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Financial Essentials Checklist for the College-Bound


"The number one problem in today’s generation and economy is the lack of financial literacy.” –Alan Greenspan, 13th Chairman of the Federal Reserve

After graduating from high school many young adults are leaving home for the first time, yet remain ill-prepared to independently manage their personal finances. This is predictable considering that less than one-half of the States mandate a course in personal finance as a requirement for high school graduation. The annual Survey of the States completed by the Council for Economic Education reports that only 17 states require high school students to take a personal finance class, and only 22 states require students to take an economics class. Of those 17 that require a finance class, only 6 require the testing of personal finance knowledge. Of those 22 that require an economics course, only 16 require testing.

With a lack of teaching personal finances before students go off to college it should be of no surprise when individuals lack the information they need to be financially healthy. MagnifyMoney and Brooklyn College created a basic course for college freshmen that focused on the areas of:

  • The power of compounding interest
  • Credit scores and how they’re calculated
  • How to understand the true cost of banking products and how to make informed decisions
  • The psychology of money and its impact of decision making

They surveyed the students at the end of the course where they discovered that more than 90% of participants wished they had had more financial training prior to college. The following is a Personal Finance 101 checklist of basic knowledge everyone living on their own for the first time needs to possess in order to start off on the right financial foot.

  • Start with budgeting - Learned early, the discipline to live within a budget is a skill that will benefit individuals for a lifetime. Parents should be transparent with their child about how much money is available for expenses and jointly create a workable monthly budget. Once on their own, students should track their spending to know where their money goes and stay in control of spending. This can be accomplished by tracking on paper, using a budgeting computer program or a smartphone app. The method isn’t important, but knowing how the money is being spent is.
  • Understand basic banking - Even those who do not write many checks each month need to understand the importance of recording transactions in their check register and promptly balancing the bank statement. Along with checks, ATM withdrawals and debit card purchases should be recorded in the checkbook, or other tracking system, after each use, with a running balance tallied daily. Attempts to withdraw funds beyond the account balance could result in being declined at the point of sale unless other arrangements such as overdraft protection have been put in place. Since overdraft fees can quickly add up, it is best to keep track of the account balance and not exceed it.
  • Respect credit - Credit matters now and it matters later. Young adults under the age of 21 cannot obtain a credit card unless they can prove ability to pay or have a co-signer. Studies show that a disturbing number of college graduates have both student loan debt and credit card debt which can prevent them from moving forward with their professional lives. However, young adults also have the opportunity to graduate with a positive credit file which could help them buy a car, rent an apartment, obtain insurance or land the job of their dreams. To have an unblemished credit report and a solid credit score, commit to paying each credit card bill in full and on time each month.
  • Be financially organized - Keep all financial records, bills, and bank statements in one location. A file or accordion folder in a locked file cabinet is ideal. Since spare time may be hard to come by, this system allows quick access to what is needed when it’s needed. Being financially organized ensures that bills are paid on time, late fees are avoided and the credit report and score are not damaged.
  • Recognize the dangers of Identity Theft - Identity theft is common on college campuses. The identity thief may not be a stranger, but someone in the room next door. Computers and phones contain a wealth of personal and financial information, and should be password protected. Social Security numbers are like gold to a criminal, and should be stored in a safe and locked location. Memorize the number and do not carry the card unless it is needed for one-time verification purposes, then promptly store it again. Be cautious when posting information on social media, as sites are frequented by thieves trolling for seemingly innocent postings that can be pieced together to equal enough data to steal a person’s identity.

Everyone makes money mistakes, particularly those who are still learning how to responsibly manage their finances. Knowing that blunders are likely, parents should decide if they’re going to bail their child out or put tough financial love in place. This is a family decision that is best made in advance, not in the midst of the emergency. It is critical that parents not allow the child’s financial mistakes to ruin their own personal finances. In the same token, it is important for students to remember that while mistakes will happen, tomorrow is another chance to start over and regain control of their financial well-being.

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