The first week of college is a time of excitement for recent high school graduates. They want to see and do everything without the ball and chain that is their parents. Doing everything is likely to cost money. So then, the first week of college is also about learning, learning how to budget. Making a good budget is one of the first discussions you should have with your college-bound high school student before they head off for school. By using one of the budgeting apps like EveryDollar or Mint, teens can plan expenses and tract spending.
Financial literacy is often left up to parents. Some schools are making teaching kids about savings and credit while they are still in high school. However, not only is it up to most of us parents to do the teaching on this subject, it is up to us to reinforce good habits regarding money. Fill up their curriculum with financial intelligence before they graduate by showing them what real life expenses look like and how a household budget really works.
1. Get a Job
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. Kids will experience receiving a paycheck, understanding banking and the beginning of budgeting and financial goals.
They may want to take a nice laptop to school with them rather than the still functioning, but not flashy, laptop they used during their senior year. Give the future college student the goal of earning enough money to buy that laptop. Have them calculate how much they will need to have earned by the end of the summer to pay for the laptop.
2. Good and Bad 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, the kid needs money and we’re perhaps hundreds of miles away and unavailable to help immediately. It’s a great idea for the banks because of the amount of interest and fees they stand to make. Sometimes, it’s not so great for the kids 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 kids regarding credit cards and spending before sending the kid off to college. Whether or not you think it is a good idea for a kid to have an “only in case of emergency” credit card, kids will eventually deal with the concept of unsecured credit from banks and the potential negative implications of mismanaged credit.
3. Loaned Out
One of us, parent or child, is going to be taking out a loan for a college education. Except for the very big or fast or wealthy kids among us, the cost of college may make loans a necessity. So then, it will be a necessity for our kids 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 the 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. Generic Goods
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 well enough not to get kicked out of class. 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 and after the client has decided who will pay for college, the role of the adviser is to provide the family with a strategy on how to ultimately pay for college. These strategies can include College savings or Prepaid tuition 529 plans, Educational Savings Accounts, or Roth IRAs.
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