For college students, sending money to friends has never been easier thanks to peer-to-peer payment apps like Venmo, PayPal and Cash App. But that convenience poses risks, including vulnerability to errors, fraud and the tendency to overspend.
As a result, payment apps can contribute to financial stress at a time when young people are learning how to manage their finances on their own. “Peer-to-peer payment apps are cash on steroids because they’re a straw stuck into your bank account,” says Anne Lester, author of “Your Best Financial Life.”
Not only does that make spending easier and more “frictionless,” Lester explains, but it also means “if you trust the wrong person, then you’re in big trouble,” because it can be difficult or impossible to get the money back.
To keep young people safe while using payment apps, money experts suggest taking these extra steps to guard against scams and overspending.
Triple-check the recipient
One risk with peer-to-peer payment apps is sending the money to the wrong person by accident. “If you send money, make sure you are 100% certain you are sending it to the right person, because it’s very hard to get the money back,” says Nilton Porto, associate professor of consumer finance at the University of Rhode Island.
For college students living on tight budgets, Porto says, an incorrect payment could really impact their ability to pay for essentials like rent and food, even if they eventually get the funds returned.
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Protect against fraud
Porto suggests being wary of unexpected requests, even those purportedly from a roommate, that claim to be urgent. “We don’t need to send money to almost anybody right away,” he says, explaining that scam artists often use urgency as a way to trick people into sending cash to them. Similarly, disregard any requests received through one of the apps containing a link that requests personal information, as it could also be a scam.
Erin Lowry, author of the “Broke Millennial Workbook,” warns against downloading any unfamiliar payment apps. “I would not be an early adopter to a payment app,” she cautions, given that it has access to your bank account.
As an additional precaution, Lowry suggests connecting payment apps to a bank account that you don’t keep the bulk of your money in. “My payment apps are connected to a bank account that’s not my primary account, so if something were to happen, it’s a low risk,” she says.
Update your privacy settings
“Default privacy settings are usually public,” notes Amanda Christensen, an accredited financial counselor and extension professor at Utah State University. That means a young adult’s payments to friends or funds received for a job could be visible to the public.
“The social part of the payment apps is where we get some of the best scammers out there because they can see what’s being regularly paid for,” Christensen says. To adjust who can see your activity in Venmo, for example, go into “settings” on the app and scroll to find the various “privacy” options, such as public, friends or private.
Earn a return elsewhere
Christensen suggests establishing a habit of transferring any balance out of payment apps once a week. “Set a note in your phone,” she says, cautioning against treating the app like a checking account, where you let money sit.
Not only is cash sitting in an app vulnerable to fraud, but it also doesn’t earn a return like it could in a savings account. Jake Cousineau, author of “How to Adult” and a high school teacher, says he sees many young people receiving payments for side jobs like tutoring through payment apps. Instead of quickly transferring the money into a savings account, they let it linger, which means losing out on interest that would otherwise be accumulating. Payment apps also generally lack the protections from the Federal Deposit Insurance Corp. that come with bank accounts, he adds.
Don’t forget to budget
The convenience of payment apps makes it easy to overspend, Christensen notes. That’s why she suggests turning to cash at times for a week or so. “Reconnect yourself to the pain of spending,” she says.
Cousineau recommends not letting “these apps get in the way of having a detailed budget.” Just because you can easily send a friend $20 with a few taps doesn’t mean you should.
The apps might even be able to help. Porto says you can use the timeline of a payment app to help track your spending. Just as with a credit or debit card, you can scroll through your history to determine what changes you might want to make in the future. “You can see where all the money went, which can be very powerful for college students,” he says.
In other words, leverage the power of these payment apps to help you manage your money, instead of just spending it.
This article was written by NerdWallet and was originally published by The Associated Press.
As parents, we want the best for our children: health, happiness — and hardy credit. Having a strong credit profile can determine whether your kid gets approved for a loan or how much they’ll pay for car insurance when they’re grown. But establishing credit for someone with no credit history is challenging.
A common workaround is for parents to add their children as authorized users on their credit card accounts. Credit checks aren’t required, and the user can quickly piggyback on the primary cardholder’s credit history. But this arrangement isn’t always the right move. Here’s what to know about the potential limitations of adding your kid as an authorized user and alternative ways they can build credit.
They might be too young to reap the benefits
If you’re hoping to boost your child’s credit before they even learn to tell time, you could face roadblocks. For one, your kid may not qualify for authorized user status. While some card issuers don’t have age restrictions, others require a minimum age of 13 or older.
Even if you can add your child, the issuer may not report their account details to the credit bureaus. Some issuers allow kids as young as 13 to become authorized users but only report credit information for those age 18 and older. It’s wise to ask your credit card company how authorized user arrangements work.
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Misuse can lead to damaged credit
Being an authorized user doesn’t guarantee improved credit. “Same as the primary account holder, it can affect your credit positively or negatively, depending on how the card is used,” says Bruce McClary, senior vice president of membership and communications at the National Foundation for Credit Counseling.
If you have a record of on-time payments and don’t use too much available credit, that can generate or help your kid’s credit score. But your credit and your child’s can suffer if either person uses the account unfavorably.
Ultimately, it’s up to the parent to keep the account in good standing.
“When you add someone as an authorized user, that’s what they are. They’re authorized to use the card but they are not legally bound to pay the bill. You are legally bound to pay the bill,” says Julie Beckham, an accredited financial counselor and financial educator in the Boston area.
You don’t need to give your kid the credit card. As long as the primary cardholder keeps their account open and active, the authorized user’s credit will share the effects. If you give your child the card, set some ground rules. Talk about when it’s OK to use the card, how much they’re allowed to spend and who will make the payments. Some credit card companies let you place spending limits for authorized users.
Authorized user status might not be enough for future lenders
Some lenders don’t take authorized user accounts into consideration when reviewing credit applications or give them much weight. “If you’re a lender and you’re looking at someone and you see the designation that they’re an authorized user rather than the primary account holder, it’s just telling you that this person did not have to go through a credit approval process to have access to that account,” McClary says.
Having an account in their own name puts your kid in a stronger position because it shows they’re equipped to manage payments. You can guide them toward opportunities in adulthood.
“There are credit-builder loans that are available. There are starter credit cards for young adult consumers, where the threshold for approval is a little bit lower. You can also look at options for secured credit cards that require no credit check, but they require a good faith deposit in order to open the account,” McClary says.
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The best way to set your child up for success is to talk to them about money, Beckham says.
You could look over your credit reports together or explain how many hours you need to work to pay for things like dinners or fun outings.
Encouraging good routines, like doing chores and turning in homework on time, is also important. “They’re transferable habits that can help them in their life financially as they build credit,” Beckham says.
Give your child opportunities to practice managing money before they graduate to credit. Beckham suggests letting kids test the waters with a checking or savings account. “Starting with their own money is always better because there is a sense of ownership and accountability to that,” she says.
This article was written by NerdWallet and was originally published by The Associated Press.
Do you want to learn how to move out at 18 with no credit, little money, or even no money? Here’s what you need to know. There are many reasons for why you may want to move out at a young age – perhaps you have a difficult home life, you want to move somewhere…
Do you want to learn how to move out at 18 with no credit, little money, or even no money? Here’s what you need to know.
There are many reasons for why you may want to move out at a young age – perhaps you have a difficult home life, you want to move somewhere new, or you just want your own space.
I moved out shortly after turning 18 (about a week or so after my 18th birthday) into a rental home, and while I was not prepared at all, I do think being prepared to move out at a young age is extremely helpful. I made many mistakes that led to many, many tears, money wasted, stress, and more.
Today, I want to help you avoid as many problems as you can.
After all, moving out at 18 years old (or any other young age) is already really hard, and there is such a huge learning curve.
Moving out when you turn 18 is a big step into becoming an adult. Even though it can be exciting, moving out for the first time needs to be planned carefully. Before you leave, it’s important to make a plan to make sure you can afford it and stay on your own.
This means finding a job, making a budget you can stick to, and saving money for unexpected costs.
How To Move Out at 18
Below are ways to move out at 18.
Recommended reading: Buying a House at 20 (How I did it)
Make a plan to move out at 18
I highly recommend having a plan if you want to move out at 18 years old.
Moving out at 18 is a big step, and making a plan will help everything go a little more smoothly.
You will want to think about things such as:
Where you will work
How you will pay your bills
If you will live with a roommate or on your own
What your budget will be like
What you’ll do if things get tough, such as if you can’t afford your rent
What you will do for health insurance and medical bills
And so much more.
I will be going further in-depth on many of these below.
Find ways to make money
If you are 18 and want to move out, then you will need to have a stable source of income, of course. There are many options for earning money, from traditional jobs to more flexible side hustles.
A full-time job typically gives you more hours and benefits like health insurance, which are helpful when you’re living on your own. If you have other things going on, a part-time job might be better because it offers more flexibility while still giving you money (but, you may not earn as much money). You can find job openings online, at job fairs, or on community bulletin boards. Jobs like delivering food can be either full-time or part-time, and companies tend to need people.
If you want to make more money, you can side hustle to make extra income – a way to make extra cash that you do alongside your main job. You could freelance by doing things like writing, teaching tutoring lessons, or designing graphics. Or, you could babysit for families nearby, walk dogs, or help people with tasks or errands. These little jobs can add up to a lot of money and give you the flexibility to work when you want.
