In all the excitement that comes with heading off to college, many students don’t realize it’s more than paying tuition, studying and having fun. In fact, it comes with all sorts of new responsibilities, including potentially being the first time they have to manage their own finances. Parents can help ease that transition by starting the conversation about finances early and teaching good habits while their student is still at home, so that when it’s time to head off to school, both will feel more confident. Here are four ideas that might help:
- Practice budgeting. A college freshman is likely to have a fairly fixed income and predictable expenses. This makes it easy to teach the basics of budgeting by showing your student how to create a simple spreadsheet of income and expected expenses. That way, he or she will know exactly what will be left over after the necessities are paid. While you’re at it, open a basic savings account for your student and encourage them to put away a small amount every month for unexpected expenses.
Having a firm understanding of budgeting will be especially important if the student receives a student loan check with funds for both living expenses and textbooks. A large sum of money like that can present a lot of temptation to anyone, but knowing how to pace spending will ensure the funds will last until the end of the semester.
- Go mobile. Does your student spend a lot of time on a smartphone? There are lots of great apps available for money management, especially from financial institutions. Many have budgeting tools and alerts that make tracking spending a breeze. Have your student download their financial institution’s app and show them how to use it.
- Teach the importance of wise credit card use. Students should understand the benefits of good credit and the importance of limiting credit card debt, especially if they’re planning to rent an apartment or finance a car after graduation. Getting them started with a prepaid card like Navy Federal’s Visa® Buxx Card before they leave for college is a great way to help them practice good judgment. Since it’s not a line of credit, it won’t impact your student’s credit rating. Parents can add funds to the card anytime and monitor spending to see what types of financial decisions their student is making.
Another way to teach smart spending is by adding your student as an authorized user to one of your cards. Being an authorized user may help students build their credit while allowing parents to set spend limits/monitor spending without needing to replenish any accounts.
- Open a student-friendly checking account. Many financial institutions offer checking accounts custom-made for college students. Look for an account, like Navy Federal’s Free Campus Checking, that has no minimum balance and no monthly service fee.
By giving your student an increasing amount of financial responsibility as they grow, you’ll be helping them develop good financial habits. Although you can’t plan for every financial situation, talking honestly about financial risks and responsibilities sets the stage for a lifetime of skilled money management.