The Foreign Service Journal, June 2008

J U N E 2 0 0 8 / F O R E I G N S E R V I C E J O U R N A L 75 S CHOOLS S UPPLEMENT Taking Charge of Your Life (Without the Credit Card!) Personal finance management is one of the big challenges for many col- lege students. Suddenly, they need to learn to be responsible for the funds parents send as well as the money they earn, and they will need to keep the bank account balanced and the bills paid. Both you and your child need to have a clear understanding of how much the student will get, how they will budget it, and what to do if they overdraw their account. Here are a few points that will help you navigate this conversation. First of all, does your teen under- stand the difference between check- ing an online balance and reconciling a checkbook? Anyone can make a sim- ple addition/subtraction error that seems like nothing —until the fees for insufficient funds start to snowball after the first mistake. A student I once worked with made a simple $2 math error that cost more than $100 in “bounced check” fees. Make sure your student understands the concept of a hold on a check before the funds are available; the meaning of pending transactions; the hidden fees for ATM withdrawals at machines in other banking networks; and how overdraft protection really works (i.e., the stu- dent gets a deposit, but the parent gets a bill that accrues interest daily and has a penalty fee attached, and then the student gets a grumpy phone call from home). To avoid transaction fees on cash withdrawal, many students open up an account with the bank on campus. Alternately, students can get “cash back” at local supermarkets and phar- macies — but this works only if they write down the transaction and keep track of the new balance. One way to facilitate the cash flow from faraway parents with slow mail to students with urgent needs is to link a bank account between parent and stu- dent within the same bank. This can be a backup for immediate money transfers. Designating the student as a “payee” in your online bill-paying ser-