By Israel Gonzalez
Pulse Staff Reporter
Many students start accumulating expenses when they begin college, such as school necessities, credit cards, textbooks, food, gas, and personal spending.
Former Palo Alto College student Elizabeth Almeida, now a junior at the University of Texas at San Antonio, said, “I wished I could have known of other payments, such as access codes.”
Access codes are online passwords for required course content. Students are unknowingly hit with extra expenses, like access codes.
According to a study done by Edvisors in 2016, 64 percent of students experience being broke halfway through the semester at least once. Many students go into college unaware of the financial burdens they will have.
Michael Taylor, a columnist for the San Antonio Express-News, Houston Chronicle and author of “The Financial Rules for New College Graduates,” teaches a budgeting exercise to see how much an individual spends on daily basis.
For one month, write down everything you spend. Then, divide the expenditures into three categories: 1) essentials, like food and bills; 2) personal needs, such as going out for breakfast every Saturday with grandma; 3) and extras, such as entertainment or eating out. This gives students an idea where their money goes and what they can cut back on.
A trap that many students fall into is wanting to build credit early on.
“The idea of building your credit early is mostly a scam perpetuated by banks and credit card companies to induce people to borrow money,” Taylor said.
Twenty-five percent of freshman have credit cards and 75 percent by the time they’re seniors. A credit card isn’t a necessary step to build credit because credit will eventually build with bills and paying off loans.
But credit cards can be a tool when used responsibly.
Chase banker Robert R. Martinez, assistant vice president/small business specialist, agrees that building credit with a credit card is a tool of responsibility.
“Don’t carry balances. Use it for Netflix, use it for Xbox Live, things they can pay off,” Martinez said. “Then cut up the card so they don’t get the temptation to use it. Pay it in full every month.”
Bank accounts open up students to the financial world and teach the value of the dollar. Students will become aware of money management. Banks and credit unions, like Chase and Generations, work with students.
They offer college accounts for students with benefits that include elimination of monthly fees. Students who put away extra money on the side can save that into a savings account or even invest it into an Individual Retirement Account (IRA).
Taylor’s YouTube channel, Bankers Anonymous, explains how compound interest can build investment savings. A 21-year-old student can invest $5,000 into an IRA account and turn it into $74,872.20 with a 7 percent interest by the time they are 61.
Students seem to try to avoid school loans to graduate from college.
“The good news about student loan debt is that it is federally subsidized,” said Taylor. “Ninety-five percent of the market is federally subsidized, and it comes in low interest rates.”
Meaning, it is inexpensive to borrow money for student loans and a way to build credit. But students shouldn’t obtain more loans than they can afford to pay back once they graduate and are employed full-time.
Talking with financial advisors and going to banks and credit unions to learn what they offer is helpful. Palo Alto’s SHARE Center will offer a financial literacy class on Nov. 15 in the Ozuna Legacy Room from 5 p.m. to 6:30 p.m. and 7 p.m. to 8:30 p.m. Resources that can help you gain knowledge of the financial world are everywhere. Find them!