5 Tools to Help College Students Manage Their Money

Before you go, we thought you'd like these...
Before you go close icon
Alex Grieb, age 18, and her mother Joy Cohen, both of New Orleans, Louisiana, tour the campus at Johns Hopkins University during a welcoming for admitted students in Baltimore, Maryland, U.S., on Tuesday, April 7, 2009. Johns Hopkins and other schools such as Amherst College, Cornell University and Bowdoin College are planning to increase student populations, according to the schools' admissions and public-relations officials. Photographer: Dennis Drenner/Bloomberg News
Dennis Drenner, Bloomberg News

It's normal for parents to worry about sending their kid to college, but it's not just their academic performance they are worried about, they're also worried about their children's financials.

According to a 2012 survey by MasterCard, parents of college students were significantly more likely than parents of high school upperclassmen to report being worried about their child's ability to manage money and spend wisely, at 69% compared to 58%.

What's more, 40% of parents with an upcoming high school junior, high school senior or college freshman reported they believed their child would run out of money within their first month of being on campus and asking for funds.

Constantly borrowing money from the bank of mom and dad is damaging to both parties since a lack of financial literacy is leaving students underprepared with little to no financial training as they enter college, says Scott Gamm, author of the new book MORE MONEY, PLEASE: The Financial Secrets You Never Learned in School.

"As a result, money management for the younger generation is now trial and error, which is a recipe for financial disaster," he says. "Students need to be familiar with common financial terms and the steps necessary to get out of credit card debt or to build strong credit history."

To put freshmen on the right track to understanding money management and the importance of building a positive financial history, here are five tools parents can give their student to guide them through the process.

A Low Interest Credit Card

With the restrictions of the CARD Act, parents will likely have to co-sign on a credit card with their student under age 21.

Parents and students should research different credit card options before committing, says Shelley Solheim, director of Financial Education at Capital One Bank.

"Make sure you shop around for the best interest rate--don't get a certain credit card just because they are offering you something for free or giving something away," she says. "Look for a rewards card which gives you the ease and flexibility to earn and redeem rewards without any hassles."

If the parent has a solid credit history and wants to exercise a little more control over their child's credit use, adding the student as an authorized user on the account can help them to establish their own history with a safety net, says Steven Smith, CEO of Finicity.

"This scenario allows parents to monitor credit card charges on a daily basis, plus the parent can choose to remove the child from the account once any set rules are 'violated,'" he says.

A Secured Card

Another way to teach responsible credit use is through a secured card, which requires a cash deposit that then becomes the credit line for the account.

"Since you're providing the credit limit on a secured card, there's little risk for the issuer, which is why it's easier to get approved for a secured credit card, even if you have no credit history," says Gamm.

Smith recommends parents and students do their research on cards that would be a good fit and watch out for high fee cards.

Explain Free Credit Reports

While it's essential for students to learn the ins and outs of how credit works, parents can discuss how it can affect their long term financial future by helping them understand how credit history is reported, suggests Solheim.

Parents can show students how to pull a free copy of their credit report once every year from AnnualCreditReport.com.

"Be sure to review your credit reports for accuracy at least once a year and report any errors immediately," Solheim says.

Savings Account

Depending on the bank, parents may be able to establish a restricted savings account that requires students to think twice before withdrawing money.

"It is a good way to help them grow savings while putting controls in place to teach them to 'leave the money alone,'" says Smith.

Gamm suggests students with part-time jobs open an automated savings account to teach them accountability and how to factor saving into their monthly budget.

"Have the bank transfer 10% of the income from the checking account and into the savings account - it will force you to make do with less, while building up your savings at the same time."

Tax Preparation Software

Whether students plan to work part-time while in school or hold a job during the summer, it's important to ensure they are correctly filing their tax returns, so they are comfortable with the process before their returns become too complicated.

Gifting students tax preparation software is a cost-effective option that can take the guesswork out of preparing a return for the first time, says Gamm.

"There are even apps where you can take a picture of your W-2 form, answer a few questions and file directly on your app," he says. "If you're a little uneasy about doing this yourself, head to a local tax preparer or accountant, though there will be a fee involved."

Here's A Quick Guide To Selling, Swapping, Buying And Renting Textbooks
See Gallery
5 Tools to Help College Students Manage Their Money

By Mandi Woodruff, Business Insider

Malls and e-commerce sites are packed with deals on back-to-school basics like electronics, but finding ways to shave the soaring costs of textbooks can be tricky.

From e-books to online swap meets, there's absolutely no reason to plop down big money for glossy hardbacks when you could be saving that cash for student loans down the road.

Click through our quick guide for buying, renting, selling and swapping your text books online and in-store.

Business Insider

Amazon's Book Rental. Rent e-books as long as you need them (30 days minimum) and save up to 80% off the cover price. The best part about this service is that all your highlights and notes will still be available via their Cloud service even after you've returned your book. You can download books to just about any device, including the iPad, Kindle, Macs and PCs.

Business Insider

Rent-A-Text. Created by Follett Higher Education Group, students can save 50 percent on average by renting their books from Rent-a-Text. Not only can you rent straight from eFollett.com, but the site gives access to rentals from more than 900 college bookstores across the nation. Want to avoid shipping charges? They tell you where to pick books up, too.

Video: Rent-A-Text

Business Insider

Collegebookrenter.com. This site promises savings up to 85% off the cover price of textbooks. It claims to have the largest textbook inventory on the market and also allows you to sell or buy books new. CEO Chuck Jones says they aren't offering e-books at the moment but don't charge customers for shipping costs. And if you're really into highlighting the margins, Jones promises they're far more lenient in that regard.

Video: College Book Renter

Business Insider

Chegg.com.This site has a huge inventory of books for rent and it recently launched an e-book rental service as well. You can download books to your account and access them anytime on the Web. The only drawback is they're only available as streaming files, so you'll need an Internet connection to access them and they can't be downloaded.

Video: Chegg

Business Insider

Campusbookrentals.com. They give you a 15-day late return grace period and offer three options for rentals: 55 days (summer), 130 days (semester) and 85 days (quarter). Extra perk: They're cool with highlighting fanatics, too.

Video: Campus Book Rentals

Business Insider

You can sell back your books on most sites, but Amazon is a great go-to site for anyone new to the game. Campusbooks.com has a great app to find the best buy-back price on your books. Stack up your text books with the ISBN codes all facing the same direction, then snap a photo with your smartphone.

Business Insider

Give Cash4books.net a try if you're looking for something quick and simple. You can ship your book to them free and they pay by check or via PayPal.

Video: Cash4books

Business Insider

Half.com. This eBay-owned site lets you rent and buy your books online, like Amazon.com.

Video: Half.com

Business Insider

Swap.com. The go-to site to swap everything from DVDs to expired Groupons, Swap.com is also great for trading textbooks. If you've got an older edition you know you won't get much cash back for, it might be a better idea to try to swap it for another title.

Video: Swap.com

Business Insider

Edubookswap.com. This site is a bit different in that it charges a fee ($8.95) for swapping services. If you sign up for a five-swap plan, that gets knocked down to $7.99 per book. But the cool part is every book you post for sale accrues points toward your account, which can then be applied to a book purchase. The points for each book are based on fair market value of the book, age and demand.

Business Insider

Bookmooch.com. This is a true swap site, in that you trade books even-steven with other users and get points for every book you give away. For each book you give, you can get one back in return and you only pay the cost of shipping. You can also request books from other countries and choose to donate points to charities.

Business Insider

Read Full Story

People are Reading