Summer is here and many recent high school grads are looking forward to the adventures and experiences that college will bring. They may already be picking out dorm room decorations, or planning which clubs they want to join, and sports they want to play. But college is also a time to take on new responsibilities. Decorations, club memberships, and sports gear cost money. Not to mention food, clothing, spring break trips, and all the other miscellaneous costs of living. Managing money is an essential life skill your child will need. Jumpstart their education in adulthood by teaching them some financial basics and discuss how your family will be handling college costs when they leave the nest.
Though some schools are teaching kids personal finance while they’re in school, the large majority of children’s financial education is up to parents. Not only is it up to you to do the teaching, it is up to you to reinforce good habits regarding money.
Getting a Job
For some students school is their job. Their parents don’t want them dealing with the additional stress or time constraints of working. But many college students do work while in school. For some it’s a necessity, for other students it’s a way to make some extra “fun money,” save up for a spring break trip, or even help fund living off campus. Getting a taste of the real world acquisition of money is one of the best ways for young people to learn and understand finances.
Earning their own money will teach them about budgeting and saving, and wants versus needs. Parents may be more than happy to provide the necessities (and a few wants) while their children are in school, but what if the student wants to get a more fashionable laptop to bring to school rather than the still working, but not flashy, laptop they’ve been using? Give your future college student the goal of earning enough money to buy that laptop.
You can offer saving incentives to encourage them, such as matching or doubling every dollar they save or offering a reward when they reach a saving milestone, for example a $100 bonus for hitting the halfway mark.
Good and Bad Credit
One thing that hasn’t changed since you were in school is that banks still want to hand credit cards to 18-year-olds. In theory it’s a good idea for emergency situations, though online banking and apps like Venmo have made transferring money much easier, you may not always be able to help immediately. But, kids may get an early lesson in the effect of bad credit if they don’t pay the bill.
If you decide to trust your child with a credit card, sit down and discuss how it will be used. Will it be used as a gas card, are they allowed to use it for discretionary spending, or will it only be used in case of a real emergency? You should also discuss what constitutes an emergency. Getting a flat tire is an emergency, while running out of solo cups is probably not on your list.
Unless your student excelled in academics, sports, or received another kind of scholarship, then tuition is going to come out of your or your student’s pockets. Whether it’s through loans or a 529, it will be necessary for your child to understand the ins and outs of education loans, grants, and other means of paying for school.
We talk a lot about the most expensive items such as computers, cars, tuition, and books when it comes to paying for a college education. However, the kids have to eat, sleep, and dress. Discussing budgetary basics should be a part of the pre-game talk for kids going off to college. They may need tips on how to stretch dollars in a grocery store or how to bargain shop for items they need.
Hopefully, you have a good relationship with your kids and can discuss these things easily. That doesn’t guarantee that they are listening. A financial advisor will be available to listen to you and take on any questions regarding paying for a college education.
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