Financial literacy for teens has gained an increasing amount of attention over the past several years.  Although many high schools require students to take an economics course as part of their graduation requirements, most teens do not have a good grasp of finances and budgeting when they enter college.  After six weeks as a college freshman, my son Jake appears to have joined this group, too.

My husband and I thought we had taken proper steps during Jake’s high school years to help him wisely handle his money and financial responsibilities.  At 16, he opened a checking account and obtained a debit card to go along with it.  He worked part-time at a pizza place during high school and was responsible for contributing to his monthly car payment and a small amount towards car insurance as well. If he incurred any unplanned expenses – like, say theoretically, maybe a speeding ticket – he paid for this additional expense, too.  As a result of these responsibilities, Jake learned the value of the dollar . . . or so we believed.

Prior to leaving for college, we sat down several times at the kitchen table to go over college expenses and who was responsible for each of them.  His part-time job would need to pay for gasoline and a portion of his car insurance.  The remainder of his paychecks could be used for entertainment and pocket money.  Sounds good, right?  Well, it did to us, too.  It was a little harder to put into practice, we soon discovered.  Despite our planning and discussions in advance, it became obvious that the gap between “practice” and “reality” needed some serious bridging. 

I want to pass along to you what we have learned these past six weeks in hopes that it may help you and your son or daughter as you hold your own pre-college planning discussions.

Lesson #1
New Surroundings + Independence + Excitement = Vacation-like Mindset

Think back to your last vacation (if you’re like us, it might take time to recall) - new surroundings, a fun and relaxing environment, a total change from the daily routine, and treating yourself to something special.  It’s a welcome change of pace. These same elements exist for many new experiences, including college.  For the first 2 or 3 weeks, it seemed as if Jake thought he was on vacation – spending money like there was an endless supply.  Every couple of days my husband or I would take a look at his checking account, and ultimately, phoned him to discuss frivolous spending.  For example, since Jake was the only student out of his four roommates that had a car on campus, he was driving everyone around and was spending $100/week just in gasoline. He’s not one to ask people to contribute money for anything, but we explained that either they would need to contribute toward the gas expense or he would need to be very judicious about when he served as the group’s bus driver.  As the weeks passed and school was well underway, the spending slowed, and it is now back in line with the numbers we discussed.  Jake is still, however, getting used to the idea of the “starving college student” budget. 

Suggestion: Factor in a few extra dollars for the first month of college as they adjust from vacation mode to reality mode.  Periodically review their checking account to address any potential problems before they become routine behaviors.

Lesson #2
Identify Fraud is a Significant Problem - College Students are Prime Targets

Jake became a victim of identify fraud within three weeks of being at college.  We had no idea how widespread this problem was on college campuses.  During one of our checking account reviews, we noticed a $350 check to Wal-mart.  We could not understand what Jake could have possibly purchased, and frankly, we were quite upset with him since this expense followed a finance talk only days prior.  When we inquired about the purchase, he had no idea what we were referring to, and over the next three days, two additional charges for similar amounts of money hit his bank account.  My husband and Jake spent hours at the bank working with the local branch and their fraud department. They were responsive, and within 10 days, his account was adjusted. The account was closed and a new one opened.  We do not know how his account information was stolen; however, Jake had made two online purchases (one for his text books, and a second one for concert tickets) in the weeks before this occurred.  These were his first online purchases. Students must be careful about:  online purchases, where they place their wallets and other important documents (bank statements, etc.) in the dorm room, and leaving wallets and cards in their vehicles.

Suggestion:  if the student plans to make online purchases, banks offer separate accounts for online shopping as a means to protect the “main” checking account from potential fraud and related complications.  It may be worth investigating!

Our main purpose for adding my husband’s name to Jake’s college checking account was to allow us to pay college expenses and make future deposits.  In hindsight, it was a good decision for a number of reasons (listed above) as Jake started college and his independent living.  Our checking account reviews are less frequent now as we see Jake being financially responsible again. He takes pride in knowing that he (and his parents!) have learned a couple of valuable lessons in the first six weeks of college.