When I was young and first moved out, I worked full-time at a retail store. I also eventually started a few side hustles (like blogging, freelance writing, and selling stuff online) so that I could pay off my student loans quickly. Living on your own is not easy, especially when you are young and your income is not that high – so side hustles may be needed so that you can make enough money to pay your bills.
Some helpful articles to read include:
Create a budget
When you’re ready to step out into the world at 18, you need a budget. I can’t think of any young adult who would not need a budget.
Budgets are great because they help you keep track of your money coming in and going out. With a monthly budget, you’ll know exactly how much you can spend on different things each month as it helps you see how much money you have and where you might need to cut back on spending.
A budget will help you to figure out if you can afford to live on your own, if you need to have roommates, or if you need to find a cheaper living arrangement.
Making a budget is easy. First, write down how much money you make each month from your job or other places. Then, write down what you need to spend money on each month, like:
monthly rent
food
phone bill
internet
car
fuel
utilities like electrical, water, trash, sewer, gas/propane
car insurance
medical/health
pet care
restaurants
cable, satellite, or any TV monthly subscriptions
household essential items, like toilet paper, trash bags, etc.
and some money for fun stuff too
Knowing your monthly expenses will help you to better manage your money so that you won’t go into credit card debt.
Recommended reading: The Complete Budgeting Guide: How To Create A Budget That Works
Save for the move (and open a bank account)
When you’re getting ready to move out at 18, saving money is obviously very important. If you can help it, I do not recommend moving out with no money saved.
Think about all the costs you’ll face – like rent, your first security deposit, food, and any unexpected things that pop up. You’ll want to tuck away money for this.
How much should you save to move out? A good rule is to save at least three to six months of living expenses. For example, if you spend $1,500 a month, aim to save between $4,500 and $9,000 before you head out on your own.
This will be your emergency fund. An emergency fund is money you save up for unexpected things that might happen. This could be paying bills if you lose your job or if your hours or pay get reduced. It could also cover unexpected expenses like a car repair, medical bill, or fixing a broken window.
An emergency isn’t something like buying a birthday present, a new TV, or going on vacation.
Having an emergency fund is smart because it can stop you from getting into debt you don’t need. Some people rely on their credit cards for emergencies, but that’s not a good plan.
I also recommend getting your own bank account for all of the money you save. It’s a safe place for your money, and it helps you track what you earn and spend. Plus, you’ll need it for things like direct deposit from jobs or paying bills online.
I personally use Marcus by Goldman Sachs for my savings account as they have a very high rate. You can get up to 5.50% at the time of this writing through a referral link bonus. According to this high-yield savings account calculator, if you have $10,000 saved, you could earn $550 with a high-yield savings account in a year. Whereas with normal banks, your earnings would only be $46.
Improve your credit score and history
When you’re moving out of your parents’ home, having a good credit score is super helpful. This is because your credit score and credit history may be used for things like getting approved for an apartment and getting signed up for utility bills.
If your credit score is low, then you may be denied an apartment and even have to pay large deposits to get signed up for utilities (like water and electric).
Here are some important things to know:
Understand credit utilization – This is all about how much credit you’re using compared to how much you have. Try to use less than 30% of your credit limit. Say your card has a $1,000 limit. Aim to spend no more than $300.
Always pay on time – You should pay every bill on time, every time. Even being a little late can hurt your credit score a LOT!
There are other ways to improve your credit, such as by getting a secured credit card or becoming an authorized user on a family member’s credit card.
Here are two really helpful articles I recommend reading:
I also recommend keeping an eye on your credit by checking your score and report. Sites offer free checks, and it’s good to know where you stand. That way, you can fix any mistakes fast.
Think about where you’ll live
When planning to move out at 18, picking where you’ll live is a huge step.
Here are some things to think about:
Think about who you’ll live with. Living by yourself can be expensive so sharing rent and other bills with roommates can save you money, but make sure you choose your roommates wisely. You’ll be sharing your space with them, so it’s important to pick people who are responsible and trustworthy (and will actually pay the bills!).
Try using online tools to compare different areas. You can check things like crime rates, public transportation options, and how close they are to places you need, like grocery stores.
Think about the cost. Can you pay the rent and utility bills every month? Make sure to include these costs in your budget. Sometimes, living a bit farther from popular areas can be cheaper.
For my first home, I rented a very small 400-square-foot home with no real bedroom. But, it was within my budget and next to my college (I lived a few miles away), and surprisingly affordable.
Talk to your parents
When you’re getting ready to move out at 18, it’s important to have a conversation with your parents. This might feel hard or even impossible, but remember that clear communication is important.
I recommend choosing a time to tell them when your parents aren’t too busy or stressed as having this conversation when everyone is relaxed can make it easier for everyone to talk openly.
I think it is also helpful to think about how your parents might feel. If you’re the first to leave the home, they might find it tough. Try to understand their perspective and mention that you’ll stay in touch and visit.
And, be ready to show them your plan. Your parents will want to know you’ve thought things through. If you’ve been saving money, let them know. Talk about your job and how you’re managing to support yourself. It’s good to tell them about the place you’re planning to move into and how you chose it.
How to move out of your parents if it isn’t safe
So, after reading the above, I know that some of you may not have a good home life. You may not feel safe telling your parents that you are moving out.
If that’s the case, then I recommend reading this section.
Sometimes, home isn’t the safe place that it’s supposed to be. If you’re in a tough situation and need to leave at 18 but can’t talk to your parents about it, you’re not alone.
Here’s what you can do:
Find an adult you trust – Look for someone you trust, like a teacher, counselor, or family friend. They can maybe give you support and help you figure out your options.
Plan ahead – Start thinking about where you’ll go and how you’ll support yourself. Look into shelters, transitional housing programs, or staying with a trusted friend or relative.
Know your rights – As you turn 18, you have rights. Learn about your options for housing, education, and employment because there may be resources available to help you.
Stay safe – If you’re in danger at home, prioritize your safety. Contact local authorities or organizations that can help you leave safely.
Take care of yourself – Moving out can be tough, but remember to take care of yourself emotionally and physically, such as by talking to friends, finding support groups, or talking to a counselor if you need to.
Leaving home at 18 without being able to talk to your parents is hard, but it’s not impossible. Reach out for help, make a plan, and remember that you deserve to live in a safe and supportive environment.
Get free stuff for your new home
One of the big challenges of moving out on your own is affording all of the different things that you need.
Luckily, there are ways to get things for free or really cheap.
Some of the top ways include:
Facebook Buy Nothing groups – This is my favorite place to start if you want to get things for free. These groups promote recycling and reusing items instead of throwing them away when you’re done with them. To begin, look for and join a local Buy Nothing group on Facebook. You can search for groups for your city. People list their free stuff all the time, such as furniture, electronics, clothes, and more. You can even make a post asking if anyone has something that you need.
Ask family and friends – Your family and friends might have extra stuff they’re willing to part with. They might even be happy to see it go to a good home – your new home!
Check online platforms – Websites like Craigslist, Freecycle, and Facebook Marketplace can be goldmines for free furniture. People often list items they want to get rid of quickly.
Visit thrift stores and yard sales – Thrift stores and yard sales sometimes offer “free bins” or low-cost items they want to get rid of fast.
Attend college move-out days – If you live near a university, go there on move-out day. Students tend to leave behind perfectly good furniture that’s yours for the taking.
Community centers and churches – These places often have bulletin boards with listings for free items.
Always be safe when arranging pickups, especially with strangers. Always bring a friend or let someone know where you’re going.
Helpful articles:
Handling utilities and bills
Dealing with utilities and bills is a big step in moving out. Utilities are services you need like water, electricity, gas, and the internet.
Before you move, call or visit the websites of local utility companies. You’ll need to set up accounts in your name. This might include a deposit fee, so be ready for that.
I recommend making a list of all your expected bills. Rent, electricity, water, internet, and maybe gas are usually the basics. Add them up to see how much you’ll spend each month.
After you move in, you will want to find out when each bill is due. It’s your job to pay them on time as paying late can lead to extra fees or even getting your services turned off. Some companies let you set up automatic payments, and this means the money comes out of your bank account on its own each month. This can make sure you’re always on time.
You will want to hold onto your bills and receipts. This way, if there’s ever a mistake with a bill, your records will help fix it.
You can save money by being smart about using your services. Turn off lights when you leave a room and unplug electronics that you’re not using. You might also shop around for better deals on services like the internet.
After you get your first set of bills, you will understand why your parents wanted to keep the air conditioning off or why they always asked you to turn the lights off – things can be expensive!
Also, remember that different times of the year will impact your bills. For example, your electric bill will most likely be a lot more expensive in the summer than it will be in the spring or fall.
Maintain your home (housekeeping)
Moving out at 18 means taking on the responsibility of housekeeping. You might be surprised how quickly your new home can become cluttered and get dirty.
Keeping your home nice starts with regular cleaning, and I recommend setting aside some time each day for tasks like washing dishes, making your bed, and tidying up the living area. This way, messes won’t pile up and become overwhelming.
Then, once a week, dedicate your time to deeper cleaning such as vacuuming, mopping floors, cleaning the bathroom, dusting, and doing laundry.
Housekeeping also requires tools and supplies, so you will want to plan your budget to include items like sponges, cleaners, and trash bags.
Make friends in your new community
Moving out at 18 is a big step, and making friends in your new community is important. It can make your new place feel like home. When you move, you might not know many people, but there are fun and simple ways to meet people.
