Going to college can be overwhelming for both parents and children. Many parents are seeing their teens head out on their own for the first time. Children are entering a new stage in life with new responsibilities. For both parties, money plays a major role in the transition. From practical everyday practices to more serious matters, finances touch virtually every part of college life.
Don’t discount the impact you can have as a parent, even if this isn’t the first year your child will be in college. Use some of these tips to prepare your child financially for what they’ll see when they hit their college campus.
Don’t Use Student Loans as A Blank Check
Student loans are the 800-pound gorilla in the room when it comes to college. In many instances, student loans are needed to fund college. Help your child understand the need to only take out the amount they actually need to pay for courses and potential dorm costs. Anything extra will add unnecessary debt they will need to repay upon graduation. The lifestyle the extra funds will provide while in college is simply not worth the additional debt.
It can be difficult to determine what your student will be able to afford for loan payments once they graduate, though estimates point to not exceeding 8-10% of gross monthly income. By limiting student loans to only what they actually need, you can help set them up for success after school.
Establish A Simple Budget
You might feel like your child doesn’t need a budget while in college. They likely won’t be making much, so why would they need to budget? It’s quite simple really; you want to help them establish a plan for their money. This is especially important if they plan on working while in college to help them avoid unnecessary spending.
Budgeting doesn’t have to be restrictive, and a basic budget can help them have more control over their money. After helping them establish a simple budget, consider adding some of the following to have greater control over their finances:
– Setting aside fun money to do with as they wish each month
– Opening a local bank account
– Paying themselves first to establish a small emergency fund
Use Credit Cards Wisely
Credit cards and college students can be a dicey combination though it doesn’t have to be. Having a credit card in college can be a great way to establish a credit history that will come in handy down the road. Thanks to the CARD Act, banks can’t actively target those under 21 any more, though they can still have a credit card.
Unless your child has a solid income or assets, and they’re under 21, they will need you to co-sign on the card. While a risk at times, you can use this to help teach your child about proper credit card usage – using it only for necessities and paying off the full amount due each billing cycle.
Teach Them How to Cook
Teaching your child the basics of cooking may seem like an odd way to teach them about handling money. Think of it as offering solid, practical skills they can use for a lifetime. Your child likely has had you preparing their meals their entire life. Living off campus can present a challenge when it comes to eating.
Don’t feel that your child needs to be a gourmet chef, by any means, but help them learn a few simple recipes they can make on their own. This will allow them to save money by not eating out as much and to take better care of themselves.
Heading off to college is both overwhelming and exciting. Take the time to offer practical money tips to your child, so they can hit the ground running.
By John Schmoll, Staff Writer