It seems like yesterday your son or daughter was just a baby, relying on you for everything they needed to survive. Now they’re heading off to college and out in to the real world without you. In many cases, this means your wallet is no longer their primary source of income. While it is definitely exciting to have that extra cash flow as your pride and joy learns to navigate the world of finances on their own dime, times like this can turn into a disaster. That’s if you don’t teach them the responsibility of managing their money.
When you build a strong financial foundation for your family, solid money management skills can be the thing that sets your children apart from the rest of the incoming class of 2018. So, what are the most important points they should take away? Don’t worry Mom or Dad, we’ve got you covered!
Always Have a Budget
Having a budget is probably the most important thing to learning how to manage your money when you set out on your own. In fact, it is those who never plan financially that often end up in the most financial trouble. The principles of budgeting can be taught well before your child heads off to college. A great time for them to learn is when they get their first job. If you’re lucky, they’ll be starting off their freshman year with somewhat of a savings.
Whether you have a big budget or a small one, all budgets boil down to two things: income and expenses. Make a list of monthly income sources. This includes any savings, financial allowances, and wages earned. Separately, list any planned expenses. The most successful personal budgets are planned on a monthly basis. As your son or daughter sets out, it’s not always easy to identify the costs of college living, but you can come up with a ballpark. School supplies, food, hygiene products, laundry, and transportations are some expenses you should consider. Once you have identified all potential income and expense, teach them to track their money weekly to properly manage their budget.
Stick Out What Matters
No matter what age or point in our lives we are, every person deals with needs and wants. Teach your children to identify the difference and focus on what matters. Needs are things that are necessary for healthy, safe living. Wants are things that entice us but we can do without. It is much easier to identify needs from wants if you plan ahead. After a few months of tracking expenses and getting to know the true cost of college living, you can begin to identify allowances and teach your children to splurge on wants when it is feasible. A great way to monitor your impulses is to wake out weekly allowances and avoid using credit or debit cards. Once your money runs out, so does your allowance for wanted purchases.
Find the Right Checking Account
There are so many different options these days when it comes to choosing a financial institution for your banking. A great tip to keep in mind is that many banks have incentives that cater to college students looking to set up a checking or savings account. Things like free checking and savings, convenient ATMs, and overdraft protection can be a great asset to your college student. Some banks will even give you money for opening an account! Shop around before you pick. Try to find a bank that has convenient ATMs located near campus to avoid unnecessary withdrawal fees. And, teach your child the importance of balancing their bank account to make sure they don’t over spend.
Talk About Credit Card Abuse
There is a major difference between using and abusing credit cards. One of the major problems college students face when they graduate is the credit card debt they’ve accrued while at school. College should be a time to build your credit not ruin it. Credit cards are so easy to lose control of, so talk about the importance of building credit without overextending their finances beyond their means. If you don’t feel confident in this topic, enlist the expertise of a financial advisor.
Do Your Homework on Financial Aid
Student loans and financial aid can be difficult to understand and may seem overwhelming to your college student. It can be somewhat scary to think about the idea of facing loans on large sums of money without the wages to pay it off. Come up with a plan before they begin of how they will pay off their student loans after college. Even if you have to help out at first, or they need to move home when they graduate, come up with a plan together to make it that the mountain isn’t as big as it sounds.
We all know college can be expensive. But, if you teach your children proper money management skills, they’ll carry it with them throughout the rest of their lives. Learning how to budget, manage debt, and properly allocate their money will give them the knowledge they need to graduate college without a massive amount of debt. Your main goal is to see them succeed. Help them find success by laying the foundation for money management today!