Surviving the financial transition from high school senior to college freshman

As students start planning their dorm room decorating and their list of classes, there is another plan they should be making: how to handle their finances.

Here are five things parents can do now to help students learn to make strong financial decisions on campus.

1. Create a spending plan. Budgeting is at the core of financial responsibility, and it is a skill that financially independent individuals must master. It may take a month or two on campus to develop a good idea of their expenses, so it’s realistic to think that the budget may need to be adjusted. Still, having one, whether it is weekly or monthly, will help students control spending. Practice a trial run, while they are home, to help get them in the habit of monitoring their spending. Those coffee runs and movie tickets can add up!

2. Work on organizational skills. The key to staying under budget is organization. Students should be encouraged to create a filing system to track all of their expenses, transactions, and insurance information and bank and credit card statements. They should also learn to balance a checkbook – talk with them about logging every expenditure and not relying solely on online banking and ATMs, because neither record checks that have not yet cleared. Bouncing checks can be very costly, both in terms of fees and damaged credit.

3. Discuss student loan obligation. Government loans and grants account for only 60 percent of a student’s borrowing needs, so it is incumbent upon parents to help their kids fully understand the terms of these loans. Students should also be aware of deferral options and the option of making payments on interest while they’re in school.

4. Talk about credit. Credit cards are not inherently bad. They can be a good way to provide funds, monitor student spending and build credit. The main thing students should know about credit cards is this: not all offers are the same. Students should compare fees (e.g., annual fees, transaction fees, late fees and over-limit fees) and understand how the card provider calculates interest.

5. Raise awareness about identity theft. According to the Bureau of Justice Statistics, college students are five times more likely to become victims of identity theft than the general public. Simple behaviors like monitoring their credit report, reviewing bank and credit card statements, shredding financial information and ensuring secure online activity can greatly reduce your child’s risk of becoming a victim.

Students will have a lot to adjust to when they arrive on campus, so helping them build basic financial skills at home over the summer is time well spent.

Leo Palana manages the Mercer Island branch.