Here are some tips:
Get to know your neighbors – Start with a smile and say hi to your neighbors.
Join local groups or classes – Look for groups that interest you. Love to paint? Find an art class. Enjoy cooking? Maybe there’s a cooking group nearby. Like rock climbing? Go to the local climbing gym. This way, you meet people who like what you like.
Visit community centers – Many towns have a community center. They have activities like sports, games, and events.
Making friends might take time, but it’s totally possible! Just be yourself and be open to talking to new people.
Balancing work and personal life
I’m guessing you will have a lot going on, between trying to work full-time and enjoying your life, and even possibly furthering your education.
I recommend trying to schedule your time so you don’t get too busy. Use a calendar or app to make sure you’ve got time for work, taking care of your place, and doing fun things too.
It’s okay to say no if you’re too busy. If you’re working a full-time job, you might not be able to hang out with your friends all the time. It’s all about finding a healthy balance between earning money and enjoying life. I had to say no to my friends many times because I was simply too busy. If your friends still live at home, it may be hard for them to understand this unless you explain your situation.
Plus, remember to take breaks. When you’re planning your week, set aside some time just for relaxing. Watching a movie, reading, or hanging out in the park are all great ways to unwind and give your mind a break.
Frequently Asked Questions
Below are common questions about how to move out at 18 years old with little money.
How can I move out fast at 18?
To move out quickly, focus on making a steady income and finding affordable housing. Create a budget to manage your expenses and look for immediate job openings or housing options. Saving as much money as you can right now is also super helpful.
How much money should I have saved by 18 to move out?
Aim to save at least 3 to 6 months of living expenses before moving out. This safety net can cover rent, groceries, and unexpected costs, giving you financial stability as you start on your own.
Can you move out at 18 while still in high school?
Yes, you can move out at 18 while in high school, but make sure you have a support system in place. Balancing school responsibilities with living independently can be very hard.
How to move out at 18 with strict parents?
When moving out at 18 with strict parents, communicate your plans clearly and respectfully. Prepare a well-thought-out plan to show them you’re serious and capable of managing your own life.
Can your parents not let you move out at 18?
When you turn 18, you’re legally an adult in most places, and you can decide to move out even if your parents don’t agree. However, it’s important to respect their opinion and explain your reasons. There are some places where you have to be older, so make sure you do your research.
Do I have to tell my parents I’m moving out?
While you’re not legally required to inform your parents in most places, it’s nice to talk about your decision with them, as transparent communication helps maintain a positive relationship after you leave.
Can I move out at 18 without parental consent?
Yes, in most places, at 18 you’re legally permitted to move out without parental consent. You will want to make sure this applies to your local area.
What things do you need when moving out of your parents’ house?
There are many things that you will need to move out of your parents’ house such as a bed, blanket, pillow, kitchen supplies, towels, a place to eat, a dresser, cleaning supplies, groceries, and more.
Is it realistic to move out at 18?
It is realistic to move out at 18 if you have a reliable income, a budget, and a plan for handling responsibilities. You will want to be as prepared as possible to move out at a young age because there will be many hurdles thrown your way, most likely.
How To Move Out At 18 – Summary
I hope you enjoyed this article on how to move out at 18 years old.
It’s really important to have a plan for a successful move when you are just 18 years old.
You’ll need to find ways to earn money regularly, like getting a job and even doing extra work on the side.
Having savings in the bank and an emergency fund will help you handle unexpected expenses without ruining your plans.
There are also many other things to think about, such as the cost of living, utility bills, your credit score, and more.
I moved out when I was just 18 years old, so I completely understand where you are coming from. I had no financial help from my parents and found and did everything on my own – from making money to finding a place to live, making all of my own meals, and more. It was hard, but it was what needed to be done.
Do you plan on moving out soon? Do you have any questions for me on how to move out at 18?
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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Learn how to utilize a tax advantaged 529 plan to help your or a friend’s children save for future education expenses.
This Week in Your Money: What are the risks of purchasing a home without an inspection? How can you plan for major expenses when healthcare providers can’t tell you how much their services will cost? Hosts Sean Pyles and Sara Rathner share their hot takes on unexpected financial challenges, with tips and tricks on handling surprise expenses, understanding the importance of home inspections, and dealing with healthcare industry inefficiencies.
Today’s Money Question: What are the benefits of a 529 college savings plan? Can you contribute to a friend’s 529 plan to support their child’s future? NerdWallet writer Elizabeth Ayoola joins Sean and Sara to discuss the essentials of 529 college savings plans. They discuss the types of educational expenses covered, the tax benefits associated with 529 plans, and the flexibility of choosing different state plans. They also answer a listener’s question about how to approach the sensitive topic of financial gifts for education with parents, sharing methods for contributing to a loved one’s 529 plan without overstepping boundaries. Then, they discuss the implications of the Secure Act 2.0 on 529 plans, methods for estimating necessary savings for a child’s education, and tactful ways to discuss educational contributions with parents.
Check out this episode on your favorite podcast platform, including:
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Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sara Rathner:
Hey Sean, has money ever made you mad?
Sean Pyles:
Yeah, it has, especially when I get a bill that I don’t expect to pay but have to anyway. So yeah, why?
Sara Rathner:
Yeah. Yeah, those surprise major expenses are a huge pain. I just had to replace my washing machine because the fun never stops in my house.
In this episode, we are going to let off a little steam about what makes us mad in the world of money.
Sean Pyles:
Welcome to NerdWallet’s Smart Money Podcast. Our job today is to help you be smarter with your money, one money question at a time. I’m Sean Pyles.
Sara Rathner:
And I’m Sara Rathner.
So listener, this show is all about you and your money questions. So, whatever financial decision you’re pondering, whatever’s making you mad about your money, let us know.
Sean Pyles:
Leave a voicemail or text the Nerd hotline at 901-730-6373. That’s 901-730-NERD. Or you can email your questions to podcast@nerdwallet com.
Sara Rathner:
In this episode, Sean and I answer a listener’s question about contributing to 529 accounts for your loved ones. But first, we’re going to yell into the void in our semi-regular Money Hot Takes segment.
Sean Pyles:
So here’s how this works. Sara and I just rail against whatever we feel like in the world of money. And let’s put, say, 100 seconds on the clock. That’s what? A second for every penny in a dollar. I don’t know, it’s just an arbitrary number really.
Sara Rathner:
That works for me. It’s a nice round number.
Sean Pyles:
All right, Sara, are you ready?
Sara Rathner:
Sean Pyles:
I’m starting my timer. Go.
Sara Rathner:
All right. I hate the trend where home buyers feel pressure to completely waive getting a home inspection before buying a property. That’s different from the type of waiver where you’ll still do the inspection, but then you’re assuming the cost of anything you find. It’s when you just do without the inspection entirely.
I live in a block of houses that are like 107 years old, and two houses on my block sold with waived inspections where the buyers had to put tens of thousands of dollars unexpectedly into problems in their house that they didn’t know about. I just had a neighbor text me asking for a roofer because the first time it rained since she moved in her house, it started raining on the inside of her house, which means that the seller just lived with that for however long before selling the house and passing the problem onto somebody else.
So especially if you’re a first-time home buyer, if you are going to drain your savings to buy your house, and then you’re not going to have much money left for repairs, be really careful about this. And as a society, can we just make inspections mandatory? That’s more consumer-friendly, honestly. People need to know what they’re getting into, and frankly, people should feel pressure to keep their houses well maintained before sale. There I said it.
Sean Pyles:
You’ve got 40 more seconds if you want to keep on railing.
Sara Rathner:
Oh man, I do? Well, if you haven’t bought a home yet, what’s nice about getting an inspector involved is they’ll look at all the major systems of the house, the appliances, the roof, all sorts of stuff, the electrical, the plumbing, and they will tell you the lifespan of some of those major things like a furnace or a boiler, your roof, your HVAC system. And even if something is going to go in the next year or two, at least you have this laundry list of things and when they’ll probably need to be replaced, and you can begin to budget for those replacements.
Sean Pyles:
Okay, that’s 100 seconds.
Sara Rathner:
Boom. All right, Sean, you got any reaction?
Sean Pyles:
Well, I totally feel that, because buying a house without knowing what’s wrong with it is very risky financially. Buying a house can be financially risky in and of itself, depending on how expensive the home is. But imagine getting into the house, it’s your first day, you’re super happy to be a homeowner, and then you realize, oh, it’s raining inside the house, or the crawl space is infested with termites. You don’t know what you’re getting into if you don’t have an inspection. And even if it may make you a more competitive buyer, it isn’t worth it, in my opinion, to get yourself into something like that because you just don’t understand the risks you could be taking on. And I’m all about mitigating risks as much as possible.
Sara Rathner:
All right, Sean, I have had my turn, and now it is your turn. I have set my timer for 100 seconds. And go.
Sean Pyles:
Okay. Today I am mad about industries that are designed to extract money from us while making our lives miserable or at least really frustrating. And I have one, maybe two, examples depending on how far 100 seconds takes me.
First step is healthcare. Americans spend far more on healthcare than other wealthy nations. Nearly 18% of our GDP in 2021 went to healthcare. And what are we getting for it? An incompetent extractive industry that exploits nearly everyone that engages with it. Among wealthy nations, the US has the highest rates of infant and maternal mortality and excess deaths, not to mention the daily indignities that come with trying to access healthcare.
