6 steps to financially prepare for college

August 08, 2017

By Maggie Tomasek

6 steps to financially prepare for college

teenage boy sitting on the floor of his bedroom preparing college finances on his laptop

Congratulations! You’re already enrolled, you have your student loans and other financial aid lined up, and now it’s time to head off to college.

But before you (or your kids) pack up and shove off, you’ll need to do some basic financial planning to help ensure the only college-related worries you’ll have are trying to ace the next exam and whether you and your roommate have the same taste in music.

1. Open a checking account

Although you might not use many actual checks, a checking account is still the best way to manage your money and ensure you’re not spending more than you have. Look for a checking account with no monthly service fees, like Alliant High-Rate Checking, which also comes with a free Visa debit card. Enroll in your financial institution’s online banking platform, download their mobile banking app, and yes, you might even want to learn how to write a check.

2. Create a budget and stick to it

Many students operate with a fixed income, between scholarships, grants, loans and college savings, which can make setting a monthly budget easy. After you pay for tuition, textbooks, room and board, divide your remaining funds to create your total monthly budget. Then, make a list of everything you’ll spend money on each month – cell phone, eating out, gas, etc. – and categorize your spending into “needs” and “wants.” Add up your necessities and subtract that from your monthly budget, and you’ll get your discretionary budget. Now, you just have to stick to it.

3. Set up automated alerts

An easy way to keep track of your spending, avoid fees and protect yourself from fraud is to use automated alerts. For example, in Alliant Online Banking, you can customize your transaction alerts for things like when checks clear, money is deposited/withdrawn, your debit card is used, or you don’t have sufficient funds to cover a purchase.

4. Educate yourself about fees

Unnecessary fees can really add up. In addition to finding a checking account without hidden fees, make sure you know how much your financial institution charges for things like overdrafts. According to a 2015 study by the Consumer Financial Protection Bureau, nearly one in 10 student checking account holders had at least 10 overdrafts per year and paid an average of almost $200 in fees. Yikes! Don’t forget about ATM fees, which can be another real pain. If you withdraw $20 and are hit with a $3.50 fee, it’s like paying a 17.5% tax on your cash. (Psst: Alliant helps eliminate that pain with more than 80,000 ATMs and up to $20 per month in ATM fee rebates – reimbursed nightly – for checking account holders.)

5. Consider credit card options

I opened my first credit card with a $500 limit a few weeks before leaving for college. My mom told me it was for emergencies, but that I should charge one small thing per month – gas or groceries or a pizza – and pay it off immediately to start building my credit. Almost 20 years later, I still have that same credit card (with a slightly higher limit), and that long credit history is still paying dividends in the form of a good credit score. To update my mom’s advice for more modern times, when you get your new credit card, set up a small monthly recurring purchase (like your Netflix or Spotify subscription), set up auto-pay so you’re never late on a payment, and you’ll be good to go.

6. Understand what’s at stake

Perhaps most important of all, being financially prepared for college is about understanding how money and debt and smart spending are lifelong skills that can set you up for success. Take Alliant member Maureen Becker, the winner of our recent Smartest Financial Decision Contest, for instance. Before her oldest daughter left for college, Maureen said they had several conversations about college finances. “We made sure she understood her loans and how interest accrues, and we talked frankly about debt and credit cards. She had a full financial picture going into college, so there were no surprises, and it worked brilliantly.”

Plus, like Maureen said, “If you have all the information, it eliminates that level of uncertainty. … There are enough other things to worry about in college. We really value that college experience and we wanted that to take prominence, not financial worry.”

Maggie Tomasek is the PR & Content Strategist at Alliant. She began her career as a journalist for newspapers in Utica, N.Y., Des Moines and Cincinnati before moving to Chicago in 2009. Maggie is an eight-time Chicago Marathon finisher and a lifelong creative writer with a passion for comedy. Her mom instilled in her a great sense of fiscal responsibility, and her big sister told her to throw that responsibility out the window every once in a while in the name of life experience. So far, that combination of financial advice has worked out pretty well for her.

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