Finances for Freshman: How to Prepare Your Kids for Financial Responsibility When Entering College
Emotions often run high the day any parent drops their child off at college for the first time. It’s an important moment for families and one that symbolizes the start of a child’s independence. But as a parent, grandparent or guardian, you want your child to set their newfound independence off on the right foot emotionally, physically and financially. Working with your child to understand the financial responsibilities independence brings is a crucial step in preparing your kid for college. Below are a few ways in which you can work with your child to help them understand the impact healthy financial decisions can make on their time in college.
Preparation #1: Warn Them About Credit Card Offers
In 2009, the Credit Card Accountability & Responsibility and Disclosure Act was passed. One of its main purposes of the act is to help protect college students from falling prey to credit card offers they couldn’t resist. Before the act was passed, credit card companies were allowed to approach students right on campus and entice them with impressive giveaways that masked the true commitment and cost of signing up for their credit card. Now credit card companies are no longer allowed to offer giveaways to students on campus, near campus or at any university-sponsored events off-campus.1
While companies likely won’t try to buy your child’s business by giving away freebies, college students are still a targeted demographic for many credit card companies. Whether it’s through the mail, email, social media or over the phone, credit card companies are still finding ways to entice young adults (even underage students) into signing up for their card services. Before your child heads off to school, make it a priority to explain the real commitment signing up for a credit card comes with such as high-interest rates, payment due dates, late fees, yearly fees and more. Empower them with the knowledge they need to either ignore the offers altogether or do some digging to find a credit card that may best fit their needs.
Preparation #2: Be Selective in Your Financial Support
How much money a parent chooses to give their child over the course of a semester varies vastly. Some may be inclined to cover all expenses, others may want their child to be responsible for everything on their own. If you do choose to provide some financial support to your college student, it may be beneficial to be selective with how much you decide to give. Doing so can help create an important lesson for your child on the value of money, without leaving them completely cut off.
Depending on what you’re able to do, it may make sense for you to help cover your child’s room and board, meal plan, insurances, medical expenses, etc. But once the necessities are taken care of, you may want to consider leaving the rest up to your child. Without a steady or reliable source of income from you, it can quickly become apparent what are needs (food, school supplies, etc.) and what are wants (going out to eat, weekend trips, movies, etc.)
Whatever approach you decide to take, sit down and make the expectations clear before they head off to school.
Preparation #3: Discuss the Importance of Making Money Last
While some college students choose to work on campus to help supplement the cost of their living expenses, many may not. And for those that do choose to work, their hours may be limited to what they can fit into a schedule packed with classes and extra activities.
For many students entering college, it’s likely that they held a summer job or internship during the months leading up to college, or they have a bit of savings socked away for the semester. You may have even chosen to give your child a lump sum at the beginning of the semester to cover extra expenses. Whatever the case may be, you’ll want to help your child understand the importance of making the money they have last through budgeting and saving.
Work with your child to give them a realistic idea of what expenses they may need to account for. Help them understand that without a steady income stream during the semester, they’ll need to spend and save what they have wisely.
Seeing your child head off to college for the first time is a feeling like no other. But as you work on buying bedding and gathering textbooks, make sure to set some time aside to help your kid understand the financial implications their first step into freedom and independence will likely have. Doing so now can help them feel comfortable and confident in the financial decisions they’re making all semester long.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.