I have a recent example that is a microcosm of these larger issues. I recently got a bill in the mail for some regular lab work, and the thing is, I have these labs done every few months, and they’re always covered by my insurance. But this time I got a surprise bill for nearly $200, and I’d already had an expensive month with some car repairs, and I was not excited about the prospect of an additional $200 to cover. So I called my doctor, and they said, “Oh yeah, the company that does the lab work just messed up. Oops, just disregard the bill.”
So if I hadn’t called my doctor, I would have been on the hook for this bill. This was a relatively small bill as far as medical bills go, and it was fairly easy for me to clear up. I’m obviously very fortunate in this case, but for so many people, especially those with chronic illnesses or complex medical conditions, the onslaught of navigating insurance, verifying that you’re being billed correctly and then somehow coming up with the money to cover bill after bill is just totally exhausting and can make achieving financial goals nearly impossible.
So why am I going on and on about things that we already know too much about?
Sara Rathner:
Just so you know, you’re over time.
Sean Pyles:
Oh, God. I’m going to keep going. I’m almost done.
Sara Rathner:
Keep going, Sean. Let’s do this.
Sean Pyles:
All right. I am going on and on about this because I think it’s important to remind people that it does not have to be this way. We are in an election year, people, so I don’t know, let’s try to do something about it.
Okay, Sara, how many seconds was that?
Sara Rathner:
Oh, well I stopped timing it the second it hit the clock, so that might’ve been just an extra 10 seconds, honestly.
Sean Pyles:
Okay. It’s hard to fit so much into such a small amount of time.
Sara Rathner:
You know what? Your rage is such that it cannot be fit into a tiny container and that is valid. It’s okay to let the rage out and give it some more space.
I agree with you. What’s annoying is, for example, this past year I had a baby, and that is expensive to the tune for me of $7,000 out of pocket after insurance. Hi. $7,000 is a lot of money, people.
And what was annoying about that, and this is something for anybody who maybe is facing a planned medical procedure like a surgery or childbirth or anything like that, or who takes medication for chronic illnesses, I tried to call the billing department at the hospital to talk to my insurance company to say, “Can you at least give me an idea of how much money I will be out?” I knew going into it that I would be having a C-section. So I could say, “I’m having a C-section, that means I have to work with an anesthesiologist, which is an extra expense. Can you tell me ballpark, even if you’re off by a grand, how much should I budget for this?” And everyone’s like, “We don’t know.” Shrug emoji.
Then the bills just fly in for months and you think you’re done. So you’re like, “Okay, we’re done paying for the hospital bill. Now we can put our money into other stuff.” And then you get another bill for like, $1,100.
Sean Pyles:
And you have to question, was this billed correctly? Was it coded correctly? You don’t know. And it just flies in the face of all the things that we try to talk about in the personal finance space, which is around anticipating big expenses, budgeting for it, saving up for it if you can. It’s impossible when you don’t know what you’re going to be paying.
Sara Rathner:
Right, and if you’re facing surgery, what, are you just going to not have anesthesia to save money? Do not recommend.
Sean Pyles:
That is not a money-saving tip that we would recommend. No.
Sara Rathner:
No, that’s a place where you should spend good money, get good and numb.
But really it is an extra expense. And that’s so, so frustrating because you are not only out a lot of money, but you’re feeling kind of vulnerable because you’ve just gone through some medical stuff, even if it’s just blood work or something, and you want to take good care of your health, and it’s sometimes financially impossible to do that.
Sean Pyles:
Yeah. Not to mention completely demoralizing.
Sara Rathner:
Yeah, and some people just don’t go to the doctor because of the cost, or the dentist. And then years later, they’re faced with really serious health issues because they’ve been neglecting their health because of the cost.
Sean Pyles:
Yeah. I don’t know, it’s really tough in this space to talk about medical expenses because at NerdWallet and in the personal finance realm, we try to give actionable advice, and a lot of the time the advice is reactive. If you get a medical bill, you do have to ensure that it’s coded correctly. Maybe try to work out a payment plan with your medical office if you can’t cover the bill in one go. But it’s so hard to be proactive like you were just describing and understand what you’re going to have to pay if you want a routine procedure like blood work or something more significant like having a baby, makes me want to yell into the void all day every day.
Sara Rathner:
Yeah. Well, we took more than 100 seconds about this. If you have a body, then this is something that affects you, and it is really hard to deal with those extra unexpected costs.
Sean Pyles:
All right, so that is what we are mad about this week, listener. I know there’s a lot to be mad about in the world of money, so do not keep it in. Let us hear what you’re mad about, and we might just share it on a future episode.
You can text your Money Hot Take to us or leave a voicemail on the Nerd hotline at 901-730-6373. That’s 901-730-NERD. Or you can email it to podcast@nerdwallet com.
Sara Rathner:
All right, I don’t know about you, but my heart rate is starting to come down from all of that. Ooh, deep breaths, everyone. This episode’s money question is up next. So calm down too and stay with us.
Sean Pyles:
This episode’s money question comes from Lauren, who wrote us an email. Here it is.
“Hi nerdy Nerds. I’m not a parent. I’m never going to be a parent. Because of that, I have made it part of my financial plan to contribute to the 529 plans of kids around me. Because I don’t have nieces and nephews, I’m contributing toward the savings of my friend’s three-year-old. How much needs to go into a 529 starting at age two or three to cover a four-year private college?”
“I got the details on this kid’s 529 plan from his dad and started contributing about $100 a month. We didn’t talk about it. I intend to keep chipping in until the kid is done getting formal education 20 to 25 years from now. How do I talk to the parents? I want to understand if I’m helping enough without becoming privy to their private financial details. I also don’t want to make it seem like I have any vote whatsoever in how the kid charts an educational path. How do I broach this with the parents?”
Sara Rathner:
To help us answer this listener’s question, on this episode of the podcast, we are joined by NerdWallet writer Elizabeth Ayoola. Welcome.
Elizabeth Ayoola:
Hello, and hi.
Sean Pyles:
Elizabeth, so good to have you on.
So let’s start by setting some groundwork. Can you please describe what a 529 college savings plan is, how they work, and why they’re such a big deal?
Elizabeth Ayoola:
A 529 plan is a huge deal indeed to me anyway. I wish I had one when I went to college because I was left with a huge bill. But anyways.
529s are tax advantaged college savings plans, and they allow people to save and invest money for education expenses. So, with that said, the money gets to grow, and it gets to compound, which can mean beneficiaries have a nice education pot to pull from when they need the money. And for those who don’t know what compounding is, it’s essentially when your interest earns interest.
Sara Rathner:
It’s the eighth wonder of the world.
Elizabeth Ayoola:
Sara Rathner:
So you mentioned education expenses and that’s what the purpose of this account is, but what kinds of education expenses can you use a 529 to fund?
Elizabeth Ayoola:
Funds in a 529 account can be used to cover a vast range of qualified expenses, and that can range from tuition to computers and education related equipment. The expenses can also be used to pay for education needs of your beneficiaries. And the good thing that I like is that the beneficiaries can be in anywhere from kindergarten through grade 12. So that said, it’s not only for college students.
Sean Pyles:
Right, that is a really good point because people hear about 529 accounts, and they think they may be specifically for people going through a traditional four-year education, but people can also use the funds in the 529 college savings plan to cover things like trade schools too. So it really isn’t only for that traditional four-year higher education route.
Sara Rathner:
So earlier you mentioned that 529s are tax advantaged accounts. Can you talk a little bit about the tax treatment of them, and what should people know when they’re considering opening a 529?
Elizabeth Ayoola:
Well, one thing that I personally like about these accounts that some people don’t know also is that some states offer a tax deduction if you contribute to their plan. And when I say their plan, I mean the state that you live in. But there is no federal tax deduction for a 529 contribution. So it’s only at a state level. The tax deduction is usually capped. So no, you can’t just deduct your entire contribution. The deduction amount varies from state to state. So it’s best that you check in your state what the amount may be, if they offer it.
And a little bit off-topic, but I also like that the IRS doesn’t set a cap on your contributions to a 529 account, although some states do set a limit.
Sean Pyles:
And I’ll call out two other tax benefits of 529 college savings plans. The first is that investment growth in this account is tax-free, and second, distribution for qualified expenses like tuition or books are also tax-free.
Elizabeth, another important thing to know about 529 college savings plans is that each state has their own, and you don’t have to choose the 529 plan from the state that you live in. And this can all get a little bit confusing because there are so many states to choose from. So, at a high level, can you outline the main differences between a 529 from one state to the next, and how would someone go about choosing which state’s 529 plan to use?
Elizabeth Ayoola:
One of the major differences that people should know and a reason that people may cheat on their state’s 529 plan is lower fees. I personally have a 529 from a different state than my current home state for that very reason. So people should consider shopping around and comparing fees before opening an account. Ultimately, the goal should be to do some math and see whether the deductions and the credits that you’re going to get in the state that you live in are worth more than the lower fees that you could get in another state in the long term.
Also, note that you can open multiple 529 accounts. I have multiple 529 accounts. I recently opened a second one in my home state, Florida, because my son was awarded a grant and it could be transferred to a 529 account, but the catch was it had to be a Florida 529 plan.
Sara Rathner:
So 529s have some flexibility, which we talked about before, not just for four-year educations, but also for trade schools and for K to 12 expenses as well. And interestingly enough, 529s were just made even more flexible. Can you talk about recent changes around the ability to roll 529 funds into a Roth IRA, and what that means for folks who maybe aren’t considering going to college?
