Young adults who go to college armed with a solid foundation of basic financial know-how tend to be better prepared to handle their finances after college. And those who actually share in the financial responsibility of paying for their education come out ahead, too. Here are 6 tactics you can use to help your college student or undergrad-to-be gain a grasp of the money-management basics.
1. Start the education process before they’re on the brink of college
That means opening a dialogue with your student about money and household finances when they’re young, emphasizing practices and values such as spending within one’s means — balancing and prioritizing income and expenses within the framework of a budget — and saving toward a goal.
2. Initiate honest discussions about money matters regularly
Their eyes might roll towards the sky, but stick with it. It’s better to be open and show your student what managing one’s finances means, from bank accounts and credit cards to a mortgage and car loans and saving toward retirement and other goals. The bottom line is to try to avoid judgement toward them or their spending decisions when having your discussions.
3. Set clear expectations and boundaries
It’s important to address weighty issues like how much college funding support your student should expect from you, who’s expected to pay what share of other expenses (car, phone, etc.), how much the student may need to work during college to contribute, and what happens after college in terms of parental financial support (or lack thereof), living at home, and the like. This might be difficult on a lot of levels depending on the maturity of your student. Some might embrace the discussion while others might withdraw out of fear or other pressures of someday being on their own.
4. Give them a lead role and hands-on involvement in financial matters
Empower your student with the confidence to manage their finances by assisting them in setting up a checking and/or savings account, showing them how to balance a checkbook and manage accounts online, and perhaps opening one credit card account with a low limit (no more than $1,000) that’s jointly held by you and the student to help them gain familiarity with interest charges, paying monthly bills, and more. Exercise caution here, because credit (“free money”) is not really free and can result in difficulties later.
5. Show your student how to track and manage their cash flow
Work with your student to build a budget using a simple Excel spreadsheet or use any number of online budgeting tools, like Mint.com or YouNeedaBudget.com. Getting your student to budget and to understand how to manage their cash flow while in college sets them up to manage their finances when they land that first job.
6. Prepare them for short-term setbacks
Like dieting, we all have the best intentions starting out, but then something happens and we’re back to where we started. Help them understand that new habits take time to form, so expect setbacks. The key is to keep trying to be better the next day.