In honor of Parents’ Weekend, we have asked our staff writers’ parents to submit blog posts to The Quad. Publisher and food writer Joel Kahn’s (COM ’12) mother and father, Diana and Jack Kahn, wrote this post for us about how college students should know about their finances when graduation rolls around.
When we were students (back in ancient times–the 1970s and 1980s), we didn’t spend a lot of time thinking about money. Tuition wasn’t yet through the roof –BU tuition was about $2000 a year in 1971 when Jack was a freshman– so student loans were minimal. Credit cards were still a novelty. And when you got a job, it almost always came with a pension, so you didn’t have to worry much about saving for retirement.
But times have changed. Now, if you want to avoid going broke, you’ve got to be more concerned about managing your personal finances. So–as a student (or a recent graduate)– what steps do you need to take to get your finances off to a good start?
Diana, who is a Certified Financial Planner®, offers this advice:
1) Establish a credit history. Bankers won’t give loans to just anyone. They want to see that before they give a young person a credit card or a mortgage, he or she has a record of handling money responsibly. So it’s good to get a credit card early and pay the balances off in full monthly. You’ll probably need to get a parent to co-sign in order to secure your first credit card, but getting a credit card in your name is a good idea. And speaking of credit cards, don’t use them to buy things you can’t afford. Only use plastic for a purchase if you can pay it off the next month.
2) Don’t miss your student loan payments. Unlike other loans, student loans don’t go away– even if you declare bankruptcy. Uncle Sam can get his money back in numerous ways, so you don’t want to play games with him. Unless you’re unable to find work, be sure to pay your student loan bills regularly.
3) Consider renter’s insurance. If you lose property in your room or apartment due to a fire, theft etc., don’t expect BU or your landlord to reimburse you. That’s why renter’s insurance is a good idea. Check to see if your personal possessions are covered by your parents’ homeowner’s insurance. If they aren’t, think about buying renter’s insurance from a company like NSSI or Geico.
4) Start saving as soon as possible. Although your first job may not have a big salary, that doesn’t mean
you shouldn’t save. You never know when you’ll be out of work or have an emergency expense, so it’s important to build up a reserve. And if your job offers a 401(k) retirement account where your employer matches the amount you put in, be sure to max out to the limit of the employer match. It’s like getting “free money”– and when you retire in a half-century, you’ll be happy you took advantage of the opportunity!
If you have questions about managing your money, feel free to send your questions to Diana Kahn, CFP® at finpharminc@aol.com.
