Money Tips as You (or your kids) Approach College

Today, we'll be discussing money tips as you or your kids approach college. Hello and welcome to Money Talks. My name is Ken Wink from Summit Financial Consulting. I would love for you to visit our podcast page on our website, summitfc.net. You can check out all the past shows, so many interesting topics. You can also subscribe on Apple Podcasts, Spotify, or Amazon Music. Today, we're going to be talking about a stage of parenting that is really important as your kids graduate high school and get ready for college. So newsflash, you still got some parenting to do here. Maybe if you've got kids that are getting ready to go into college or just started college, I would encourage you to have them listen to the show. This could be life-changing. We're trying really hard to make this a useful show. So today we're gonna be talking about checking accounts and money markets, debit cards versus credit cards, credit scores, how to avoid credit card debt, an emergency fund, how taxes work, how to negotiate a big financial purchase, how to avoid scams, and a little bit on paychecks. So a lot of stuff we're going to cover today. Before we jump in, let me introduce my co-host, Tony Shore. Tony, I used to budget for pizza in college. Do you recommend budgeting for pizza?

Oh, I have to have a pizza budget. If you eat pizza like I eat pizza, you have to have a budget for it. Well, you have to budget for food and snacks. I think a lot of, you know, depending on what you're like in college. But, yeah, I think a lot of kids spend a lot of money, a lot of people in college spend a lot of money on things like pizza or snacks and snacks. sodas, things like that. Other beverages maybe, I don't know, depending on the child or the person. But yeah, I definitely should have had. I didn't in college have a pizza budget, but I quickly learned I should have had a pizza budget. I know. But, you know, and I my kids when they went to college, you know, my son was very frugal living on Top Ramen. And, you know, he was he was frugal. But, you know, there's still that time when everybody's, hey, let's get pizza. It happens a lot. Right. Right.

I got so much free pizza in college. So I went to Michigan State and I worked for maintenance. And in the dorm, they had these rooms where people would put their garbage to go down a chute down to like the basement compactor. Right. And kids were lazy and they would not want to put stuff down the chute. They just throw it in the room. Um, but oftentimes there'd be pizza boxes and there was this one pizza place named Gumby's, which, you know, like, um, the famous old, um, so Gumby's pizza on the side of their box would say, collect 10 of these coupons and get a free pizza. I would basically get enough coupons for free pizza once a week. Wow. Yeah.

So I never had to pay for pizza because of my job. Oh, you scared me and probably our listeners as you're telling that story. You're like, kids would order pizzas and put them down the chute or throw them in the trash room. And I was thinking, I get free pizza. I'm like, you weren't eating leftover pizza out of these boxes. Oh, my gosh. You saved yourself. I was starting to worry, like, Ken's dumpster diving for pizza in college? You got to eat. No. Yeah, we don't recommend that, folks, but that would be amazing. Collect the side of the box and bring them in for a free pizza. That's awesome.

Yeah, don't worry, guys. I got the pizza tonight. You can't.

Generous Ken. And he whips out torn off pieces of the pizza boxes. That's awesome. That is awesome. Well, we better jump right into this because that was a long list of things we need to know about. Where do you want to start?

So the foundation of everyone's finances is bank accounts. And we encourage people on their first day of college or leading up to college to go get a bank account. So a checking account is the cornerstone of most people's finances. That's where if you're working, your paychecks are deposited. That's where mom and dad can send money if it's needed. It's where debit cards pull from. So one negative thing about them, though, is that they don't earn much interest. So if you want to earn interest while you're there, you should set up either a savings account or a money market account. Generally speaking, a money market account is going to pay the best interest, followed by savings, and then checking is typically the worst. Oh, yeah.

If any, I mean, most checking accounts, you don't make any money.

Right. Yeah. So this is the first time I'm going to caution people because most people with a checking account, they're going to have a debit card tied to it. Right. is lost or is fraudulently used in some way. Because when you go to a retail store or online, they're not typically going to check your signature on the back. Oh, no.

They don't check anything anymore, no.

Right. Yeah, it's really, really easy to have fraud. So with a debit card, banks are not always cool, Tony. Sometimes if your card's stolen, they're not necessarily going to give you all your money back or they're going to freeze all your assets while they investigate the fraud. Yes. So debit cards are good because you can't spend more than what you have, but then if you ever misplace it, it could be a bad thing. Yeah.

Yeah. Yeah. That's, that's a good, that's a good rule of thumb. And I think that, um, credit cards are better in that sense because you can cancel them immediately or put a hold on them. Uh, they will often notify you and, um, you're usually covered. If somebody fraudulently uses your card, you're not at any liability, and they'll get you a card right away. And some banks are better about it than others, but you're right. That's a good tip.

