As you get ready to pack up your child to head off to college, you know to pack the books, clothes and other things they need. You know you’ve taught them how to be safe on campus (and off), how to cook (even if just a little bit) and the things they need to know to take care of themselves. The one thing that parents may overlook is finances.
It is very important to sit down with your child and talk money. It is something that many will have more exposure to when getting away from home and the last thing you want is for them to make financial mistakes which could follow them for years to come. Here are things you should cover with your teen:
1. Budget. Sit down and help your son or daughter with a budget. It should be in writing and be something they can follow. Make sure you include items such as fees, rent, food, car payments, insurance, etc.
You can set up a budget for each month or even for the entire semester. It might be wise to also arrange for a monthly meeting (skype or call) to go over the budget and check in.
2. Credit Cards. These can be very tempting for a teen. The idea of being able to get things without having the cash in hand can be tempting….and can lead to debt and financial headaches. Take the time to talk to your child about credit cards and how to use them wisely. Make sure that they use them in a manner which will allow them to be paid in full every month.
You can even show them how long it would take to pay off a $500 balance if you pay the minimum each month. When they see that a $500 balance with a 15% interest rate will take 74 months to pay in full, if you pay just $10 per month, they tend to take notice!
3. Don’t forget to save. It can be tempting for a teen to spend their money without planning ahead. Help them set money back for emergencies and those unexpected expenses. Teach them how to set back at least 20% of their income from all sources.
4. Identify wants vs. needs. This can be tough for kids. They may think they “need” that new electronic device, but it may really be a want. It is also a desire to gout with friends, but that is a want. Doing this helps them follow their budget and save as they should.
5. Watch bank statements online (keep identity safe). With technology, having access to bank statements on phones and tablets is very convenient. Teens and parents can always monitor spending. This ensures there is enough money in those accounts for when it is needed.
Not only is it wise to check your statements for cash flow, but your teen should also know how to watch this for possible theft. They need to know if they see small transactions, usually $1 or less, it could be a sign of something sinister. If they see this, they need to make sure that they did not authorize the transaction. Contact your bank at once so that they can help change account details before any large sums of money are stolen.
Finally, make sure you teen also knows to never share PINs or account information with anyone. Statements and other forms of ID should never be left out in the open. People come and go in college dorms, so you never know if someone may stop by and be up to no good. They should also make sure they sign out of all accounts when done, be it on their phone or computer. They may also want to update passwords more frequently, in order to be proactive against possible theft.
All of these are simple to do and do not take much time, but can truly help your child get on the right path financially.
What else do you have to add to our list?