Elizabeth Ayoola:
The Secure Act 2.0 was recently passed, and if I can be honest, that’s what motivated me to open up my first 529 account, and I just opened it last year. I was always on the fence and only saved money in a brokerage account because I was afraid of what would happen if my son decided not to go to college in 15 years. He’s six, by the way.
I decided to get off the fence when the Secure Act 2.0 made it possible for people to roll at least a portion of the unused funds into a Roth account. However, you do have to wait until 15 years after you’ve opened the 529 account before you can roll those funds over. And you can also only roll up to a certain limit starting in 2024. It may be ideal to read the IRS’s rules, they have a lot of fine print around the conversion or speak to a finance professional about it.
I think Roths are also awesome because they aren’t subject to required minimum distributions and withdrawals. They’re also tax-free when you meet certain requirements like waiting until 59-1/2, amongst other rules.
Sara Rathner:
All right, well thank you for that great summary of the tax rules surrounding this new change. We just want to let you all know that we are not investing or tax professionals, and if you have any specific questions to your own situation, definitely consult a professional who can give you guidance.
Now let’s turn to the fun stuff. The math, Sean. I know that you are in the midst of your certified financial planner coursework. I have slogged through that myself. It is a lot. It is a lot of math.
Sean Pyles:
Sara Rathner:
And now that you know how to do it, I’m sure you’re eager to show off your chops. So are there any insights you can share that will help our listener figure out how much they need to save every month or every year to help their friends reach their savings goals?
Sean Pyles:
As a matter of fact, yes. And you’re right, I have been waiting for an opportunity to show off what I’ve been learning about because often I’m just doing calculations in silence and this is a time for me to be loud and proud about hitting buttons on a calculator. So let’s do it.
I’ll spare you and our listeners the specifics of the calculation, but I plugged the listener’s situation into a time value of money calculation and got a rough estimate for how much they will need to save.
Sara Rathner:
All right, drum roll. What’s the number?
Sean Pyles:
For our listener to meet the savings goal that they outlined in their question, remember, they want to save for four years of education at a private college starting now-ish and saving until the kid finishes school. They would need to save around $8,000 per year. Obviously, that’s a lot of money to contribute to a 529 account, no less for a kid who isn’t your own. And this is why 529s are often just part of the picture when it comes to paying for college, which usually includes some combination of scholarships, grants and loans and generous gifts from family friends.
Sara Rathner:
That is definitely more than a hundy a month.
Sean Pyles:
Yeah, that’s for sure.
All right, so all of that math out of the way, I want to talk about the other part of our listener’s question. They seem to be concerned about how much they should contribute and also how to talk about this with their friends. I am not a parent, so I would love to hear from both of you who are parents, how you would approach the situation if you had such a generous friend. Would you welcome the money, or say get out of my business? Or if you are going to accept this money, if you want to have this conversation with your friend, how would you want them to communicate that with you?
Elizabeth Ayoola:
Honestly, I would welcome the money, especially because I’m a single mama. So as a matter of fact, my friends always contribute to my son’s savings account in London for his birthdays or holidays and I really, really appreciate it. It can be a better gift to me than toys that stab me in the foot within a few days.
Sean Pyles:
Elizabeth Ayoola:
I would also appreciate a friend asking me what my savings goals are, so they know how to support that goal. However, I do think, for the sake of boundaries, I would like my friend to ask me my comfort level with the topic before they dive in and start trying to give advice.
I think it’s also important to note that not everyone is comfortable discussing money or financial goals. But with that said, here’s an example of maybe how somebody could say it. So you may say, “Hey, I want to help you reach John’s college savings goal. Are you comfortable discussing that target number you have in mind, and can you tell me how I can support that?” Or another option could be you saying, “Hey, would you like to do the math yourself and then let me know how I can support that goal?” So those are just a couple of options.
Sara Rathner:
Yeah, I mean, I’m not going to look a gift horse in the mouth. College is expensive now, and it’s only going to become even more expensive in the future. Even in-state tuition, where I live in Virginia, is often over $20,000 a year. That used to be the economical way to get a four-year degree, and now it’s also very, very expensive. So what’s it going to be like by the time my kid’s in college? I don’t know. A lot.
Sean Pyles:
I think we can confidently say more money.
Sara Rathner:
Confidently, we can say a whole lot more money.
I would want my friends to decide for themselves what they feel comfortable giving, because I don’t feel comfortable telling another person how they should allot their money because they have other competing financial goals and obligations. And I never want to tell another person what they can do with their money unless they specifically ask me to tell them what to do with their money, which nobody ever asks me.
Sean Pyles:
And you also don’t want to give the impression that your friends can’t look after their own family’s finances, right? That’s a bit of the awkwardness underlying the question, is you want to help someone that you care about and this child that you’re seeing grow up in the world, but you don’t want to impose your will upon them. It seems like our listener is being very thoughtful about that. And you don’t want to make it seem like you think they aren’t doing enough.
Sara Rathner:
Right, or you think their kids should go to a four-year private university because that’s what you value, but maybe the parents have other values that they want to impart upon their child as the kid grows up, and then the kid will go off and do their own thing as a young adult.
In my case, we have a 529 for our son. We have family members who’ve contributed money. They’ve just written checks to us, and then we deposit it into our account that is tied to our 529 and then deposit the money into the 529.
Ultimately, when you contribute, you do go through the account owners, and that’s oftentimes parent or guardians. You are going to have to communicate with them because they’re ultimately the gatekeeper of that account. They are the owners, and then the child is the beneficiary.
Sean Pyles:
That actually brings up something that I wanted to talk about, which is who would own this account? The listener could in theory open up a 529 account on their own for this kid. But long-term, it’s probably going to be easier if the parents are the owners of the account, because that way when the kid is eventually ready to go to college or trade school or what have you, the parent can be the one managing those distributions.
Personally, I know as a friend, as much as I love my friends and my friends’ kids, I don’t want to have to manage that down the road. So that’s something else that they should think about when they’re talking about this with their friends.
Sara Rathner:
I definitely agree with talking to the parents and ultimately contributing to an account that the parents or guardians are in charge of.
Sean Pyles:
Well, Elizabeth, do you have any final thoughts around 529s and helping your friend’s kids afford college?
Elizabeth Ayoola:
I think we have given some very juicy tips here and only two more things come to mind, which is one, while it’s noble to contribute to your friend’s kids or loved one’s kids’ 529 account, please take advantage of any state income tax deductions that you might be eligible for. The rules around this can be muddy. And I know the original listener who asked this question lives in a different state than where he’s contributing, but sometimes you’re able to get a deduction depending on the state that you live in. So if you can get money back, I mean, why not?
My second thing that I’ll say is that if your loved one doesn’t have a number in mind, guide them to a college savings calculator or run the numbers together over coffee if they’re open to doing that.
Sean Pyles:
Great. Well, thank you so much for coming on and talking with us.
Elizabeth Ayoola:
I loved it. Thank you for having me.
Sean Pyles:
And that is all we have for this episode. If you have a money question of your own, turn to the Nerds and call or text us your question at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected].
Visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate, and review us wherever you’re getting this podcast.
Sara Rathner:
This episode was produced by Sean Pyles and myself. Kevin Berry and Tess Vigeland helped with editing. Sara Brink mixed our audio. And a big thank you to NerdWallet’s editors for all of their help.
And here’s our brief disclaimer:
We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Sean Pyles:
And with that said, until next time, turn to the Nerds.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
Becoming an authorized user on an open credit account, paying down student loans and securing credit builder loans can help young adults build credit.
Learning how to build credit at 18 can pay dividends throughout your life and help you explain financial concepts to others. Length of credit history is one of many factors that impact your overall credit score, so building credit early on can make it easier to secure credit cards and loans in the future.
Here, you can learn how to build credit at 18 and better understand which factors influence your credit health. You can also discover how Lexington Law Firm can help you improve your financial literacy.
Key takeaways:
You don’t have a credit score until you take actions that are reported to credit bureaus.
Length of credit history makes up 15 percent of your FICO® credit score.
Paying down student loans will positively affect your credit over time.
Table of contents:
1. Learn what credit score you start with
Starting credit scores vary from person to person and are largely based on each individual’s financial habits. When you first secure a loan, a credit card or a line of credit, your credit habits during the following six months will determine your starting score. Afterward, your credit score can increase or decrease based on several factors.
Who provides credit scores?
Credit reporting bureaus keep track of your credit history and provide reports based on your financial habits. Equifax®, Experian® and TransUnion® are the three main credit bureaus you can request a credit report from. Your credit score will be based on the information found in your credit report.
The law requires each bureau to provide at least one free report each year. Checking one of your credit reports every few months throughout the year can help you track your credit habits and progress.
2. Become an authorized user on a credit card
Just like other adults, young adults can become authorized users on another person’s credit card with the cardholder’s permission. With this method, an individual without any credit history can make purchases with a credit card and gradually build credit.
The caveat to this method is that all activity with a credit card will affect everyone connected to it. If a young adult gains access to one of their parents’ credit cards, the child’s activity will increase or decrease their parent’s credit score as well as their own.
3. Apply for a student loan
As previously mentioned, length of credit history can positively impact your credit score. For many young adults, a student loan will be their first credit account until they can acquire a credit card.
