This spring we will likely be congratulating many high school graduates and wishing them well on their college careers. While the high cost of college has received lots of attention, another startling fact is that before a student graduates, he or she often has had several unpleasant financial surprises – many of which they keep from their parents.
Not surprising, many of these so-called unpleasant financial surprises stem from “hidden” or disguised fees. While the regular suspects like credit card fees and bank ATM charges are to blame in some cases, other times it is fees for hi-tech entertainment like music streaming or service charges on concert and sporting event tickets that provide young people with their first real taste of debt.
Sixty-three percent of parents polled in a Quicken survey said they were “confident” or “very confident” in their children’s ability to manage finances while at school. Despite this, over a third of students polled said they incurred unexpected debt in their first year of school and almost one in three said they hid the debt from their parents.
Credit cards and banking fees can add up fast. Forty percent of those who signed up for credit cards during their first year of college said they regretted doing so. Similarly, nearly a third of college freshmen incur unexpected banking fees in their first year at school. Thirty-seven percent had over $300 in fees, and 1 in 10 incurred $1,000 or more.
The Key – Financial Education
Education should not be confined to the classroom. Speak to your child about financial basics such as interest rates and budgeting before they leave for school. Teach them how to balance a checkbook, plan for day-to-day expenses and to read the fine print before signing on the dotted line. Unfortunately, vendors often attract students with cheap gifts like t-shirts or a free month of streaming music or premium TV simply by signing up. This frequently leads to unexpected fees.
Conversely, many companies want to forge relationships with young people and will offer legitimate bargains. Discounted meal plans, travel and entertainment deals, as well as software and car insurance, are often available to college students at good prices.
In addition to having a basic “money talk” with your aspiring student consider the help technology can provide. Young people are often comfortable online. An investment in personal finance software, one in which the parent and child can use together, may pay for itself if it helps a young person become financially responsible.