Top 3 Financial Things Incoming College Freshmen Need to Do Right Now
1. Open a checking account.
If you don’t have a checking account already, now is the time to open one. You can have your parents on the account as joint account holders, as well, but you should be the primary account holder.
Why…
- If you are working during school, you will need a checking account in order to have your paycheck direct deposited into your account.
- A debit card provides a safe way to pay for things without carrying cash.
- Having a checking account allows your parent/guardian to deposit money for you to purchase books or pay school fees with your debit card.
- Mobile Banking apps let you keep track of your balance, transfer funds, track spending and pay bills, all from your phone.
- You can connect your checking account to Venmo or CashApp for fee-free person-to-person transfers and deposits.
- If you attached a credit card, these apps charge up to 3% per transaction.
- You can also transfer funds from the Venmo or CashApp back to your checking account for free when you select the 1-2 day deposit option instead of instant (1.5% charge)
How…
Visit your local credit union’s website and look at their checking accounts. Look for a free checking account that does not require a minimum balance. Or, find a reward account like CCF’s Rewards Checking that rewards you monthly for everyday spending.
2. Establish credit.
Establishing credit isn’t about needlessly spending money or going into debt, it’s about getting on the FICO scoreboard.
Why…
· The “length of credit history” factor is 15% of your calculated FICO score.
· Establishing a credit account for something you already buy, like gas for your car, allows you to build credit without the temptation to run up a huge balance on a credit card.
· The longer credit history you have, the better for you when you need to buy/lease a car, rent an apartment or apply for additional school loans.
How…
If you are taking your car with you to campus, or commuting from home, find a gas station that is on your route and apply for a gas-station specific credit card with a small credit line (max $250). Once you receive the card, set up online payments through the company’s website so you can have your bill emailed to you, and pay your monthly bill online.
If you do not use a car on campus, talk to your credit union about opening a credit card with a small credit line (max $500). You can use this card for a few small purchases per month and pay it off in full each month.
Set a reminder in your phone to check the card balance at the end of each week. Don’t allow friends to use the card. This is not free money; this is a bill that will arrive at the end of the month that you need to pay in full. The “on-time payment” factor is 35% of your FICO score, so paying on time is very important.
3. Make a plan to manage student loan debt.
Four years seems like a long time, but college will be over before you know it. Don’t let student loan debt dictate your life after school.
Why…
- Compounding interest stacks up every month on unsubsidized Stafford loans, which, if left unchecked, can majorly increase your final balance once you graduate.
- Private student loans accrue interest every month right after you sign for them, so just paying the interest on these loans will keep the principal from growing.
- Determine which loans are subsidized (no interest until 6 months after graduation) or unsubsidized (interests starts to accrue immediately after the loan is issued).
How…
Have an open conversation with your parent/guardian about who is responsible for which loans and payments and calculate how much total debt will be accrued by the end of your education. If you are working during school, calculate your income and figure out what that income will be used for.
You can check out the College Financial Checklist anytime at CCFinancial.com/blog
College Financial Checklist
Open a Checking Account – Talk to your local credit union about opening a checking account so you have an easy and safe way to both save and spend money. Learn how to properly manage this account using online and mobile banking, and practice using your debit card responsibly.
Open a Savings Account connected to your Checking Account – In order to open a checking account you may be required to also open a Savings Account. Use this account to pay yourself by designating a set amount of money each month you want to save.
Establish credit with a gas credit card – Apply for a low-limit ($250) credit card at your most frequently visited gas station. Use this card when you fill up and pay your bill on-time each month. By doing so, you will start building your credit history and you will be prepared for future financing needs.
Set your semester budget – Setting and sticking to a budget can be challenging, so get in the habit now! Determine how much money you have coming in, then subtract the amount you want to save and the amounts you need for bills and other necessities. The leftover is what you have to spend on entertainment, food and other miscellaneous items.
Check out your school’s Student Services department for Work/Study jobs –Find out what work/study opportunities are available for you. This will not only give you practical work experience that relates to your area of study, but it will also give you more financial freedom to enjoy your college years.
Make a plan to manage student loan debt – Although you are just beginning your college journey, it’s important to anticipate the amount of student loan debt you will eventually be responsible for repaying. If you need help tackling this checklist item, your credit union can provide you with additional information and resources.
