If you have not already done so, parents of college-bound freshman should spend some time talking to them about managing money. For many students, they are facing financial challenges as an independent young adult for the first time. This is not a conversation to have over the phone, on during a car trip, but should be done in a relax setting.
Although the student will be making financial decisions that amount to a few dollars or even thousands of dollars, the money management skills they learn now will benefit them after college and for the rest of their life.
Here are some tips for guiding one of the most important conversations you can have with your child.
Make a budget
Financial expert Melody Hobson recommends that you sit that with your child to create an annual budget. Typical expenses include the following: room and board (rent) books and supplies, fees, groceries, transportation, personal care items, dining out, entertainment, travel and other items.
Then, determine income, such as scholarships, grants, student loans, employment, allowance from parents and other sources. Make sure the individual understand that income and expenses must balance.
Talk about them opening up their own checking account with a debit card-it safer than carrying cash. If you will be transferring money, consider opening an account at the same bank to make transactions easier. Another option may be a nation bank or credit union that has local facilities in the hometown and where the child will attend school.
Make sure the child understand basics of banking such as using a ledger and balancing their account. Many students will probably opt for a less traditional approach to track and monitor their finance and prefer to do it online. The website Mint.com provides a handy app for iphones and Android that creates weekly reports to help track spending.
Discuss the various fees, such as ATM or bounced check charges. Discuss how to pay lower fees or avoid them.
Parents and students should carefully consider and discuss the ramification of getting student loans and that they should only be used for school expenses-not a new car or spring break vacation. For example, private loans charge higher interest and fees than government loans.
Understand what you will need to repay and when the loan will have to be paid. Encourage your child to seek as many “free” sources of financing as possible—grants, scholarships to keep debt to a minimum.
One of the most important aspects of money to discuss with college freshman concerns credit cards. Credit card companies will overwhelm them with enticing offers. The CARD Act requires students under the age of 21 to demonstrate the ability to repay credit card debt or have a cosigner on the application.
Even if the parent does not cosign the application, make sure the student understand their financial responsibilities regarding credit card debt.
Closing the discussion
During your conversation about money, make it a point of emphasis to convey to your child that this is an important opportunity for him or her to take the lead on one of the most important aspects of being a responsible adult and make their sound financial. They may be neophytes when it comes to managing their finances but they have the ability to make sensible financial choices that will pay big dividends now and in the future.