Packing your child up for college? Teach them money 101 before they go.
A generation ago, the only grave concern most parents had about their college-bound kids and numbers was how much they’d spend on pizza and beer. Today, it’s the feat that their child could be headed to bankruptcy court by the time they’re ready to graduate.
As the new school year approaches, it’s a good time for parents to conduct a money class for their students, even if they’ve made their best effort to teach money lessons before. Why? Because money savvy for the average 18-year-old can evaporate against all that freedom.
Consider new student week on most campuses. Tables set up in the student union by the nation’s credit card issuers stretch as far as the eye can see. It is estimated that 83 percent of all college students had at least one credit card. Late-night pizza runs add up. And there’s an ATM on every corner waiting to dispense cash at warp speed for a fee.
While your child is making his or her list of stuff to cram into the back of the car, use this list as a last-minute money curriculum for your student.
Talk about bank accounts. Students generally should set up a checking account on campus, but talk to your student about debt options and fees, particularly for overdrafts. Also ask your child to ask the bank about direct-deposits options if you’re planning to deposit money for their tuition or agreed-to spending needs. Some universities also have their own credit unions. You may want to encourage your child to open an account and begin a relationship with their own credit union.
Help them make a budget. Help your child develop a tentative budget for school. Use all the information you both currently have at your disposal — the amount of spending money your child has in his own accounts, any amount you supplement and any other source of funds. Work together to determine necessary realities about everyday expenses, tuition and financial aid. Buy them financial planning software if necessary (have them put a password in their computer so roommates and “guests” can’t access the information).
Explain that when he or she comes home at break, you will sit down again to review those figures and make reasonable adjustments. You obviously need to trust your children, but you might want to do this for as long as it takes them to develop solid and consistent money habits.
Co-sign that credit card. Co-sign the credit card but keep it you’ll be alerted to financial mishaps before they get too serious. Consider prepaid cards as well as lower-limit credit cards. Do whatever it takes to convince your child not to sign up for any credit cards on campus, no matter what the card company is giving away as incentives.
Discuss your child’s work plans. If your child is working part-time while going to school, you should always be on top of how that’s affecting their schoolwork. If your child is planning to work during the summers only, you need to have a conversation about that at winter break so your child can start pitching for the highest-earning jobs and internships related to their field, which will help them get a leg up in the full-time working world.
Talk about identity theft. Personal financial data left on laptop computers, cell phones and other electronic devices can be readily stolen on campus or in a dorm or roommate environment. Tell your student to keep all paper records in a safe place and introduce passwords to keep all their digital information safe.
Start summer vacation with a financial checkup. Sit down with your child and review their budget. Let them petition for more funds for expenses they feel are necessary in the coming year. If you’re not willing to foot the bill, talk about how they will earn their way towards those goals. And introduce a new summer tradition — the credit report check. For as long as you’re supporting your child, you should ask them to request their annual free credit reports from the three agencies and the both of you should review them for possible errors. They can request those reports at www.annualcreditreport.com.
Source: Financial Planning Association