Paying off your loan might temporarily cause your score to dip, as your oldest account will be closed. However, regularly making timely payments will benefit your overall credit score far more than this dip will hurt it.
4. Secure a credit builder loan
Credit builder loans are helpful options for individuals with no credit history and people looking to repair their credit. These loans often have flexible requirements for applicants, though they typically have higher-than-average interest rates and brief repayment terms.
Community banks, credit unions and online lenders offer various credit builder loans. Large commercial banks don’t usually offer these loans, as their small payout amounts (normally $300 – $1,000) aren’t helpful to their everyday operations.
5. Frequently review your credit report
Challenging an error on your credit report and getting it removed can be an effective way to improve your credit. To discover these issues, it helps to routinely check your credit reports throughout the year.
Equifax, Experian and TransUnion all accept challenges by phone or online, and Lexington Law Firm can also help you challenge any errors on your report. Explore our services and see what features our tiered plans provide.
6. Space out your credit card applications
Every time you apply for credit, a hard inquiry occurs. This means that a third party (i.e., the bank offering the credit card you applied for) asked to review your credit report. Hard inquiries can appear on your report for years, but they’ll generally only hurt your credit for 12 months.
Issues can arise if you apply for too many credit cards or other lines of credit in a short period. Those dings against your credit can mount and damage your credit. On the other hand, spacing out your applications can help keep your credit healthy and stable.
7. Manage your credit utilization ratio
Your credit utilization measures your current account balances against your total credit limit. The higher your utilization is, the more negatively it will affect your credit. Ideally, it’s best to keep your utilization below 30 percent, or even 10 percent if possible.
Here’s an example to help visualize credit utilization. If you have a total credit limit of $5,000 and you’re currently using $500 of your available credit, your credit utilization will be 10 percent.
8. Use a credit monitoring service
Credit monitoring simply refers to reviewing credit reports and making decisions based on that information, whether you see inaccurate information that needs to be fixed, or accurate information that shows you where you can improve your credit usage. People can do this process themselves or seek out a credit monitoring service for help. Institutions like banks, credit unions and the three credit bureaus all provide distinct credit monitoring services.
Learn to manage credit with Lexington Law Firm
Young adults looking to build and manage their credit have many resources at their disposal. Still, professional advice from individuals with years of experience can make a big difference. Lexington Law Firm can provide a free credit assessment to help you get a sense of where your credit is starting and where you may want to go from here.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Brittany Sifontes
Attorney
Prior to joining Lexington, Brittany practiced a mix of criminal law and family law.
Brittany began her legal career at the Maricopa County Public Defender’s Office, and then moved into private practice. Brittany represented clients with charges ranging from drug sales, to sexual related offenses, to homicides. Brittany appeared in several hundred criminal court hearings, including felony and misdemeanor trials, evidentiary hearings, and pretrial hearings. In addition to criminal cases, Brittany also represented persons and families in a variety of family court matters including dissolution of marriage, legal separation, child support, paternity, parenting time, legal decision-making (formerly “custody”), spousal maintenance, modifications and enforcement of existing orders, relocation, and orders of protection. As a result, Brittany has extensive courtroom experience. Brittany attended the University of Colorado at Boulder for her undergraduate degree and attended Arizona Summit Law School for her law degree. At Arizona Summit Law school, Brittany graduated Summa Cum Laude and ranked 11th in her graduating class.
When your child heads off to college, you are probably awash in all kinds of emotions. Pride, relief (yes, they got into school!), sadness, anxiety, and excitement can all swirl around you. Your baby is growing up and forging their own independent life. Will they make new friends? Like their classes and excel in them? Find their way around campus easily enough? Will they overspend, sleep through class, and stay out all Friday night?
Part of having a college student as a child means you must get used to some separation and lack of information. But that doesn’t mean you can’t continue to play a vital role in their life. Here, some wise advice about conversations to have, topics to cover, and when to help them have an amazing time at school.
Advice for Parents of College Students
Although each parent-child relationship is unique and each parent may face different challenges with their college student, there are moments that can be universal when your “baby” heads off to university life.
You’ll need to know how much to let go and encourage your child to become independent versus how much you should continue to provide support, whether that’s emotional support or financial.
Where that line should be drawn for each child and parent depends upon things like the seriousness of the problems being faced and how temporary or permanent they may be. In general, though, tips include:
• Listen, but try not to dive right into problem solving. This may not be the moment to lead with, “Here’s what you need to do…”
• Be mindful about how often you communicate and give your college student space while also staying available. Texting constantly and expecting quick replies will be unrealistic for many parents.
• You may be used to getting those report cards regularly and monitoring your child’s checkups at the doctor’s office. Recognize that now, times are changing, and you may not always be kept in the loop. FERPA (or the Federal Education Records Privacy Act) gives college students new privacy rights that can be defined pretty broadly. You may want to talk to your child about signing a FERPA waiver that will give you more access to information.
Accepting that college isn’t just about education but also about your child establishing themselves as an independent adult is an important transition for both of you. 💡 Quick Tip: Pay down your student loans faster with SoFi reward points you earn along the way.
Parenting College Students During Summer Break
Just when you figure out how to parent your child when he or she is away from school, summer break arrives with a different set of challenges. The young adult that you watched leave for college is probably not the same person who is returning. Maybe they don’t want to chat as much as before, or don’t seem as open to talk about daily life, friendships, and relationships.
The parent-child dynamic may be less about directing your kid’s actions and more about creating a collaborative partnership.
This can include things like withholding judgment about your child’s actions and making requests rather than demands — even when you’re sure you’re right. Your child is growing up and stretching their wings, both at school and when they return. They are becoming a full-fledged adult, after all.
Analyze which rules are the most important, and focus on those, letting other ones go. One example is you might ask that he or she call you if dinner will be missed, but not try to impose a curfew.
Recognize that during summer break you’ll probably need to readjust to being together, while also focusing on enjoying your time together.
Conversations about Paying for College
As part of your evolving parent-child relationship, you’ll likely find yourself in conversations about the best ways to pay for college. As the parent, you’ll likely initiate these talks. As part of your discussions, you may want to:
• Be clear about how much money you’re willing or able to contribute towards your child’s college expenses and how much your child will need to contribute.
• Discuss how much college will cost once you add tuition, housing, books, and other expenses together.
• Talk about student loans, including the differences between federal student loans and private student loans.
• Discuss how your child working during college may help pay for expenses.
• Talk about money management and how your child may feel some stress over student loan debt.
Here are some valuable topics to mention.
• There are scholarships and grants that usually don’t need to be repaid. What’s left is the amount that typically needs to be paid for by a combination of parental contributions, student contributions, and student loans.
• The two main types of student loans are federal and private. To qualify for federal student loans, you’ll need to fill out the FAFSA® (or Free Application for Federal Student Aid). This form needs to be filled out every year to determine eligibility for federal student aid dollars, including federal student loans.
• Federal loans can be subsidized or unsubsidized. Students may be eligible for a subsidized loan if they have a certain degree of financial need. Subsidized loans do not accrue interest during the six-month grace period after graduation/dropping below half-time enrollment and during any loan deferments.
• If the student drops below half-time enrollment, the grace period will begin even if he or she has not graduated yet, although there are some circumstances in which the student loan grace period can change.
Unsubsidized federal student loans do not require a demonstration of financial need, but do accrue interest during the entire loan period.
Private student loans are not funded by the government. Your child can apply with individual lenders, and each loan will come with its own terms and conditions, including repayment terms. Private loans can help fill the gap between what your child can pay with scholarships, grants, or federal loans. 💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.
Saving for Your Child’s College
If you’re still saving for your child’s education, your options may include:
• What are known as 529 college savings plans, also called qualified tuition plans, allow you to save for college while potentially offering tax benefits. Money saved in an education savings plan (sponsored by some states) can be used for tuition, fees, room and board, and other qualified higher education expenses at a college or university.
• Prepaid tuition plans (available at some universities) offer the option to prepay tuition and fees at current rates.
• Traditional or Roth IRAs, although more commonly used to save and invest for retirement, can be used to save for college expenses. .
• Coverdell Education Savings Accounts allow you to set up an account to pay for qualified education expenses, but contributions are not tax deductible and are only available for people whose income falls under certain limits.
• Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts are intended as a savings vehicle for beneficiaries under the age of 18. Depending upon your state, the funds will transfer to your child at either age 18 or 21 and do not have to be used for education expenses.
Tax Credits and College
When it’s tax time, if you claim your college-age child as a dependent, you might qualify tax credits related to education.
• The American Opportunity Tax Credit could be helpful during the first four years of their undergraduate education. Qualifications include MAGI, or modified adjusted gross income, among other factors.
This is a credit for tuition and other qualified education expenses worth up to $2,500 per eligible student and could reduce the filer’s tax bill, not their taxable income.
• The Lifetime Learning Credit is also a tax credit, but may be harder to qualify for. Each year, you can claim either the AOTC or the LLC, but not both.
Parent Student Loans
You may be able to take out loans for your child’s education expenses, including a federal Parent PLUS Loans, available to parents of dependent undergraduate students for the amount of attendance costs minus other financial aid.
Private lenders may also be an option. Fees, rates, and repayment options vary by lender and they don’t typically offer forbearance or deferment options like federal loans do. As another option, you may be able to co-sign a private student loan with your child.
