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Finances for High School Graduates 

 

As parents across the country get ready to send their young adult into the world, Apprisen wanted to know how prepared they were to manage their own finances. We posed this question on our website and found out that sixty-one percent felt their student was not prepared at all while only thirty-two percent felt they were only minimally prepared to handle their finances. This sends a strong message that parents need to do a better job to make sure their student has the skills and knowledge necessary to properly handle and protect their money when they are on their own. Only two percent felt their student was ready and five percent felt they were very prepared to handle themselves in the financial world. Apprisen offers these tips to start a discussion that will focus on how they will handle their money, their bank accounts and how they can start to build a positive credit history.

 
  • Have the money talk. Make sure you and your student agree on how money issues will be handled before they leave. Discuss who will be responsible for what expenses and what the monthly budget will be for those expenses. Help your teen establish a fixed amount that they can spend on food and entertainment. Have them avoid going to convenience stores and vending machines for quick snacks. Instead, scouring store ads or websites, such as Groupon or Living Social, will help them find discounts for economical food options. Investigate on-campus meal plans which are often built into student fees.  

  • Decide how bank accounts will be handled. Consider using a local bank or credit union at school. They sometimes offer special deals for students and it should be fairly easy to get a free checking account. Make sure the bank you use has ATMs easily accessible so you won’t have to pay ATM fees. They can add up fast. And make sure your student knows how to handle their checking accounts and ATM cards. Don’t assume they know. Put yourself as a joint owner on your teen’s account so you can have access to statements to see how he or she is handling it. When the account is opened, you have the option to “opt-in or “opt-out” of having transactions paid at the point of sale, if there is no money in the account.  If you “opt-out” the transaction will be denied and thus limit possible insufficient fund fees. If you “opt-in”, the transaction will be completed, however they could be subject to that NSF fee. An alternative might be to link the checking account to a line of credit to cover transactions when there is no money in the account. It would be critical to point out that this line of credit was not “extra money” but a safe guard in case of an error in the checking account. 

  • Help them establish a positive credit history. We live in a credit-dominated society with most of us dependent upon credit for major purchases. Ideally, while in school, your student should start to establish a positive credit file. Lenders, employers, service providers and landlords review this file, and having no credit or bad credit can prevent them reaching their financial goals after graduation. Due to the Credit Card Act, greater restrictions are in place to protect your student from getting credit that they don’t have sufficient income to support. However, with your help, they can still establish a credit history.  

  • Consider making them an authorized user on your credit card. This is a practice known as piggybacking, and is exactly what it sounds like. The student is attached to the parent’s card and has charging privileges, but no legal responsibility for payment since the card is not in his or her name. The activity on the account is reported to the credit bureau in both the parent’s name and the student’s name, thus the young adult builds a credit file of their own. This option allows the parents to monitor the student’s spending, and remove them from the card if things get out of hand.  However, keep in mind, if you mess up on the credit card, this will also be reported on your student’s credit report.  

  • Get a secured credit card. This type of credit card requires a cash collateral deposit which then becomes a line of credit, thus limiting any abuse. Make your student aware that sometimes, this type of card charges high fees which can greatly diminish their spending power. They can also expect a secured card to have an annual fee and a higher interest rate than an unsecured card. Make sure that the issuer reports to the credit bureau. If they do, and if they pay responsibly, a secured card can be a safe way to build a credit file. 

Make them aware that if they have unpaid cell phones contracts, library fines or other unpaid bills, those accounts could be sent to collections and thus turn up on their credit report as a negative item. It is important that they understand the importance of paying their bills on time, every time.

Finally, encourage your student to monitor their credit history. They can receive one free copy of their credit report from each of the credit reporting agencies, Equifax, Experian and Trans Union, once a year through annualcreditreport.com. This will strengthen their commitment to establishing good credit so when they graduate they will be in a stronger position to make their financial dreams come true.

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