you factor in supplies, some classes are much more expensive than others. Make note of all your education expenses in your spending plan. 

Don’t forget to factor in some fun money into your budget -- for going out with friends, concerts -- whatever you really enjoy doing. You’re going to do all these things, right? So put it in your spending plan.

The key to good money management is balance. If you spend a little more than expected one week, try to spend a little less the following week to balance it out. Stay organized and you’ll stay on track.

First apartment – Are you passing on the whole college dorm experience and living off-campus instead? Choose your apartment carefully. In most cases, you’ll need to sign a lease. Read each aspect of a lease carefully before you sign on the dotted line. You’ll need to abide by the agreement for the term of the lease. Many apartments require that you pay first and last month’s rent and a security deposit prior to moving in. Usually you’ll need to pay for utilities and Internet service for your new place as well.

Your college years will be full of many “firsts.” With a little help from Credit.com, all your financial firsts should go smoothly!