Bills, budgets, spending temptations, lines of credit -- across the country, newly minted college students are facing these adult money issues on their own for the very first time. To help kids ace Money 101 -- and avoid graduating with a killer financial hangover (or bankrupting the Bank of Mom and Dad, for that matter) -- here's what they need to know.
Ah, a college degree: You can't live in it, drive it anywhere, or sell it on Craigslist when you're done. It's probably one of the biggest purchases you'll ever make, and one of the easiest acquisitions to justify. After all, an education is worth its weight in gold, right?
As they say, college is an investment in your future. The key word here is "investment."
College is a tangible financial investment. Managed correctly, your degree will pay out a sweet long-term dividend (helping you qualify for better jobs and higher paychecks). Mismanage it in the short term, and you buy yourself a money-losing investment that you'll be paying off for decades.
Hey, don't you have class in 20 minutes?
At these prices, you can't afford to cut class
When you're sleep-deprived and deciding whether to blow off an early morning biology lecture, opportunity costs are probably the last things that come to mind. Chances are, most students aren't thinking about the enriching learning experience they're about to miss, or how honoring one's commitments builds character.
Well, would $200 persuade you to throw on some sweats and a ball cap and get to the lecture hall on time?
The actual cost of skipping class is nothing to sniff at. To figure out what tomorrow morning's class actually costs, consider your tuition (the national average ranges from $7,000 to $27,000 a year, according to collegeboard.com), the number of courses you're taking (typically four or five per semester), how often the class meets, and for how long.
Not a math major? Neither am I. So let's cheat off a few!
- A visiting math professor at Fordham University calculated that each lecture for a three-credit class is worth $143.30 and every minute of a four-credit class is $1.40 if you leave the meter running. All told, blowing off a week of the four-credit course costs $281.01 of missed education.
- Attending one of the Ivies? Cutting class costs some serious coin: $300 at Princeton, $242 at Harvard, $241 at Yale, and $238 at MIT, according to a student blogger at nextstudent.com.
Even if you're not attending a big-name, fancy-pants school, the point is that you paid your cover charge (tuition). There are no refunds if you decide to stay home and watch TV instead. (For those readers who are more responsive to the old guilt-trip approach, here goes: Your parents didn't skip vacations and cut back on retirement savings contributions for you to hit the snooze button. [Insert head-shake and look of disapproval here.])
Attention slackers: The cost of your lazy ways
It's one thing to sleep through a Tuesday morning biology lecture. It's another to hit snooze when bills come due.
Your mea culpas are no good in the real world. (And, no, last-minute cramming won't get the electricity turned back on.) Messing up leaves a mark – and this time, it's your money and reputation on the line:
- Watch in amazement as that crumpled $25 parking ticket at the bottom of your messenger bag morphs into a $100 one (special for last-minute callers: a free lovely safety-yellow car boot!).
- Make a few too many ATM withdrawals this week? Feast your eyes on the litter of rubber checks and overdraft fees multiplying in front of your very eyes! (Sign up for low-balance alerts. And decline pricey overdraft protection programs; instead, link your checking account to a savings account, or just let the bank deny purchases you don't have the cash to cover.)
- What's another late payment to that credit card company? Yet another late-payment fee, as well as a nasty bruise on your credit report that won't completely fade away for the next seven years. (Dude, just automate your payments, so at least a check for something is in the mail on time every month.
- Miss the flight home for winter break because you were out partying the night before? No problem, the ticket agent is happy to get you on the next flight. That'll be a $100 change fee. Or, even worse, the difference between the cost of the last-minute new ticket and the super-sweet low fare you booked months before.
- Thanks for checking out the portable projector from the library for movie night at the dorm. Did you remember to return it on time? Overdue charges on equipment like that are $20 a day (don't worry -- the maximum fine, at least at UW-Madison, is $400).
- Adding the personal touch to your dorm room is encouraged – up to a point. A co-worker of mine still winces about the $100 fine he had to pay for sawing out a chunk of window frame in his dorm room to install an air conditioner.
If that's not enough to convince you to hit your due-date deadlines, think about what you could have done with the money you instead blew on $35 late fees, $20 expedited payment surcharges, and $100 fines for defacing campus property. You might also want to read up on Ramen Noodle recipes and "how to ask your hot date to go Dutch."
A note to parents: Just so you know, this skipping class calculator has probably already made the rounds among your young. We can let that one slide, because there are adult versions for us to play with, too! If you're stuck in a meeting, you can keep a running tally of how time and money are ticking away online, with an app or an actual clock/calculator designed specifically for the purpose.
More advice for college students and their adult supervisors:
Fool.com's Dayana Yochim graduated college (Rock Chalk Jayhawk!) with only minor financial bruising, thanks to in-state tuition and the lack of plastic in her wallet. The Motley Fool has a disclosure policy.