Some tips on managing money for new college students (and parents)

Students walk through Harvard’s campus in Cambridge.Erin Clark/Globe Staff

When Jawahir Mohamed joined Harvard College as a freshman, in 2021, she felt compelled to spend freely in order to fit in with her wealthy peers. Later, she learned she was hardly alone. There’s something about arriving at college for the first time that makes people put up a facade, says Mohamed, now a junior studying economics and psychology.

So she has some advice for the new cohort — tips on managing money that college students, and their parents, may want to consider.

Foremost, be wary of the urge to splurge, she says. Instead, follow a simple “50-30-20″ rule that’s held her in good stead: Deploy half your money toward living necessities, a third in wants like dining out or buying a tchotchke, and the remaining fifth in savings. Second, find a side hustle related to your studies that makes you money. In her case, she works as a student advisor at Harvard University Employees Credit Union in Cambridge. Third, learn to invest. Start small. Her pet bet: Gold.

Migdalia Gomez, who works in community relations at the not-for-profit Harvard Credit Union, has seen many a fad come and go in her 16 years working in higher education and finance. When asked to name one big recent change, she singles out investing.

“I love that students are asking about investing when they attend our presentations — it’s never too early to learn about investing,” says Gomez.

Thanks to Robinhood and other free platforms, the ranks of young day-traders have swelled, particularly since the pandemic when both spare time and stimulus checks were abundant. Call it the GameStop phenomenon: This younger generation is way more hands-on and savvy about financial markets.

Yet, Gomez always encourages students to build a solid financial foundation before they start investing, due to obvious risks of going in blind. This includes having a sound budget, setting aside rainy-day funds, and learning about their money personality.

Other money basics for the first year of college? Here are a few recommendations from the pros.

Jon Bernstein, the New England head of PNC Bank, points out that college is a really big investment and should be treated as such. Indeed, the average annual cost of attendance in New England ranges from $43,000 to $56,000, according to online scholarship platform Scholaroo.

Bernstein identifies four things students should know before they arrive on campus. The first is simple budgeting essentials — how much money is available and how to expend it. Figuring out the correct spending basics can be challenging for young adults, who may be stepping out on their own for the first time. Second, know the value of saving and compounding. Keep it simple — a high-yield saving account gives amazing rates right now. Third, start building your credit score, which is going to become more and more important as you move through life. Fourth, understand what a credit card is not: It’s not cash, and it’s not meant to be used that way. Keep a low balance and only use a small portion of available credit. And don’t blow a payment. Paying a little is better than nothing or being late.

What about tips for parents?

Dan Griggs, the Boston President of OceanFirst Bank of New Jersey, has some pointers. First, establish allowance ground rules, such as cadence, method of delivery (Venmo or a check or bank transfer), bank account details, and such. Second, be clear on who is picking up the cost-of-living tab at college. It tends to sneak up because no one thought beforehand about minutiae like toiletries. Even if the parent will pay, ensure the child knows the cost. Third, gauge the teen’s financial literacy level. Do quick quizzes on how debit and credit cards work, and how credit limits work. Fourth, establish a clear spending plan before leaving home.

Bruce Tannahill, a director of estate and business planning at Springfield-based MassMutual, suggests adding three legal documents to your checklist: a financial durable power of attorney authorizing a parent to handle financial matters for the child; a health care durable power of attorney, which enables a parent to make medical decisions if the student cannot; and a living will outlining medical treatment options the young person may want.

On more mundane matters, Tannahill recommends talking through how financial scams can occur and what to do if one falls prey; buying a small safe for the dorm; and keeping photocopies of the student’s health care card handy, because it will be misplaced.