I was in Nashville the weekend before last, and my debit card fell out of my pocket sitting at a bar in Nashville. Oh, no. And I realized it pretty quickly because I went to go – you know, you're in Nashville, you go bar restaurant to bar restaurant. So we went to the next one. I noticed the card was gone. So what was crazy was I logged into my bank's app, but it was a Sunday afternoon, you know, the bank's not open, but I was able to communicate with the AI representative from my bank. And it helped me very quickly within a minute, lock my debit cards that it couldn't be used on anything. Wow. So then I went back to the restaurant bar and, They did have it, you know, in a lockbox for me. And then I just went right back to the AI assistant and turned it right back on. So just a reminder that. Wow. Even if it's after hours. You lucked out, buddy. Finally, you're back. I lucked out.

That sinking feeling when you can't find it. When you realize you lost something. Yep. Isn't that terrible? That is the worst. Yeah. Yeah. You want to be careful. And that is good. It's funny that an AI helped you there.

Yeah, AI was helpful and did it very, very easily. So the reason I had that debit card out was I wanted to get some cash out to pay the performers in Nashville. But normally I would just recommend using a credit card like you hinted at. Credit cards have many, many benefits. So one is fraud prevention. They're super cool that if it seems like there's some type of fraud, you call them up. they are going to lock your card, but they're also just gonna, in most cases, just forgive any fraudulent activity that happened immediately. So they're, they're way easier going than a debit card would be. Also, you can earn rewards. And then maybe for kids in college, I would argue the most important thing is it starts building your credit history, because your, your credit score is, is really, really important. But I'll get to that, more on that in a second, but Credit cards are also the thing you got to be most careful with. You need extreme discipline with a credit card because the interest rates can get up to almost 30%. So they're great, but they're scary.

Yeah. Oh, yeah. Yeah, that's the problem, especially for a college age student. folks, it's really easy to get in that. You're not thinking, you're just using it and like, oh, I'll put it on my credit card. I'll pay it off. But you got to have the money in the bank.

Yes. Yeah. So it's this thing where you got to keep track and make sure you don't overextend yourself. But then, you know, the debit card, there's the risk of using the debit card because of fraud. So it's they put you into a tricky position where if you want to be safe, you got to use a credit card. But then if you got to be safe, you got to not use the credit card too much financially. Yeah.

It's like, hmm. Yeah. If you're not disciplined enough to pay it off each month and know you have the money to pay it off each month. Yeah. The fraud risk I'd probably lean toward because that interest is going to kill you.

Right. Yeah. So credit scores is one of the number one reasons to get a credit card. So for those of you that don't know, a credit score is basically it's like a financial reputation score. It tells you. Basically, lenders, are you a good person to lend money to? So this is car loans, apartment applications, in some cases, insurance costs, mortgage rates, eventually, even some job applications. Right. They're gonna wanna know, do you pay stuff on time? Are you responsible? It's really, really important to have a strong credit score because it can really limit what you can do later in life if you don't take care of it. So getting that credit established as early as possible is good. That's what these lenders are gonna wanna see is that, oh, okay, this isn't the first time this person's used credit. Let's see how responsible they are. So the longer you have a credit history, the better. But again, it better be a good credit history or else it's going to hurt you. Right. Yeah.

Yeah. A lot of people don't understand the importance. I didn't when I was younger. It's like credit score. Who cares? I don't need to know my credit score. I don't need to worry about that. But you do. When you start adulting, you need a good credit score. So what's the next thing we should be looking at?

So I would argue an emergency fund is the next most important thing. So the stuff is going to come up in life, car repairs and medical bills. And maybe at some point, once you're an adult, you're going to lose your job. If there's a travel emergency, mom is sick at home or you got to get home. If your phone breaks, if your laptop breaks, so many things can happen. They cost a lot of money. Yeah. Yeah. So you got, especially car repairs. That's what always got me in college. Um, I remember one time I was driving down the road and I couldn't afford new tires. Like I, I was just so poor and didn't want to ask my parents for help. And I was just driving on these bald tires and I was driving down I-75 here in Michigan. And, uh, you deer ran across the road on a snowy day, and I had to go, you know, I basically went into the ditch. And I, I remember the first thing that the police officer said when he pulled up is, uh, is your dog okay? Like, so my dog was in the back seat, and I was like, my dog? Yeah, I'm fine, buddy. Is your dog okay?

he looked at, he took one look at your tires and he was concerned for your dog. Yeah. Yeah. So smart to play there. Yeah.

So you got to have emergency funds to pay for things that might come up without having those savings. Then you're probably going to use credit cards and that's not good. That's how a, a debt cycle begins. That's, that's a bad thing.

And it's a spiraling nightmare, credit card debt. So you want to avoid putting anything on a card that you can't, you don't have money in the bank to pay off right away. You know, you can pay up to 30% interest.

