The federal minimum wage hasn’t increased since July of 2009, and some would argue it has decreased. The U.S. dollar has lost about 10 percent of its buying power since 2009 due to inflation, according to the Bureau of Labor Statistics. Put another way, an item that cost $7.25 (the federal minimum wage) in 2009 would cost $8.00 today.
Granted, 21 states increased their minimum wages in 2015, but those just scraping by still must closely monitor every penny. College students are particularly vulnerable when it comes to money. A survey by public policy research firm Public Agenda found that 58 percent of college students receive no financial help from their parents. Those who said they dropped out cited financial reasons 70 percent of the time.
Parents naturally offer unconditional love and support to their future college graduates. But it’s your experience dealing with tough financial realities that can help them through the greatest and most challenging years of their lives. Here are three budget tips to pass along to them:
Be Smart About the Smartphone
A 2013 survey by the Campus Computing Project found that 79 percent of colleges use mobile apps for courses and to communicate with students. Facebook, Instagram and Snapchat are fixtures in the lives of college students today, and smartphones are now true necessities on campus. However, it’s important to weigh the options before purchasing both the hardware and the calling and data plans.
Advise your kids to look for payment plans when shopping for top-of-the-line smartphones. For instance, T-Mobile allows 24 monthly payments on a new smartphone as part of the contract. Some plans even offer a free phone on approved credit.
Alternatively, an often overlooked way to save money on cellphone service is going the prepaid route. All major carriers have flat-rate prepaid plans that require no contract. You never have to worry about overages, late fees and other extra charges. Ask a sales representative next time you’re in a retail store of a wireless provider for details on what prepaid plans they have to offer.
Care for Your Car
A 2015 study commissioned by BankRate found that only 38 percent of Americans could pay for a $500 car repair in cash right now. A broken down car can lead to missed classes, missed days of work and more stress for your already busy college kids. A large estimate or bill from a mechanic is equally stressful. The chances of either happening can be minimized with a little due diligence.
Changing your oil every 3,000 miles is simply a marketing ploy by lube shops to scare people into spending more money. Most newer cars can go upwards of 10,000 miles between oil changes, according to Edmunds. Technology of both the oil and automobiles has made the “every 3,000” mantra obsolete. Even older vehicles utilizing synthetic oil can go upwards of 10,000 miles without oil changes as long as you swap out the filter every few months.
However, your college student needs to keep up on all routine maintenance called for in your owner’s manual, particularly transmission, radiator and air filter service. Always get two to three estimates from different mechanics before having any major repairs done because it’s the labor costs that typically swell the final bill. Check with local community colleges with auto mechanic programs because they sometimes offer repairs at much lower costs since students are performing the work.
Be Disciplined
College students must get the maximum value out of every dollar they earn. That means making a few tax adjustments. Student workers should fill out a new W4 form with their employer and claim “exempt” on Line 7. People making less than $10,500 in a given year are not required to file a tax return according to H&R Block. Thus, students who are allowing federal withholdings are simply giving the government an interest-free loan on the money they’ve earned.
A slightly larger paycheck, however, doesn’t mean they can spend more. Students should eliminate any unnecessary expenses like cable, satellite TV and Internet bills. Students typically get free Internet everywhere on campus and can stream most of their favorite shows via Hulu or Netflix. Also, they should make it a point to save 5 percent of every paycheck no matter what. Over time, this will turn into an emergency fund that can come to the rescue when emergencies pop up.
When your kids ultimately graduate from college, they will have acquired real-life financial lessons to help them transform into successful young adults.
