Fall semesters are starting and new students are eager to start their college experiences. This is a time of excitement for recent high school graduates! As you help prepare your child to leave for college: packing up blankets, pillows, school supplies and laptops, talking about money may be the farthest thing from your mind but teaching your teen good financial habits should be the most important part of the process and one of the first discussions you should have with your college-bound high school student for their own financial well-being as well as yours before they head off for school.
While some high-schools are making it part of their curriculum to teach students about savings and credit it is up to most of us as parents to do the teaching on this subject and to reinforce financial intelligence before they graduate and become independent responsible adults. Consider these 4 financial tips to help your teen or young adult develop good money habits:
1. Discuss getting a Job as a college student
Will your child be working while they are in school, only while on breaks, or over the summer months? If so, what will they be expected to pay for with the money that they earn? One of the best ways for young people to understand finances is for them to have a taste of the real world acquisition of money and experience receiving a paycheck, understanding banking and the beginning of budgeting and financial goals. Perhaps there is a nicer newer laptop that your teen wants for school - try giving your college student the goal of earning enough money to buy that laptop, and calculate how much they will need to have earned by the end of the summer to pay for it.
Keep in mind that if it's decided to add a job to your students course load - look for something that is maybe part-time to see if your teen can handle working along with school so their performance doesn't suffer. Consider having your student concentrate solely on school for their first semester and then make the determination if a job can be managed.
2. Importance of Establishing Good Credit
One thing that hasn’t changed since we were in college is that banks still want to hand credit cards to 18-year old kids. It’s a good idea for us parents in theory; something could go wrong, your teen needs money and we’re perhaps hundreds of miles away and unavailable to help immediately. It’s also a great idea for the banks because of the amount of interest and fees they stand to make, but sometimes it’s not so great for the teens who may get an early lesson in the effects of bad credit if they don’t pay the bill.
Parents should have a good conversation with their teens regarding credit cards and spending before sending them off to college. Try helping your teen ease into the world of credit cards by setting them up with a debit card first and teaching them how to use it in accordance with the budget that you've discussed of who will cover what expenses. After a couple years of doing this then consider a credit card for your teen, and discuss very specific guidelines. Having a credit card of their own is great way for your teen to learn how to be responsible for debt and establishing a credit history.
3. Student Loans
Whether you are the parent or the student, one of you may be taking out a loan for a college education. If you are fortunate enough to be able to afford college tuition without a loan, that's wonderful, but for many of us the cost of college may make loans a necessity. So then, it will be a necessity for our teens to understand the ins and outs of education loans, grants and other means of paying for college that doesn’t involve cash or credit. The best time to have this discussion would be during the filing of applications. Filling out financial aid forms may be a good place to begin what can be a difficult topic to discuss.
4. Develop a budget together, and have them track their spending
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, but what about the basic items that students need to have to eat, sleep and dress? Is college the first time that your teen will be responsible for managing their own expenses on a larger scale? Discussing budgetary basics and estimating potential expenses for the year should be a part of the pre-game talk for teens going off to college. Make the budget as concrete as possible - They may need tips on how to stretch dollars in a grocery store or how to bargain shop for items they need. In addition to helping them create their budget, have them track their purchases to get a better feel for the outflow of money as many teens don't realize that all the little purchases add up.
These tips will go a long way toward helping your teen function as an adult and prepare them for money independence later so everyone wins!
At Leonard Financial Group, we can help you set your financial priorities and construct a plan regarding paying for a college education. Please feel free to call our office (321) 259-6239 for a complimentary planning consultation.
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