Yeah.

I mean, that's just crazy, right?

Yep. Yeah, absolutely. And most people, once they have credit card debt, they can only afford to pay the minimum payment. So then you're just paying interest and you're not even really making a dent in it. So it can take a really long time to pay those things off because you're not typically making a ton of money while you're working in college, you know, at least during the school year. No.

But that is a good tip. Build up that emergency fund. Have an emergency fund. What's the next tip you have for us?

So once you have a job, whether it's in college or after college, you're going to have to file a tax return. So anytime you get a paycheck, you know, people sometimes see like, oh, this is my starting salary. And then they start paying. budgeting and planning for what they're going to be spending it on. You got to wait until you actually get that paycheck and take a look. They're taking out federal tax, state tax, social security tax, Medicare tax. It all adds up. So at the end of the year, you're going to get a W-2 from your employer. Mm-hmm. And that's what summarizes how much you earned and how much was withheld in taxes. So you can use that info to then file your taxes. And it's important to remember, you got to keep these W-2s and the tax returns. We normally recommend for seven years, just in case you're audited or something comes up.

Wow. Yeah, I guess, yeah, I guess we'd have ours for the last seven years. Now they're mostly electronic, which is handy.

Yep. Yeah. Yeah. I keep a digital, I probably have, I actually have a 25 years worth of tax returns digitally.

Cause I appreciate you. You're very organized. If people haven't learned one thing about you from this show is Ken is very organized, especially with his finances.

I try.

And all aspects. So, okay. So taxes. People have no idea. It was so funny. My daughter just got her first big full-time job as a flight attendant for Delta. And she got her first check. And, you know, she's like, I'm making this much an hour. And she got her first check and she goes, I think they made a mistake. I laughed. I laughed out loud. What? I'm like, let me see your, pull up your statement on the computer there. And I go, she goes, what's all this? And I'm like, that's called adulting. She's 21. I go, welcome to the real world. Yeah, it has come.

Well, on the bright side, you know, she's going to take that W-2 at the end of the year and go to complete her taxes. But a lot of people don't realize what gets taken out of your paycheck. It's just a guess of what you actually owe in taxes. Yeah. So that is all reconciled when you actually prepare the income tax return at the end of the year. That's going to figure out whether you get a refund, which means you paid in too much money in taxes, or if you owe, which means they did not take enough out in taxes. So it's good to know the IRS has no cost tax filing software that you can use, or you can use TurboTax or a similar program, a tax layer. There's a couple of them out there. Or you can use your parents tax preparer.

Yeah. Yep, exactly. Yeah, my two my two youngest still use our tax preparer. I just give they give me all their stuff and I hand it over to them. I think you know him, Joe Norlin. Oh, yeah, absolutely. Yeah. He does for me and my kids, which is nice. He's the CFO of a large financial organization and an expert in taxes. So I'm kind of fortunate in that way. But also, what's the next tip? This is a Avoiding scams.

So I actually heard a thing on the radio this week that, you know, for 20 years, people get these random emails saying that, like, I am a refugee from Nigeria and I'm trying to get a Nigerian prince. Yeah. So somebody is making a comedy movie about that, that like the Nigerian prince was real. And then he like comes to America and says, where's my money? And I But anyways, there's just so many scams that are out there. We've had multiple podcast shows about scams. There are fake job offers. That's the number one scam going around right now.

Yeah. A lot of the scams, the more scams now are targeting specific areas like college age people. And I think used to be the majority of the scams targeted seniors, and they still are a lot of scams. scams that target seniors, but you're starting to see more like the fake job offer message. Yeah. Yep.

Yeah. So, you know, text message scams, urgent payment requests, calling, pretending to be the IRS, calling, pretending to be your bank. So you, you mentioned this in a previous show, but the number one rule when it comes to scams is if you get an email or you get a phone call, assume it is a scam and then call back, you know, if it's the IRS and, get the IRS's actual number and call the IRS and make sure that this is legitimate. If it's your bank, get your actual bank phone number.

Not from the message that they email or text or voicemail they leave or give you over the phone and say, oh, I'll call you back later and then get it offline. But government agencies are never going to call you in the first place. So you don't even have to call them back. The IRS and the Social Security Administration and Medicare, none of those three will call you on

the phone. It says right on their websites: avoid scams, don't, we will not call you. I've had two scams in the office that we've heard about recently. One was a client of ours just Google searched Charles Schwab 1-800 number, and the link that they clicked on was for a hacker, so it was not

I got sucked in. I Googled something. The first thing that came up or the second thing looked totally legit. I went on there. I started to fill it out. And I'm like, wait a minute. It was actually chat GPT. No kidding. Yeah. Yeah. I typed in chat GPT. I don't know why I didn't remember the OpenAI GPT thing. And it was so close, the URL. And then it said, you need to register to use it. I'm like, well, I've never had to register before. You know, I guess it wants my email. A lot of places do now. So I email. Then it took me to another page. We want your phone number. We need to confirm this. Then it said, create a password. And I'm like, hmm. And then it wanted my social security number. Oh, perfect. That was the, then I looked and I'm like, oh my gosh, I almost got. So even if you Google something, you got to make sure it's the legitimate site. You got to be really careful and look at the URL, the address and yeah.

