Now is the time of year whenmany young adults will be headedoff to college, perhaps leavinghome for the first time. That first year ofcollege is "independence day" for manyteens. It is both exciting and intimidatingbecause they are in a completely newenvironment with new people and musthandle the challenges of being on theirown. Here's my advice for these college-boundscholars. I suggest you share thiscolumn of financial pointers with them tomake life a bit less taxing.
Whether you are paying your waywith a part-time job, student loans, orreceiving an allowance from your parents,it is time you take control of yourmoney by setting up a budget. Softwareprograms, such as Quicken (www.quicken.com), are easy to set up and will cutyour future bill paying time by at leasttwo thirds. It is also invaluable experiencefor after you graduate and are trulyon your own.
As soon as you get to your school,open a checking account. In collegetowns, many banks offer free checkingfor students. If available, be sure to getoverdraft protection to avoid expensivefees for bounced checks. Also, choose abank that has convenient ATM locationsso you won't be paying fees when youuse another bank's ATM.
Get in the habit of saving some moneyeach month. This is the first mindset tobecoming wealthy once you venture intothe real world. Even if you are saving only$25 to $50 per month, this is a great start.Have your bank set up a money marketaccount for this purpose and have thefunds automatically transferred from yourchecking account each month. This automatedsystem is the key to creating consistencyin your savings program.
If you are renting a house or apartment,you should realize that your stuffis not insured. This includes your TV,sound system, and furniture. If you wantto protect these items from fire or theft,you will need renter's insurance. Thiscoverage is not expensive and shouldcost you no more than $100 per year.Choose replacement cost coverageinstead of actual cash value. If yoursound system is stolen, replacement costcoverage will allow you to buy a new system,whereas cash value coverage willonly reimburse you for the value of yourused system. For more informationabout renters insurance and free quotes,visit www.rentlaw.com.
Limit your credit card ownership to nomore than two cards and save them foremergencies unless you are certain thatyou can pay off the full balance whenyour bill arrives. Responsible use of creditcards is a great way to begin to build agood credit history. Applying for toomany credit cards will actually damageyour credit rating.
If you get funds from student loans,be sure to deposit the money in a moneymarket account so that it is earning atleast some interest. Current interest ratesare low, but it still pays to shop around.
Stewart H. Welch III, CFP®, AEP,
founder of The Welch Group, has
been rated one of the nation's top
financial advisors by Money and
Worth. He is the coauthor of J.K.
Lasser's New Rules for Estate and
Tax Planning (John Wiley & Sons, Inc; 2002). He
welcomes questions or comments from readers at
800-709-7100 or www.welchgroup.com. This
article was reprinted with permission from the
Birmingham Post Herald.