As soon as her ACT scores were posted, my daughter Annika began to be courted by more than 100 different colleges and universities. Letters, postcards and emails arrived offering free lunches, theater tickets and collegiate swag if she visited their campuses. She also received a dozen or so mailings regarding college loans, and emails from authentic and alleged scholarship organizations.
As a member of the Class of 2021, however, Annika did not receive information on how to make the financial leap from dependent high school student to college-bound independence.
I asked friends what financial structures they wished they or their student had in place before striking out on their own. Many echoed this sentiment: “I wish I would have known the value of credit.”
There are times in college (when buying a new cellphone, for instance) when one must pay an extra fee if one lacks credit. One friend pointed out that by cosigning on a small loan with her father to buy a used car, she built up her credit while still in high school.
To help students begin building a credit history, Success Bank in Bloomfield, Iowa, offers the First Experience credit card, which just launched this year and is designed for consumers under the age of 23. “We saw a need for it because we would see applicants with no credit who may or may not have had anyone to cosign for them,” said Alexis Henderson, senior vice president of marketing and retail banking at the $224 million bank. The credit card has a standard interest rate of 10.25 percent regardless of credit score and starts with a $250 limit that can be reviewed at the end of a six-month probationary period. There are no geographic boundaries, and the bank offers online applications. (Applicants must be at least 18 years old.)
The credit card, combined with the bank’s First Experience checking account has worked out well for the bank. “We have retained 88 percent of accounts opened,” Henderson said. As for getting cash when students are out of town, they can either use ATMs or get cash back at retailers, as very few charge for that service.
Others emphasized that young people should save and invest as soon as they can. Horicon Bank, a $1.2 billion bank based in Horicon, Wis., brought Monotto in-house late last year. The solution allowed the bank to create an app called RoboSave. Christian Ruppe, one of Monotto’s founders, now works at Horicon. RoboSave “uses artificial intelligence to find out how much you need to save and then does the saving for you,” Ruppe explained. The app analyzes a user’s transactions every two to three days and transfers an appropriate amount into the user’s savings account. “It analyzes what it thinks you’re going to spend and pulls an amount you won’t feel coming out,” Ruppe said. The app will not cause the user to overdraw their account, he said.
Devin Grant, a recent college grad and sales associate at Horicon, tested RoboSave so he could tell Horicon customers about it. He likes that the app is automated. His first prioritized goal was to have a safety net of three months’ worth of living expenses saved. In the eight months since the app launched, he’s reached about two-thirds of his goal. “You don’t even know [the funds] are gone,” Grant said, “but you do notice your savings balance climbing.”
Lake City Bank in Warsaw, Ind., just launched an updated digital platform in March, which also has financial planning tools that help analyze spending, create a budget, see trends in income and expenses, and calculate the best way to pay off debts. The platform also allows users to link accounts at other financial institutions and transfer funds between the two, handy for a student who uses a different bank at school than at home. “We knew that adding Zelle was critical to Lake City Bank remaining digitally relevant, so we started the process as soon as it was available from our core provider,” said Stephanie R. Leniski, senior vice president and chief retail banking officer at the $6 billion bank.
“We felt the fact that Zelle originated with larger banks was a plus, in that those larger banks would invest in marketing that could only help Lake City Bank when we launched Zelle.”
Other banks offer security features within their banking apps to help parents with peace of mind. Availa Bank’s mobile banking app allows the user to turn debit cards off and on. “When one of my sons was in college, I got a call at 2 a.m. [saying] that he had lost his card,” explained Lisa Irlbeck, marketing director at the $1.39 billion bank based in Carroll, Iowa. She was able to shut off the card while laying in bed.
I value the convenience and security of safety nets like that as I send my daughter into the great big world.