Yeah. Just yesterday, a client emailed my brother and said, hey, can you remind me how much is in my account? I want to take a distribution. And the tone of it was like a little bit different than what I was used to. So he called the client. Sure enough, someone had hacked their email, was reading all the emails, figured out who the financial advisor was, and then was emailing my brother, Jim, to try and get information. Oh, okay. client stuff.

Yeah. You guys see that a lot and you're very wary of it and watch out for it. I think that's great. I mean, it's great that you watch out for it. It's not great that this is happening. I mean, people are, they get so sophisticated. Okay. So avoid scams. What's the, what's the next one?

I would argue the last and best is negotiating a big purchase. So my wife and I are making some improvements to our back porch right now. And I negotiated. Sounds familiar.

Yeah.

Yeah, I know you've got a big porch project too. So yeah, our back porch floods all the time and it's not at a pitch. So the water just gathers and it turns into a little terrible hot tub, I guess, of not what we want rainwater back there. Yeah, yeah. Yeah. So anyways, we're getting these these things put up that will prevent water from getting on the back porch. But I negotiated, negotiated, negotiated and saved like 18 percent off the original offer. My mom and dad are looking at getting some improvements done to their basement. They negotiated, negotiated, negotiated. They got 30 percent off the price by negotiating. So, you know, big money. So cars, apartments, furniture, Internet service, cell phone plans. You want to negotiate, you want to shop around. Do not just do the first thing that should come across. Um, you know, research prices ahead of time. If you're looking to make a big purchase, uh, don't ever appear desperate. Don't ever let them know. I need to get this taken care of right away. Yeah. Be willing to walk away, but you know, you want to, you want to compare multiple offers, but you also want to be polite, you know, um, When I was getting married, we just had our 16 year wedding anniversary. I called these two nice hotels in our area and I said, I've got 150 guests that are coming and most of them are from out of town. You know, I want to get the best rate possible. And I went back and forth between the two hotels eight times and got the price reduced for my guests 40 percent.

Wow. That's huge. Yeah. I would never negotiate any type of financial agreement with the Winx because they're going to whittle you down. You and your dad, yeah, you're good negotiators as far as when you're purchasing something. and getting good deals for your clients, getting good deals for your family. I think that's great. It's a good trait to learn early. And so it really applies to college students and college age people. And also I like the three day wait period. Don't make big impulse purchase or impulse purchases, you know? Yeah. Yeah, that is a great tip. Yeah. When you said purchases, that's kind of part of that. Well, hey, great show today. You covered a lot. What do we need to take? What's the takeaway here? And what do you have for our listeners out there and viewers?

Just remember with all these tips, your goal is not perfection. The goal is preparation. So prepare for college, prepare ahead of time, get that checking account set up, work a bunch of hours during the summer, get that emergency fund built up. Maybe you apply for a debit card or a credit card ahead of time, but then know what your limits are. If you're really good during college, have a budget. You know, actually look at what you have coming in, what you can spend. Maybe you saved up a few thousand dollars over the summer. Figure out how much you can spend per week on food and fun ahead of time so that you don't get broke by the end of the school year. The more preparation you do in almost anything in life, the better.

Yeah, there you go. I like it. Well, that's great advice. If our listeners out there or viewers want to get a hold of you and set up that no charge, no obligation consultation, how do they do that?

Oh, please give us a call. 586-226-2100. We'd love to sit down with you, go over all things financial. If you are getting ready to go to college, if you have kids that are getting ready to go to college, or if you're thinking about how might college affect my retirement, if I pay for half of my kids' college, how long is that going to delay my own retirement? We'd love to help crunch those numbers with you. Our website, summitfc.net. We've got seven financial advisors in the office. We've got a deep bench here. We'd be happy to help you accomplish your goals.

Awesome. Sounds great. Well, listeners and viewers, thanks for tuning in. That does it for today's episode of Money Talks with Summit Financial Consulting, LLC, and our host, Ken Wink. Thank you for joining us for Money Talks. Don't head into retirement without a strategy that addresses both income and taxes. For more information, please contact Ken Wink at Summit Financial, working with people you trust. Call 586-226-2100 or visit summitfc.net.