SoFi Parent Loans
Paying your child’s tuition with SoFi’s flexible, competitive-rate parent loan may be an option for consideration as well.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
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SoFi Private Student Loans Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Northwestern Mutual Study Finds Gen Z Wants to Talk About Family Finances Far Earlier than Previous Generations Gen Z trusts family members and advisors – and not “FinTok” influencers – for financial advice Millennials want to talk to parents about wills, life insurance, inheritance and long-term care plans a full decade earlier than Boomers+ MILWAUKEE, … [Read more…]
Snapshot: TheSecured Chime Credit Builder Visa® Credit Card1 doesn’t have interest4 or an annual fee, which makes it a great credit-building2 option. You’ll have to open a Chime checking account and receive a qualifying direct deposit in order to apply.
Pros
Cons
No annual fee.
You can’t apply without a Chime checking account.
No interest4
You have to secure your credit limit with a deposit.
Chime reports to all three credit bureaus.
Chime doesn’t report credit utilization.
You can use your deposit to pay down your charges at the end of the month and move more money from your checking account to the secured account to secure future credit
Secured Chime Credit Builder Visa® Credit Card
Qualifying direct deposit of $200 or more. Chime Checking Account required.
No annual fee. No minimum security deposit*. No credit check to apply
*Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.
Build credit history with your own money on everyday purchases and on-time payments**
**On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Results may vary.
View and track your FICO® Score¹ right in the Chime app. FICO® Scores are used by 90% of top lenders
¹Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn More
***$2.50 Out-of-network ATM withdrawal fees may apply.
Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Credit Builder Visa® Credit Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.
Table of Contents
Full Review of Secured Chime Credit Builder Visa® Credit Card
What You’ll Like About This Card
The Drawbacks
Is the Secured Chime Credit Builder Visa® Credit Card Worth It?
Full Review of Secured Chime Credit Builder Visa Credit Card
The Secured Chime Credit Builder Visa® Credit Card is unique among secured credit cards. Most secured credit cards require an initial qualifying deposit that acts as collateral and determines your credit limit. The Secured Chime Credit Builder Visa® Credit Card works a little differently. By transferring funds from your Chime checking account to your secured account, you determine your own credit limit.
This means that you don’t have to worry about accruing credit card debt faster than you can pay it back. You’re essentially “borrowing” from the deposit that you initially submitted to set up the account, except that it appears on your credit reports as a credit account. This means that all on-time payments you make on this card will show up as positive items on your reports, helping you build up good credit.
Also, a credit check isn’t necessary to apply – which makes it a good option if you have a low or non-existent credit score.
To apply for the Secured Chime Credit Builder Visa® Credit Card, you will need to open a Chime checking account and receive a qualifying direct deposit of at least $200. So although the Secured Chime Credit Builder Visa® Credit Card has no security deposit minimum3, with the requirement for the Chime checking account, it’s essentially a $200 minimum requirement to get the secured card.
At the end of the day though, a $200 minimum deposit is right in line with other secured cards. And the lack of interest rate4, annual fee, and credit limit flexibility available with this card make it a great choice if you’re looking to build your credit.
What You’ll Like About This Card
No Minimum Security Deposit3 and an Adjustable Credit Limit
The money that you use as a security deposit for your Secured Chime Credit Builder Visa® Credit Card is transferred from your Chime Checking Account to your Credit Builder secured account. So even though you need to have a qualifying direct deposit of at least $200 in your Chime checking account in the last year to get the card, you don’t have to transfer the full $200 to your Credit Builder secured account – you can transfer however little you want.
One of the most unique features of the Secured Chime Credit Builder Visa® Credit Card is that there is no minimum security deposit3. You can also change your credit limit later if you decide to add more money into the Credit Builder secured account, which provides a lot of flexibility. You can start working to build your credit history right away. (There is a maximum deposit limit of $10,000 though).
No Interest Rates4 or Annual Fees
With Chime, you essentially get a checking account as well as a secured, credit building card. The benefit is that you get these things for free – no interest rates, no annual fees.
User-Friendly App
You can easily manage your Secured Chime Credit Builder Visa® Credit Card and your Chime checking account from the Chime app, including moving money from your spending account to your Credit Builder secured account.
Great for Building Credit2
There are two aspects of this card that make it a great option for building credit:
Because you’re spending your own money and Chime doesn’t have any interest rates, you don’t have to worry about racking up credit card debt. You can spend to your credit limit without any worries (although you will need to continue to make on-time payments).
Chime doesn’t report your credit utilization ratio to the credit bureaus (the ratio of available credit to used credit). Typically, with credit it’s a good practice to keep your credit utilization ratio below 30%. But with the Secured Chime Credit Builder Visa® Credit Card, you don’t have to worry about that.
The Drawbacks
You Need a Chime Checking Account
While you don’t need great credit to get this card, you do need a Chime checking account. You also have to continue to transfer money over to your secured account to secure future credit if you use your deposit to pay down your charges each month.
No Upgrade Path
Many secured credit cards offer an upgrade path after a period of “good behavior” where you’ve shown that you can make payments on-time and can be trusted with a line of credit. Typically, this is a great option if you’ve been struggling with a low credit score for a long time and are looking to work your way up to a larger line of credit.
Is the Secured Chime Credit Builder Visa® Credit Card Worth It?
Our opinion? Absolutely. Why? No interest4, no annual fees and total flexibility.
If you’ve never had a credit card before (maybe you’re a young adult or a college student) and you’re looking to build credit and avoid high interest rates while learning about how to manage a credit card, this is a great option. It can also be a tool to help those who’ve had significant negative credit items in their past, like bankruptcies, rebuild their credit.
It all depends on what you’re looking for. If you’re looking to rebuild and protect your credit, this card is a great option. If you have a low credit score and are looking for an access point to a larger line of credit, you may want to consider other secured credit cards.
What are the credit limits for Secured Chime Credit Builder Visa® Credit Card?
The Chime credit card doesn’t come with “traditional” credit limits. You can spend as much as you secure with a deposit of funds from your Chime checking account to the secured account. You need to receive a qualifying direct deposit of at least $200 in your Chime checking account in the last year before you can qualify and apply for a Secured Chime Credit Builder Visa® Credit Card.
How soon can I increase my credit limit after being approved for a Secured Chime Credit Builder Visa® Credit Card?
You can increase your own credit limit at any time, depending on how much money you transfer from your Chime checking account to your Chime Builder secured account. The maximum limit you can have on the card is $10,000. There is no upgrade path to a typical “unsecured” line of credit though.
Is a Secured Chime Credit Builder Visa Credit Card good for building credit?
Yes! The Secured Chime Credit Builder Visa Credit Card offers two main benefits for building credit. First, Chime does report your positive payment history to all three of the credit bureaus. Second, it doesn’t report credit utilization. That means you can use your credit amount as you want without worrying about what percentage of the credit limit you’ve used.
To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.
On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.
Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.
Out of network ATM withdrawal fees may apply. See here for details.
Starting a family comes with an entirely new set of responsibilities. One of the most important, yet frequently overlooked, necessities is setting up a will. This crucial document outlines tons of important details should you pass away, including what happens to your child.
Estate planning for parents can be broken down into just a few digestible steps. Here’s everything you need to think about, plus tips on how to organize all of your documents.
Estate Planning for New Parents
1. Draft a Will
About 67% of Americans don’t have a will. Setting up a will can be simpler than it seems. A will is a document that outlines how you want things handled after you pass away, including distribution of assets and how any minor children to be cared for.
While some people with complex investments and multiple properties may want to hire a lawyer for help, younger, healthy individuals can seek out online services that can walk them through the steps to make a will and sometimes have no initial cost.
Then, you can follow the execution instructions, which typically include signing your will in front of eligible witnesses. Check your state’s individual requirements. Sometimes, you must have your will notarized in order to become valid. Many banks and public libraries offer this service for free.
If you’re married, consider drafting a joint will with your spouse. This gives you the ability to plan for different scenarios, like what happens when one spouse passes away versus both passing away at the same time. Remember to regularly update your will whenever a major life change occurs, like having another child or adding new major assets. 💡 Quick Tip: We all know it’s good to have a will in place, but who has the time? These days, you can create a complete and customized estate plan online in as little as 15 minutes.
2. Choose an Executor
When you’re setting up a will, you’ll need to choose an executor. This is the person responsible for handling the legal and logistical aspects of disbursing your assets. They are also responsible for filing any remaining taxes and settling your debts.
Consequently, your executor should be someone you trust and who has the ability to handle the tasks involved. This is especially important when you have young children because the executor’s ability to tie up your finances will impact your kids’ inheritance.
Once you choose an executor, let them know that you’ve chosen them. Give them a quick rundown of what to expect, and also let them know where to find your will and other relevant documents.
3. Name a Guardian
When you start having kids, you also need to name a guardian to care for them if you pass away before they reach legal adulthood. There are a lot of things to consider when making this important decision.
First, think about the potential guardian’s ability to care for children. Are their grandparents too old to take care of them? Does the guardian live far away from other friends and family who could serve as a support system?
Also consider their financial capabilities and their ability to manage any assets you leave to help pay for your kids’ expenses.
Finally, think about your values and who would raise your children in a way that’s similar to your own parenting style. Also realize that your kids will be going through a tough time, so their guardian would ideally be someone whom they trust and would provide emotional comfort.
If you have more than one child, make sure you name a guardian for each one, even if it’s the same person. That means you need to update your will every time you have a new baby. Be as explicit as possible when naming a guardian; for instance, if you pick a sibling and their spouse, name both individuals as coguardians.
