Resist the urge to bail them out of a financial jam.
My 18-year-old son is leaving home to start college this fall. His dad and I have tried to teach him responsibility. (He knows how to do his own laundry and make his own meals, for example.) But he’s never been completely responsible for managing his own money. He was free to use the money he earned from high school jobs however he pleased, and we were around to pay the bills and make sure he wasn’t spending too much. This year will be different. What should we do to make sure he’s ready for the financial responsibility of going off to college?
You’re right: When your child starts college this fall, he will be launching a whole new life — socially, academically, and, yes, financially. And he’s not alone. For many students, the first year of college is the first time they’ve been responsible for managing money on their own.
And many are less prepared than parents expect. While 40 percent of parents of college students say they taught their students specifically how to manage money, only 18 percent of college students say their parents taught them money management skills, according to U.S. Bank’s Student and Personal Finance Survey.
What can you do to make sure your soon-to-be college student is prepared for financial success along with academic success? Start with these five steps.
Make Your Expectations Clear
If you plan to provide your college student with some spending money, take time to discuss how much you’re willing to provide, how often, and what the money is for. For instance, if your deposits into your student’s account are intended to pay for food and laundry services, make sure that’s clear. If your student doesn’t know what you expect, you can’t be angry when he blows it all on a new outfit or a weekend beach trip.
Create a Budget
Even if you aren’t planning to foot the bills, your child can still benefit from your financial expertise. Take time to sit down together and develop a monthly (or even weekly) budget. Seeing all the budget items and their prices in black and white will make it easier for your student to be aware of all the expenses that spending money needs to cover, including haircuts, clothing, food, transportation, and books.
Use Tech Tools
Even better, input your student’s budget into an online tool such as Mint or LearnVest. Many of these apps will securely link to a checking account to make it even easier to keep track of spending. If your student is willing to share access with you, these apps can also allow you to keep tabs on the situation from afar.
Encourage Financial Freedom
Although your college student will be (hopefully) working hard in school, a part-time job on or off campus may also be a good idea. Having a job for just 10 hours a week can help students develop responsibility, schedule their time better, and make some extra spending money of their own.
Allow for Mistakes
Everybody makes mistakes, and your child is likely to overdraw her checking account or run out of food money before the end of the month. Encourage your student to link his savings account to his checking account so that potential overdraws will be covered. And although you may be tempted to come to the rescue when trouble hits, allow your child to face the consequences of financial mistakes, when possible. It won’t hurt him to eat cereal or ramen noodles for a few days, for instance. It will be better, in the long run, to learn a lesson now about sticking to a budget than to have to learn that lesson later when there are more — and more serious — bills to pay.