We know college students do not get the education they need around personal finance. The data seems to indicate that while we as parents prepare them for steering clear of alcohol and other “risky” behavior, we continually stop short of preparing them on how to steer clear of other predatory and destructive behavior – like dream-killing debt.
Evidence of how college-bound kids are marked as “easy targets” for risky financial endeavors was recently featured on the national news. Last month the New York Times reported that college students – along with other vulnerable groups – were being targeted by Wells Fargo. Kevin Pham, who worked for a Wells Fargo branch in Daly City, CA said he saw fellow Wells Fargo employees targeting customers for sham accounts at the San Jose, Calif., branch where he used to work. “They would look for the weakest, the ones that would put up the least resistance,” he said. Mexican immigrants who speak little English. Older adults with memory problems. College students opening their first bank accounts. Small-business owners with several lines of credit.
Even with all the protections that are supposedly taking place on college campuses, college students are still targets as freshman at a point when they are first trying to establish their financial independence. Why? Because generally, the accounts that you open first are the ones that you keep the longest. Therefore, college students are ideal clients and likely they will “put up the least resistance”.
This story is a good reminder (and a wake up call for some) that we cannot forget how valuable a target our college freshman are to financial service institutions when we hand them off to life independent of us.
What can parents (and schools?) do to protect their kids? We need to forewarn and arm our college students with money knowledge to make this at least an even playing field. Here are a few tips from our new book,“O.M.G. Official Money Guide for College Students”, to help you and your college student get started:
- Know what you’re dealing with. One of the many “mysteries” of college – especially freshman year – is what it will actually cost to be on campus. Beyond tuition, there’s start-up costs (i.e. laptop, software for special classes, textbooks, etc.) and everyday costs (i.e. toiletries, laundry, snacks) which can add up quickly. So make a list of all those potential “additional” costs before heading off to campus so your spending plan (budget) is ready to go before your first class.
- Design a budget. Helping to keep expenses under control is a challenge – in college and beyond. Building a budget will help you to compare the money you have with the expenses you need to cover. Then, if they don’t balance, you can make adjustments to figure out how to make them come out even (or with a surplus on the income side). If you’re not sure where all the money is going, you’re not alone. But by tracking everything you spend over a few weeks, you can figure it out. A budget template can be found in our “OMG for College Students” book or there are several apps available to help you record expenses on the go. (Apps we like: mint.com, pocketguard.com, slice.com or Wally.me)
- Find the right bank for you. Deciding whether the on campus bank or the one back at home is best for you depends upon what type of services you think you will need away from home. Consider whether you need access to free ATMs and how many ATMs a bank/credit union may have near campus. Also, look closely at the fees each bank or credit union has for each type of account. Some may have special student accounts with lower fees, but you may have to ask for them specifically. Also consider the pros and cons of a virtual bank or credit union. They may be a better fit than a traditional bank. Accounts you need but don’t cost a lot are out there, just do your research before setting up the account.
- Understand revolving credit. Knowing how credit cards really work – and that it’s not your money, but the bank’s money – will help you decide if a credit card is right (or necessary) for you to use on campus. Remember, when you pay for something on a credit card, you will need to pay it back sooner or later – preferably right away – or you will be paying more for the purchase than it was originally worth. Also, it’s a good idea to check the credit card statement often to make sure all the charges look correct. If you contact the card issuer early enough they will investigate the charges and you don’t have to pay that part of your bill until they finish their investigation.
Find more quick tips like this in our “O.M.G. Official Money Guide for College Students” book, available now on msgen.com. It’s a quick read, but offers great resources for anyone ready to take their first financial steps away from home.