Is your son or daughter heading to college? If the answer is yes, it’s an exciting moment in your child’s life. But, financially, it can also be a paralyzing time if they do not have a principled approach for managing money.
Out on their own for the first time, your child has an opportunity to sharpen their financial skills for the future, but they are vulnerable to mistakes. Thankfully, regular chats about money can help get them on the right path.
Here are some suggested financial topics to cover with your college-age child:
Expected financial contributions
College costs have skyrocketed in recent years. Tuition, room and board, books and travel can readily exceed $100,000 depending on what school your child attends. Your family situation will dictate how you manage these costs. Students who carry some financial responsibility for their education tend to be more invested in the outcome. Before your child starts college, be clear about whether or not you expect them to share some of the costs and how much they need to contribute. If you or your child take out loans for school, discuss who will be responsible for repayment after graduation.
Budgeting and spending
For many young adults, college is the first time they will be responsible for their expenses of daily living. Help your student create a realistic budget for campus life. Encourage smart decisions around discretionary spending. For example, it’s not uncommon for students with meal plans to eat out several times a week, but that’s an expense that can be avoided. Likewise, indulging in a latte or late-night pizza on a regular basis adds up over four years.
Risks to financial reputation
Help your student see how their financial actions in college can affect their future. Some employers run credit checks on prospective employees, meaning if your child has debt or unpaid bills, it can adversely affect hiring decisions. Landlords and mortgage lenders also look at credit scores. So, talk to your child about how to use credit cards responsibly.
Most students bring a cell phone and a laptop to school with them. They may have other valuables that would be costly to replace. College campuses are not immune from theft. Let your student know they need to be vigilant about keeping their personal possessions safe. Discuss whether rental insurance makes sense. It may provide the protection your student needs while at school.
Daily account monitoring
Cellphones and laptops are not just for homework and social media. Help your student get in the habit of monitoring their bank account on their electronic devices. Daily check-ins can help students avoid overspending and spot fraud if it occurs. They also should take care to avoid using public or unsecured Wi-Fi when conducting financial activities online.
Talk about how you will discuss money matters while they are away at school. Set up weekly or monthly financial chats so you can review expenses, reset expectations, adjust budgets and so on. If problems arise, you have a standing appointment to work things out. These conversations can help prepare your son or daughter for a relationship with a financial adviser. When the time is right, encourage them to find a professional who can help them set and achieve financial goals over a lifetime.