As a mother, sending your child off to college for the first time can be a mix of emotions—pride, excitement, and a hint of worry. Not to mention the difficulty of letting go. One of the key concerns many parents share is how their child will handle finances while away from home. No matter how well we prepare them, they are bound to make mistakes.
Here are some valuable tips to help your college-bound student prepare for managing expenses, being cautious with credit card offers, and minimizing student loan debt.
Create a Spending Plan Together: Sit down with your kiddo before they leave for college to create a realistic spending plan. Discuss tuition, housing, meal plans, and personal expenses. By involving them in the process, you’ll teach them valuable budgeting skills. And if you are footing the bill, by all means, give them boundaries before they leave. I recall giving my step-son a gas card to use for gas. He quickly figured out he could use it in the convenience store. This led to him creating an enterprise at our expense by being a supplier of snacks and beverages to his buddies, charging them and pocketing the cash! Don’t be naive like me.
Open a Student Bank Account: If your child doesn’t already have a student checking account, may I suggest opening one right away with your local bank or credit union. Student accounts often come with lower fees and can help them learn about managing their finances responsibly.
Emergency Fund: Emphasize the importance of having an emergency fund for unexpected expenses. Start them off with a small savings account to cover medical emergencies, roadside auto issues, or other unforeseen costs.
Cautious with Credit Cards: Warn your child about the dangers of excessive credit card debt. Once on campus they will be exposed to all sorts of inticing credit offers. Encourage them to avoid signing up for multiple credit cards, no matter the incentive, and only use them for essential expenses if they must.
Financial Literacy: Encourage your child to attend financial literacy workshops or seminars offered by the college. Regardless of their course major, learning about budgeting, saving, and investing can set them up for success.
Part-Time Work: Consider allowing your child to work part-time during college to cover some personal expenses. Balancing work and studies can teach them valuable time management skills.
Minimize Student Loans: Help your child explore scholarship opportunities, grants, and work-study programs to reduce the need for student loans. It’s not too late to see what is available. Explain the long-term impact of student loan debt and the importance of borrowing responsibly. I have seen many clients with student loan debt balances that are more than four times their income earning potential. Make sure what is being borrowed makes sense for their future income opportunity and repayment.
Set Clear Expectations: Communicate your expectations regarding financial responsibility while in college. Discuss how you’ll handle expenses, what you expect of them, and make sure both you and your child are on the same page.
Sending your child off to college is a significant milestone, and equipping them with financial knowledge and skills is a crucial part of their journey. By working together to create a financial plan, you’ll empower your child to make informed choices and build a solid financial foundation for their future.
