Incoming Freshman: Easy Stuff for Managing your Money

Cool, you have graduated high school and have moved on to an institution of higher learning aka a university or community college. Maybe you’re self funded, parent-funded, or using a variety of grants and/or student loans to make your ends meet. Over the next four years, you will likely be handling more money than at any other time in your life so far.

As you start your classes, you will find there are a lot of demands on your wallet. Books and tuition are a large part of this demand. But it is managing your living expenses and personal entertainment that calls for the most attention. Take some advice and don’t throw money out a window!

1. Open a checking account at a credit union.
• Why a CU? No monthly service charges. Reduced fees. More Free ATM’s.
• Use your online banking to track your checking usage. Don’t be afraid to check your balance daily on your phone, laptop, or tablet, it’s free!
• Open up a savings, too. Set up a small amount to automatically transfer to the savings monthly. You may not miss the money but it will be there when you need it. $20 a month can be a lifesaver down the line.
2. Organize: Create some files for your important documents and statements. The basics will include:
• College File: This file has your documentation for your financial aid; loans or grants. It should hold the receipts for your tuition payments.
• Banking File: This file has all your bank statements (if you are not using your online banking). If you have a credit card you are managing, the statements would go here as well.
• Bills: This file is where your monthly/quarterly records of bills shall be filed away; i.e. rent, cable bills, cell phone, heat/electricity.
• Find a locking cabinet at a yard sale or second hand store to save your documentation. A simple lock is often all it takes to keep honest people honest and discourage would be identity thieves.
3. Budget: You have a limited amount of money each semester from your student aid grant or loan receipts.

·        Use any money left over after paying your tuition and book expenses to help pay for your living expenses. That money left over after paying your school expenses is not a bonus to be spent at parties and spring break. It is what you have to feed and cloth yourself.

·        Take the amount and break it out in even amounts for the next few months until your next aid payment is expected.

·        Plan for your expected expenses by creating a budget for each month. You don’t have to wait until October to create the budget for October.

·        Saving money should be the second item in your budget after paying your rent. See #1.

4. Avoid owning a car. This may sound crazy in “Car Culture” California, but in the big picture, owning a car is a major expense.
• Paying for gas, insurance, maintenance, and repairs can put a major crimp in your happy fun time at college.
• Colleges like San Jose State are close to all manner of stores and restaurants. There are lots of great shopping and eating options within easy walking or bike riding distances.
• Besides, municipal transportation passes/bus passes are so much cheaper than gas, tires, and car insurance!
5. Don’t get talked into applying for a credit card. You don’t need it.
• Of course, if Mom or Dad set you up with a card that you will manage together, that is a different matter. That card is in your possession for emergencies more than likely. Emergencies involve medical issues, police issues, fire, or floods. Running out of beer or pizza does not constitute an emergency. There is no such thing as an emergency night at the movies or an emergency concert.
• Manage the card well and, if your name is on the account, you will build a strong credit record while you are enrolled in college.
• Mismanaged cards don’t just get you into expensive credit card debt at high interest rates, it can affect you emotionally through depression and that can affect your studies.

Some of these suggestions may make your life easier. Some of them may save you money. The final word is that only you can make decisions and manage your finances. No one will do it for you. Do it right and you will thrive. I don’t like to think about the alternative! 

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Our next free financial literacy workshops are coming August 21st and 28th. 

• The 21st we will have our Real World Budgeting Class for Teenagers. The class is held here at our main office in our Training Center at 6:30pm. Click her to RSVP! 

• The 28th we will be offering The Myths of Credit and Credit Repair. This class will also be held here at our main office in our Training  Center at 6:30pm. Click here to RSVP!

Teach your Children to Save! (They will thank you when they are older.)

One thing we can rely on in our lives is change. Many important financial issues come about due to change. Life changes such as marriage, divorce, and death force us to deal with finances in different ways. One of the biggest changes you will experience is having a child. Let’s talk about children’s savings plans.

To start a savings plan for your new bundle of joy you need to have the child’s Social Security number to start their account. I am a little prejudice (I am the Credit Union Guy!) so I would go to a credit union and start a savings account with the minimum balance. Typically, credit unions have very low minimums; often in the vicinity of $20 or less to open a savings account that will have no fees. This makes it easy for young parents to get started.

An important aspect is the vesting or ownership of the account. Whose name should be on it? It is a good idea for you to act as a custodian for your child’s money. A custodial account uses your child’s social security or Tax ID to establish the account rather than your own. As custodian, you have full control of the funds. Any interest earnings will be reported under your child’s name and social security. Your child cannot access the money until you decide to place the funds in their name alone.

If you are banking in the same institution as the one where you opened the child’s account, you can have an automatic transfer of funds from your checking or savings to the child’s account. But you should not start it and forget it. You need to place the dollar amount of that transfer in your budget as if it were a bill and pay it religiously as if it were one of their most important bills. This is because it is important. Studies show that children who have a college savings account from the time they are young are more likely to attend college. It serves as a college incentive to the children and to the parents.

Saving in a savings account is a good idea, but the interest rates on savings are rather low right now. Once a certain dollar amount goal has been reached in the savings account, often $100 is a good target as that is what it takes to initially fund a 529 College Savings Plan. You can transfer the $100 into a 529 and have a much wider selection of investments. You should work with your investment representative to determine your personal level of risk tolerance and select the appropriate investments. If you have younger kids you can accept a bit more risk as time is on your side. You have time to be aggressive with the investments to achieve higher yields and grow the funds. As the child ages, it is a good idea to reduce the amount of money that is at high risk and move it to investments that offer more safety (less risk). As the child gets closer to college age it is important to consider principal preservation in the investment. Moving most of the investment into a money market account at that time would be a good move so you can prevent any investment losses while the student is in college. You will need that money to pay tuition!

For more information on accounts for young people, check out the Meriwest Flow Card Page at https://www.meriwest.com/flow/ . The Flow Card is a debit card for kids that is managed with a parent.

This week's featured article: Meriwest Credit Union: Thinking Globally, Acting Locally, Making a Difference!

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