For most families, college is a major expense and serious undertaking. But for parents, it is also an opportunity to teach their children some important lessons about financial goals and money management. Like the star college athlete who enters the NBA or NFL and discovers the game is the same, but the level of expectation is higher — managing money in college is similar. Even if your child has been earning their own money, budgeting expenses on their own in college requires them to step up their game — just like the college-turned-pro athlete who walks into the professional arena for the first time.
Use these tips to help your college-bound teenager make smart financial decisions:
- Help them understand the difference between a want and a need. For many college students, discretionary spending can be the trickiest part of adhering to a basic budget. It’s easy for them to fall into to the trap of, “eating out saves time, so I have more time to study,” without realizing the financial impact. You can read our blog for additional information on needs vs. wants.
- Encourage them to open and maintain a savings account. For college students on their own for the first time, a savings account or an emergency fund may not be something they anticipate needing. But it’s important they save for a rainy day. Teaching your child about the importance of savings plans and getting them in the habit of having a savings account will soon become part of their routine where extra money will be something that goes into their savings account rather than a reason to spend on a want instead of a need.
- Discuss the consequences of late or missed payments. It may be easy for your young adult to think one missed payment isn’t the end of the world. But late and missed payments can hurt their credit scores. Explaining why it is important to pay bills on time will help your child have a better understanding of how late payments can impact them. Teaching them to make good financial decisions while in college can help them years after graduating.
- Create an environment of financial transparency. Discussing how your family plans to pay for college can be awkward or uncomfortable but it can be a short-term pain that leads to a long-term gain. Talk with your child about who is responsible for what, payments on rent, cars, phone, credit cards, as well as books, supplies, or toiletries needed if you are living on or off campus and more.
Sending your child to college is exciting. It also comes with a lot of emotions as your child is likely living away from home and making “real life” decisions for the first time. Preparing your child with some sound financial tips will help them in the short and long run.
I am a Financial Coach for college students and parents. I am an Accredited Financial Counselor (AFC®) and received my BBA in Management from Texas State University. I help students understand their financial aid and help them develop a plan to achieve their educational and financial goals. I was a first-generation college student, so I have a personal understanding of some of the struggles students face.
Working in the financial aid industry for 13 years has given me the opportunity to work with students at different points in their life from starting college to graduating and finding a job — all the way through helping them repay their student loans and save for the future.