As a parent, you know staying on track with your finances requires a lot of preparation, focus and discipline.
It’s not always as easy as 1-2-3.
Now put your feet in the shoes of your college-aged child who is trying to learn the ropes when it comes to managing their own income and setting their own goals. Regardless of their grade level, academic major or career path, money can be a tough subject to master. So, it helps to begin with the basics.
If you’re a mom or a dad, you can play a critical role in teaching your kids about the importance of investing in their future and providing them with tips, tricks and techniques to help them be smart with their spending.
Before your student heads back to campus in the fall, hold a short study session to educate them on the “ABCs” of saving.
A IS FOR ACTION
Back-to-school season is all about hitting the books, but it’s also a great time for you to assign some financial homework.
Start with the topic of earning.
Your child doesn’t need to attend class to understand money doesn’t grow on trees. In the real world, of course, people collect a regular paycheck for completing various tasks and duties related to their profession.
Today, nearly 45% of undergraduate students work on a part-time basis.1 Encouraging your young adult to find a temporary gig or side hustle — and even assisting them in their search — can help them sharpen their savings skills while they’re away from home.2 By putting in a few hours per week at a local coffeehouse, supermarket or bookstore, they can bring in a little extra cash for today while improving their financial standing for tomorrow. In fact, research suggests individuals who hold a job while attending college often secure a larger salary after graduation than their peers who don’t work.3
B IS FOR BUDGETING
Needs vs. wants.
It seems like a simple philosophy to follow, but many people can fail the test if they don’t have the right plan in place.
Showing your child how to build a budget can help them realize they don’t have to break the bank to cover common costs associated with college like books, meals and activities. See if a mobile app or online tool can help them organize their expenses, bills and priorities. Have them factor in all their income sources, too. They may have a long list of accounts to manage and balance, such as financial aid, student loans and personal wages, as well as any funds they receive from you and other relatives.
Recording every transaction can help your child gain control of their money and identify some of their unhealthy spending habits — which could help them avoid racking up unnecessary debt in the process.4
C IS FOR CREDIT
While this concept may sound too good to be true to your child, it’s important for you to explain to them how a credit card really functions. After all, more than one-third of college students owe over $1,000 on their credit card as everyday purchases can add up quickly.5 Each swipe can create a deeper hole.
Talking to your child about the benefits, rules and capabilities of a credit card can help them get familiar with credit and use it responsibly. For example, you may simply advise them that a credit card carries a certain limit with a promise to pay back the outstanding balance. In other words, it’s not free money. Make sure they’re aware that if they don’t submit their payments on time, they could be faced with interest charges and late fees, which may negatively impact their credit score down the road.6
1 American Association of University Professors, “Recognizing the Reality of Working College Students,” February 2020.
2 The College Investor, “Side Hustle Ideas: 50+ Ways To Make Money Fast,” July 2021.
3 CNBC, “To get a bigger paycheck after college, start working now,” May 2019.
4 Debt.org, “10 Financial Tips for College Students,” May 2021.
5 CNBC, “Over a third of college students already have credit card debt,” June 2019.
6 Debt.org, “10 Financial Tips for College Students,” May 2021.