Credit vs. cash: Teaching college students to be financially responsible

Is having a credit card a good idea for a college student?  It can be.  Whether or not you agree, there are new rules in effect that are really good news  for parents and students.  As of February 22, 2010, getting a credit card is much harder if you’re under 21, thanks to the Credit Card Act of 2009.  If you are under 21, you will be able to get a credit card only under certain conditions:

  • a student must be able to prove sufficient income to support credit card payments; OR
  • the student can get an adult cosigner; OR
  • a student can be an authorized user on someone else’s card.

Promotions for credit cards (you know, the free T-shirts, etc.) will be not be allowed within 1000 feet of a college campus.

It’s high time these new, stricter guidelines were put into place for kids and credit cards.  According to USA Today, in 2008, college seniors with at least one credit card graduated with an average of $4,138 in credit card debt.  There have been stories of college students who committed suicide because they felt they would never be able to pay off their credit card debt.

The new law should help protect students from their own irresponsibility.   But what’s the best way to help students learn financial responsibility?  I would argue that learning how credit works is an important part of it, but probably not the most important part.  I also believe that the best ways to learn responsibility depend on the child, as I discussed in a February 13 New York Times article.  Some key elements include giving the child some financial independence and letting him or her learn from making small mistakes.  Nothing drives home the importance of budgeting quite like running out of money before payday and living on ramen noodles for a couple of days.  Is it important for a new college graduate to have a great credit score?  Maybe.   However, it’s probably more important to teach your student to save for financial goals rather than borrowing for them.  If you think having a credit card is important for your student, I’d recommend setting spending limits by getting a prepaid credit card and letting your student know it’s only for emergencies.

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This entry was posted on Monday, March 1st, 2010 at 7:38 pm and is filed under Credit cards, Debt Management, General Information. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Get in line now for Tennessee Hope Scholarship, other college financial aid

If you or someone you know will be going to college this summer or fall, it’s time to apply for college financial aid.  For most students, this means filing the FAFSA, or Free Application for Federal Student Assistance.  It’s easy to submit the FAFSA online at www.fafsa.ed.gov.

Like most things invented by our federal government, the FAFSA is complicated and confusing, not unlike doing your federal income taxes.  Luckily the FAFSA has recently been simplified somewhat.  One nice change is that you can now get instant estimates for Pell Grants and student loans as you work through the form.  Another change on the horizon is being able to upload info from your federal income tax return directly into the FAFSA form.

Before you start completing the FAFSA online, get your records together. You’ll need your Social Security number, drivers license, and alien registration number if you’re not a U.S. citizen. You will need your 2009 income tax returns and W-2s. Get together statements for savings, checking, and investment accounts. Also have ready records of any non-taxed income you or your parents receive, such as welfare payments, EIC, and Social Security. You can complete the FAFSA using estimated tax information. Then, when you get your 2009 income tax returns completed, you can go to the FAFSA website and update the tax-related questions on the FAFSA–but be sure you do so before the applicable deadlines. Be sure to sign your FAFSA, either electronically or by signing and mailing the paper page provided on the website.

Be aware of the various financial aid deadlines.  To receive the Hope Scholarship for the Fall 2010-2011 school year, you must submit the FAFSA by September 1, 2010.  Colleges have their own deadlines by which they prefer to receive the FAFSA as well.  For federal student aid,  online FAFSA applications must be submitted by  June 30, 2011.  Online FAFSA corrections  must be submitted by September 15, 2011.

There’s a lot of good information out there to tell you more about all the money available for college.  Visit www.fastweb.org and for information about financial aid offered by the State of  Tennessee, try the Tennessee Student Assistance Corporation at www.tn.gov/collegepays.

This entry was posted on Thursday, January 28th, 2010 at 5:40 pm and is filed under Education planning, General Information. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

New Memphis City Schools health insurance to be in place January 1

Cigna will become the new administrator for MCS employees’ health coverage starting January 1. The most substantial change will be the move from a dual hospital choice (Baptist and Methodist hospital systems) to a single hospital system choice (Methodist Network only). However, according to Cigna, the choice of doctors and other providers will be wide: 99% of  eligible doctors in the Greater Memphis area are in the Cigna provider network. MCS employees who want a provider to be added to the network  can contact the Cigna Hotline and ask for a provider nomination form. The provider must go through Cigna’s approval process, but several local providers have already been added as a result of MCS employee nominations. The Cigna hotline number for current MCS employees is 1-800-564-7642. MCS retirees have their own hotline number, 1-877-507-4099.  For more information, visit http://www.mcsk12.net/ and view the video “Conversation:  HR Benefits Part 2.”

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This entry was posted on Tuesday, November 10th, 2009 at 11:24 am and is filed under Insurance Planning, Retirement Planning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Homebuyers Tax Credit to Be Expanded

A Senate panel has worked out a deal to extend the homebuyers’ tax credit program through April 2010. Income limits for eligibility would be extended too–to singles making up to $125,000 a year and couples making up to $225,000. Repeat buyers are included in this new expansion, but their tax credit will be $6500 versus $8000 for first-time buyers. Sales agreements must be in hand by April 30, but buyers will have until June 30 of next year to close the sale.

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This entry was posted on Thursday, October 29th, 2009 at 8:41 am and is filed under General Information, Tax Planning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

F-I-D-U-C-I-A-R-Y! Can your financial advisor spell it?

Trying to find objective financial advice can really be a challenge. The fact is, many people calling themselves financial advisors are really just salespeople. That’s why, when you are looking for financial advice, you need to learn where a potential advisor’s loyalties really are. Always ask if the advisor has a fiduciary duty to you, the client. If so, the advisor must put your interests ahead of his own in every situation. If the advisor is not a fiduciary, any products he sells you still have to be “suitable” for you, but he does not have to put your interests first. Fee-only planners do not sell any financial products and are compensated solely by their clients. Since there are no conflicts of interest, clients can be sure they are getting objective advice that is truly in their best interest. My colleague Michael Chamberlain, who like me is a member of the Garrett Planning Network, discusses this important issue in a recent issue of Investment News Daily. To see this article, go to:

Let’s Call A Spade A Spade and a Salesperson a Salesperson

This entry was posted on Tuesday, October 6th, 2009 at 9:07 am and is filed under Financial Planning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.