4. Set Up the Right Accounts
Some types of accounts may help you pass on your assets without having to pay as much in taxes. It’s an important part of the estate planning process and can help you maximize the amount of money you’re able to pass onto your kids. A trust fund can protect the money from being spent too quickly, either by the guardian or your children themselves.
You can implement safeguards as to how much money can be taken out and when. Even if your kids are of legal age, you can put annual withdrawal limits on the trust to prevent a young adult from overspending. Alternatively, even if you pick a guardian to oversee the emotional wellbeing of your children, that same person may not be the best at handling money. Choosing a trust can limit their spending on behalf of your children as well.
There are many different types of trusts, so you may consider consulting an estate planning attorney to choose the best one for your family’s needs. 💡 Quick Tip: A trust is a customized estate planning tool that can be helpful for your heirs in addition to a will.
5. Designate Beneficiaries
The final step of estate planning for parents is to designate a beneficiary for every account and insurance policy you have. Include bank accounts, retirement and other investment accounts, and life insurance policies.
When choosing beneficiaries, find out how each type of account is taxed for the recipient. Also create a list of all of your account numbers and other pertinent details and include them with your will. This makes it easy for your executor to locate all of your assets. Include debt information as well, like your mortgage and/or auto loan servicer.
You can also update beneficiaries as life changes. For instance, you might initially name your spouse as your life insurance beneficiary. But if they pass away before you, it’s time to update that designation to someone else.
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6. Safely Store Your Documents
Once you’ve drafted your will and signed it in accordance with your state’s laws, it’s time to store all of the appropriate estate planning documents to make it easy for your executor and beneficiaries to access.
Lots of documents are now stored online, but you’ll still need to keep your original, signed will in physical form. You can keep it in a fire-proof box at home, or in a safety deposit box at your local bank. Be sure your executor knows where and how to access your documents.
7. Outline Access to Financial Accounts
Remember to keep an up-to-date list of all your financial accounts that need to be taken care of. Bank statements should include the account numbers to make it easy for your executor to find. Also include the location of any valuable items, like art or jewelry.
Finally, it’s helpful to include the contact information for any professionals you work with, like an accountant, financial advisor, and estate attorney. Include insurance policy numbers, loan details, credit card numbers, and any other financial accounts that would need to be closed.
The Takeaway
Estate planning for parents isn’t a one-time event. Get started when you have your first child, but also review your intentions and make changes at least once a year. That way, you always have an up-to-date and comprehensive will that reflects your current financials and family structure.
When you want to make things easier on your loved ones in the future, SoFi can help. We partnered with Trust & Will, the leading online estate planning platform, to give our members 15% off their trust, will, or guardianship. The forms are fast, secure, and easy to use.
Create a complete and customized estate plan in as little as 15 minutes.
Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
When considering where to go to college, a young adult has a dizzying array of choices, including public vs. private schools and colleges vs. universities. There are also liberal arts colleges, which can be appealing to creative types and those seeking a broad education resulting in exemplary problem solving and communication skills.
But what exactly is a liberal arts college? And how are liberal arts colleges different from other colleges and universities?
Liberal arts colleges tend to put more focus on broad academics and personal growth than on professional training programs. An education from a liberal arts college is still valuable in helping students start their careers, but the emphasis is more on producing well-rounded individuals than putting graduates on a specific career track like engineering.
Students can major in a wide range of subjects at a liberal arts college, including the arts, literature, philosophy, social sciences, natural sciences, and even math or engineering. However, these colleges are meant to be a place that values learning, without strictly limiting what students are learning.
Read on to learn more about liberal arts colleges, including what they offer, how they compare to larger schools and public universities, and how you can cover the cost of a liberal arts education.
A More Personal Vibe
Though both universities and liberal arts colleges will help prepare students for entering the working world, there are some differences in what the experience will be like:
1. Liberal arts colleges are smaller. Most classes will have far fewer students than is the case at a university lecture hall, which can have hundreds attending at the same time. 2. Because of the smaller size, it may be easier for students to bond with their professors. The faculty members often have more time to spend with their students. 3. The focus of a liberal arts school is undergraduate education. At universities, there will likely be graduate programs and major research efforts.
A liberal arts college may be the best college fit for students who prefer a more personal experience where they can get to know faculty members and other students.
Those trying to decide which college is right for them can take this eight-question college personality quiz. 💡 Quick Tip: Fund your education with a low-rate, no-fee SoFi private student loan that covers all school-certified costs.
The Admissions Process
The application process for getting into a liberal arts college is similar to other schools. Students will have to submit the usual components: an application with transcripts, test scores, essays, and letters of recommendation.
Liberal arts colleges may have a different focus when it comes to reviewing applications, though, so it’s essential to keep the following information in mind when applying to a liberal arts college.
When it comes to test scores and grades, liberal arts colleges don’t always have specific requirements. Admissions can still be very competitive at these schools, but they’re often more interested in whether or not students challenged themselves in high school. Generally, they want to see that applicants are well-rounded but also have an area of interest they specialize in.
Extracurriculars are important when applying to any college, but liberal arts colleges often value a wide range of activities, not just those that involve leadership.
A liberal arts college may be more likely to value extracurricular activities that are outside the box, so students applying to these schools have more options for what they can get involved in.
The Common Application, which can be used to apply to more than 900 schools, only requires one essay. However, many liberal arts colleges will require at least two supplemental essays. The reason is that these schools tend to put a high value on writing and critical thinking. This can be beneficial for students who have strong writing skills but may be weaker in other areas.
Many liberal arts colleges are also interested in a student’s character and how they’ll contribute to the school, so they may put more weight on letters of recommendation and interviews than other schools.
Top Ranked Liberal Arts Colleges
According to U.S. News’s National Liberal Arts Colleges Rankings for 2022-2023, the top ten liberal arts colleges are:
1. Williams College 2. Amherst College 3. Pomona College 4. Swarthmore College 5. Wellesley College 6. Bowdoin College 7. Carleton College 8. United States Naval Academy 9. Claremont McKenna College 10. United States Military Academy at West Point 11. Middlebury College
Financial Value of a Liberal Arts Education
There’s a stereotype about people who pursue a liberal arts education: that they won’t find financial success and their degree could be useless. This claim isn’t backed by evidence, though, so students who feel like a liberal arts college is the right choice for them shouldn’t be scared away by this false narrative.
The gap in income between those who attend a liberal arts college and those who attend other schools isn’t necessarily linked to the institution.
Instead, it’s determined more by a student’s career path and the market forces at the time, according to two economists who analyzed the payoff of a liberal arts college education.
Another reason for this misconception is that people are unaware of the diverse selection of topics that are studied at liberal arts colleges. If people don’t actually know what is being studied at these colleges, they’ll have a more difficult time conceptualizing what a student’s future could entail.
Though graduates of liberal arts colleges may not earn as much as those from STEM-oriented institutions right away, the economists’ study found that 60% of students ended up in the top 40% of U.S. income after graduation, even if they started out in the bottom 60%.
Choosing where to attend college and whether or not it will have a “payoff” is personal to each student.
Attending a liberal arts college can lead to upward mobility, but students also have to take into account the cost of the education and the availability of financial aid when choosing which school will have the most value for them.
Paying for College
Along with the painstaking process of choosing where to apply for college and making a final decision, there is another difficult process: figuring out the cost of tuition and how to pay for it all.
Luckily, students usually have access to a few options that may help fund the yearly cost of attendance, which goes beyond tuition and fees to usually include room and board, books, supplies, transportation, loan fees, costs related to a disability, and reasonable costs for eligible study-abroad programs.
To figure out financing, a good place to start is by filling out the Free Application for Federal Student Aid (FAFSA). This will let you know if you are eligible for federal financial aid, which includes grants, scholarships, work-study, and federal student loans (which may be subsidized or unsubsidized).
Some private colleges use a supplemental form called the College Scholarship Service (CSS) Profile, to determine how to give out their own financial aid. The form is more detailed than the FAFSA. Almost every college that meets financial need for all enrolled students without federal student loans uses the CSS Profile.
Most liberal arts colleges are private and carry a relatively high “sticker price,” which includes tuition, fees, room and board. But students will typically pay less, and sometimes far less, when grants, scholarships, and other benefits are factored in.
If students will require loans to cover the cost of college, it’s recommended they take out federal loans before private loans, because the former come with benefits that the latter usually do not, like lower fixed interest rates and income-based repayment plans.
Private scholarships are also widely available. Some are need based; others are merit based. They’re offered by schools, companies, community organizations, religious groups, and more.
Private student loans are an option as well. Eligibility usually depends on a student’s income and credit score or those of a cosigner. These loans are available through banks, credit unions, and online lenders and rates and terms vary, depending on the lender. 💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.
The Takeaway
Whether you choose to go to a state university or a private liberal arts college, the experience will be enriching and can set you up for long-term career success.
Though a liberal arts school isn’t solely focused on teaching students a profession, a Bachelor of Arts from a reputable liberal arts school can lead to a rewarding career. The skills students learn at a liberal arts college — which include communication skills, analytic skills, the ability to work in a team, and a strong work ethic — are ones that often highly valued by today’s employers
While liberal arts colleges are known for their high cost, keep in mind that your actual cost of attendance will likely be much lower than the “sticker price,” once you take grants, scholarships, and other types of financial aid into consideration.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
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SoFi Private Student Loans Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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