A Letter to My College-Bound Daughter
On your first day of college, let me congratulate you on your well-earned freedom. No more curfews. No more being dragged places you'd rather not be. No more of Dad's teachable moments about responsibility, opportunity...life. And no more boring lessons about after-tax income, saving, borrowing, compound returns and growth stocks.
While we're on the subject of "no more," let me gently mention that it applies to the car you've been driving too, and my gas card and your allowance. Freedom, you see, has its price. Sorry, I couldn't resist one more teachable moment.
I know that you will study hard and explore all the great things that a university has to offer. You are ready for this and, frankly, so am I. Your freedom and a degree of mine come wrapped together.
Yet I can't help but worry that you may get tripped up with money issues. It's easy to do, especially when you're just starting out. But happily, it's also fairly easy to avoid. So if you'll just indulge me one last time, I'd like to offer some parting financial wisdom for your first semester and beyond.
Separate your spending into categories, such as books, laundry, entertainment, food and beverages (spare me the details about what kind of beverages). "Keep an envelope for each, and place all of your receipts in those envelopes so you can go back and count what you spent where," says Douglas Andrew, author of Millionaire by Thirty. "That way you'll quickly recognize where you may be going overboard." Make adjustments as needed. But when you add to one category, be sure you subtract from another. If money runs tight, don't default to a part-time job unless you'd really enjoy it or it's truly a last option. You worked hard all summer and saved enough to get by. Cut your expenses instead. That's a lifetime skill worth developing now.
You don't yet appreciate how important a good credit history is. When you graduate, your credit rating will be looked at by landlords, utility companies, cell phone providers, banks (if you buy or lease a car) and even employers. "The worst thing you can do is miss a payment," says Ellen Cannon, managing editor of BankRate.com. "That will damage your credit score, which is the basis of your financial life." Look for a low-rate student card with no annual fees, like CitimtvU Platinum Select Visa for College Students (0 percent interest for six months; 13.99 percent thereafter) or Blue Cash from American Express (0 percent interest for the first six months; then 8.99 percent to 15.99 percent depending on your credit history; and a cashback feature for purchases). I don't often get excited by a 0 percent introductory rate. But in this case it's a nice feature. You may charge more than you expect initially buying books and setting up your dorm room—and have to carry a balance for a month or two.
So that's it, Lexie. Of course, I'll be available for more advice anytime—for the price of a phone call. Judging by how eagerly you packed your things, though, I recognize that my time would be ill spent sitting in front of the telephone waiting. That's okay, I won't. We're both ready.