Preparing Your Kids to Manage Money in College
Thursday, April 20, 2017
The season is upon us when we’re getting graduation announcements and invitations.That also means that a lot of these kids will be preparing to go to college. There are a lot of financial pressures for a kid who’s new to the college environment — pressure to dress a certain way, have the coolest new gadgets, hanging out with new friends — all of this can amount to a financial burden that many college kids can’t bear. As parents, there are things you can do to help your college-bound offspring to manage their money effectively:
Give them an allowance that includes ALL of their monthly expenses
Your child is going to want to go to the movies, buy clothes, get haircuts, etc. Consider adding up all these types of expenses and giving it to them all at once for them to manage, rather than nickel-and-diming them.
Teach them how to think about upcoming expenses and budget the money they have
A great quote about budgeting comes from John Maxwell, “A budget is telling your money where to go before wondering where it went.” Walk your child through the budgeting process to get them to think about upcoming expenses and how to create and stick to a budget. Online software like Mint can help. Follow up with the budget with weekly meetings or a phone call with your child.
Teach your kids about credit
College campuses are swarming with credit card companies trying to get students to open accounts. Even though it has gotten better, credit card companies still market to college kids who have no idea what they’re signing up for. Luckily, the CARD Act of 2009 provided some level of protection to college students. College students may treat credit cards like “free money”, not grasping that they’ll be paying something like 25% interest on the things they buy. Help your children understand that the money is not “free” and that the lower they pay on their monthly credit card bill, the more they will pay in the long run in interest.
We hope these tips are helpful. Teaching your kids good money management now will help them to build a prosperous financial future. What’s a better graduation gift than that?