It’s FOOTBALL SEASON (apparently). And, of course, colleges are getting back into the swing of things.
For better or worse, often our college-aged children haven’t been “burned” enough by the real world (I mean, of course, as opposed to the weird social media world many of them inhabit) for them to understand how financial complacency can lead to ruin.
So this week’s post is a public service for families in the Fort Collins area with children starting college — or those with children already there. I put it together because I’ve seen too many kids get underwater, and too many parents unknowingly enable them.
Before I get there, a couple of tax reminders:
1) Monday, September 15th is the estimated tax payment deadline for the third quarter.Our existing clients were given coupons to make it easy (albeit never fun), so let us know if you need any quick input there…
2) Corporate extensions are also due that Monday. This really only applies to you if we handle your S- or C-corp returns (which, of course, we do for a variety of our individual clients and friends). We’re on top of this on your behalf, if that’s you.
Now … onto my Animal House advice…
Judy Meyer’s Useful Financial Guardrails for College Families
“If we wait for the moment when everything, absolutely everything is ready, we shall never begin.” – Ivan Turgenev
Financial independence training is a short-term pain, for a long term gain. But it’s terribly important because “untrained” college students are sitting ducks for unscrupulous financial service companies and their own lack of financial sense.
So, with that in mind, here are some off-the-cuff guardrails to consider for your son or daughter who is entering or continuing on through college…
1. Make a definite plan to leave college with no consumer debt. And I’m talking a realPLAN. Credit cards, car loans — college kids are ripe for the plucking. Consumer debt is a killer, simply because it depreciates so much. In a short matter of time, these items lose their value, but the payments and interest continue to inexorably pile up.
So set up a clear budget for travel, late-night snacks, and other miscellaneous lifestyle expenses (heck, going through the process might even prompt some lifestyle evaluation!). Tell your child: “You should have an exact answer if I ask about your weekly spending limit.” And have them try to earn enough over the summer that they can afford to skip the part-time job during the fall and spring semesters.
2. ATM bank fees are killer. Moving to a new city often means the local debit card will be charged from $1.50 to $3.00 for every withdrawal from a foreign ATM. Consider an online bank account that reimburses all ATM fees or a local bank with easy ATM access, or moving accounts to a bank local to the school, or a mega-national bank.
3. Overdraft fees are as common as hangovers for the college kid — avoid both. A recent Pew Foundation study found that the median overdraft penalty fee is $35; an additional $25 accrues if this overdraft is not repaid in seven business days. The average bank allows up to four of these overdrafts to occur in one day for a total fee of $140 or more per day. However, if you open a savings account in addition to your checking account, you can use the overdraft transfer protection. You might even set up a situation where the college student controls the checking account — but you control the savings.
4. One cell phone bill gone awry can swamp you. New routines in college will likely mean that data habits will change. If your child doesn’t have an unlimited plan, have them make it a habit in the middle of each billing cycle to review their account’s data usage for the month. By the way, this is a very good expense to NOT pay for as a parent.
5. Avoid gimmicky credit card offers. Often the first credit card is awarded at a football game where so-called “free” T-shirts are being handed out. Again, college kids are ripe targets. Shop online for the best rates and terms and purchase a dozen dress shirts with the money saved by finding a card with less onerous terms for interest rates and late fees. Focusing on the so-called “rewards” which credit card companies give you is a distraction in your financial life. Like a casino, credit card companies win most of the time — which is why they stay in business.
And, of course, having children enter into adulthood sometimes changes your tax considerations. Let us know if this applies to you — we’re here to help!
Judith E Meyer CPA