1 Finances and the College Student NCASFAA/SCASFAA FALL CONFERENCE November 6-8, 2006 Brad Barnett Senior Associate Director James Madison University Office of Financial Aid & Scholarships Harrisonburg, Virginia

2 Objectives Learn about the format used in “money management” sessions at JMU Review strategies to keep the student’s attention Discuss partnerships that have been created with other campus offices to provide an avenue for reaching students

3 JMU & Financial Aid Office James Madison University –Approximately 16,000 students, of which 15,000 are undergraduates –Primarily year olds who graduate high school, enroll full-time in college, and complete college in 4-5 years –Male = 40% & Females = 60% –In-state = 70% & Out-of-state = 30% –Minority = 10%

4 Session Types Discussion varies depending on audience –Freshmen –Upperclassmen Will focus on freshmen for the purposes of this presentation

5 Understanding Freshmen A lot of firsts: –Living without parents –Responsible for finances –Able to make decisions without being “checked on” Many have never balanced a checkbook Think about the financial woes of the parents you work with…that’s where your students are coming from

6 Attendance Voluntary Mandatory (Partnerships) –IS 202 –Athletic Office –Student Organization –Passport Events

7 Basic Set Up 1 to 1 ½ hour sessions Keep class to approximately 20 – 25 students Focus on Kinesthetic Learning…hands on! Movable desks Chalk board or dry erase board Paper and pencils for students Avoid PowerPoint whenever possible

8 Beginning Always start by asking, “How many people have created a budget?” Question: Out of 25 students, how many students do you think have created a budget by this point in their lives? Answer: Generally no more than a couple

9 Financial Concerns Break class into 4 or 5 working groups Ask them to develop a list of their top five financial concerns, which can be: –Concerns while in college –Concerns for post-college Have each group report and write on the board

10 Let’s Do It! Break into groups Develop a list of the 5 most common financial concerns you think college students have These can be –Concerns while in college –Concerns for post-college Paying tuition does not count…that’s a given

11 Income – Let’s Do It! Develop a list of the 5 most common income sources for college students Generally receive a lot of duplicate responses from the groups

12 Expenses – Let’s Do It! Develop a list of the 5 most common expenses for college students Generally receive a lot of duplicate responses from the groups

13 Congratulations! You just created the framework for a budget –Goals (concerns) –Income –Expenses Assign dollar amounts to these items and the budget is created Goal of exercise is to take the fear out of budgeting

14 Typical JMU Freshmen Responses Concerns: Food Housing Credit cards Student loans Insurance Not running out of money Saving Paying tuition (this is a given) Buying a house Having a family Graduate school Income: Parents (could be monthly or lump sum) Financial aid (usually disbursed lump sum) Summer jobs (earned in summer and sitting lump sum in bank) Gambling (sporadic) Part time jobs while in school (paid on set schedule) Expenses: Food (dining out) Beer Taxies Clothes Hair/Nails Porn Entertainment Cell phones Dating Electric Gas Rent Car (gas, insurance, etc)

15 Teaching Note While groups are working on lists, walk around the room and listen Interact to develop a rapport Make mental notes of discussions you hear that you can pull into the instruction Let the class guide the topics discussed as much as possible to keep their interest

16 Additional Discussion Use your mental notes to make a connection Stress difficulty of planning for items in “concern” list if cannot budget Get a handle on it now before it’s too late Tell stories of students who got in trouble due to poor budgeting skills Focus on topics in “concern” list

17 Earnings vs. Spending How much you spend is much more important than how much you earn. This is often referred to as “living within your means.”

18 Credit Cards Positive –Points –Ease –Help with credit score (side bar about FICO) –Loss (versus cash) Negative –Easily accumulate debt if do not budget –Ease –Damage credit score

19 Ways to Establish Credit Credit Card payments Student Loan payments On-time payments with all bills, including: –Housing –Utilities –Medical –Financed purchases

20 Establishing Credit cont... Communication is the key to maintaining a positive credit file and may help to avoid student loan default Paying bills in a timely manner is important to your future credit needs

21 Credit Card Interest Scenario: $3,000 charged on a credit card Interest rate of 19.8% You pay $50 per month It will take 24 years to pay off the card At the end of at time you would have paid back $14,070 ($11,070 in interest) (source:

22 Year Future Value Without Additional Contributions (One-time $3,000 investment) Future Value With Additional Contributions (Annually investing $3,000) 1$3,300$6,600 2$3,630$10,560 3$3,993$14,916 4$4,392$19,708 5$4,832$24,978 10$7,781$60,375 15$12,532$117,381 20$20,182$209,190 30$52,348$595,178 40$135,778$1,596,333 50$352,173$4,193,071 $3,000 Earning a Rate of 10% Annually (Source:

23 Senior Group Topics Cost of living comparisons Insurance (health, life, disability, etc.) Retirement savings (Roth IRA, 401k, etc.) Mortgage Cost of a family Pay off student loans Graduate school

24 Conclusion Don’t lecture Be hands on Make it real Be VERY basic Teach to your audience Ask open ended questions Involve the students Shock value is good