Ariel Edwards-Levy on Monday, Dec. 20th
When Fahiya Rashid started college at UC Irvine, she thought she knew most of the financial traps to avoid. Chatting at an LA coffee shop, she says her father’s experience taught her to watch her spending.
“When he was in college, he went crazy,” says Rashid. “He had, like, 18 different credit cards. He took student loans. And now he’s almost 50 and he’s still paying that money back. And there’s not a stop to it. So he taught me, just limit yourself to one or two cards, and spend very wisely. Don’t spend money you don’t have.”
But during her freshman year, Rashid says she faced an unexpected problem.
“When you start school, they give you a whole bunch loans. They’re like, ‘OK, take this, take that, take this.’ I was under the impression that I needed all of that money, so I said yes to every single one of them, which is a bad idea, of course.”
She returned as many of the unnecessary loans as possible — about three thousand dollars worth. Rashid figures the less she borrows now, the better off she’ll be after years of compounding interest.
Problems like hers are common, says financial expert Kathy Kristof, because students aren’t taught about money. “Most of them are pretty clueless when they first start college, unless their parents have really done a great job of educating them about finance all along. We just don’t get much financial education in high school, and then parents send their kids off to college kind of like pushing them out of the nest.”
Kristof, who wrote the book Taming the Tuition Tiger, says the biggest mistake students make is getting into too much debt, especially by taking out private student loans. She says the loans are easy to confuse with federal loans. But they have much higher interest rates.
There are other financial lessons that have to be learned through experience. USC student Arlene Washington says living on her own taught her how to budget. She learned to save money for hidden fees on things like student government, as well as for smaller purchases.
“When you’re living with your parents, you don’t know everything that comes into what you need to support yourself. So when you’re on your own, there might be certain things, even as little as toilet tissue.”
She says her best lessons in finance came from her job on campus: “Because you know you would get your check at a certain time of the month. And then after you get that check you say to yourself, ‘Well, how much can I spend and how much do I need to use on certain things monthly?’ Whether it be bills or different things. I need to buy food. Things like that.”
Financial expert Kristof says making sure kids have jobs is one way parents can teach them about money. But it has to be part of a larger conversation.
“If you’ve been all along, all through high school, talking to your kids about money, it’s good to let them fly solo right now and take the responsibility for their finances. If you know you haven’t done that, you want to wean them from your protection over time.”
Kristof sees no fast way to make college bound students financial pros. But she says learning how to manage money is as important as what you learn in the classroom.