More than 40% of new college students admit that they don’t feel ready to manage their finances. Most choose avoidance and are often afraid to delve into their bank accounts because they’re afraid of what they might find.
Not sure where to begin? Here are five basic things to teach your kids about money.
1. It’s important to know how much money they really have.
College students need to know how to dig into their bank statements and understand what they mean. Just because their balance says they have a certain dollar amount available doesn’t mean that’s the true amount they have to spend. Pending transactions can take a few days to clear and recurring subscriptions are deducted every few weeks. What the bank says is “available” may not be accurate.
2. Be wary of loan and credit offers.
College students are inundated with offers for credit cards and personal loans. They’re easy prey for predatory lenders because they’re short on cash and inexperienced with money. Establishing a good credit history is important but debt can quickly get out of hand. Teach your children how to identify a good offer and exactly how credit cards, loans, and interest work.
3. Understand how to put together a budget.
Learning how to budget when you don’t have a lot of expenditures is easier than trying to figure it out years down the line. Prioritization is important as is learning how to come up with a specific plan for how to spend their money, now and in the future.
4. Figure out what you want and what you need.
Most college students get some financial support from their parents to help them with necessities like rent, food, and tuition. They may also help in other ways, like providing health insurance coverage or maintaining a family cell phone plan. Although they may not see it this way, most college students end up spending their money on things they want. As they grow older, it can be a shock to find out how much their needs really cost. Teach them early on to figure out what is essential and what isn’t.
5. Look ahead.
Retirement is probably not something most college students think about but it’s important to impress upon them that they earlier they start saving, the better off they’ll be. Encourage them to save what they can now to establish a rainy-day fund.
An Ongoing Process.
Teaching your kids about money management isn’t a one-time thing. It’s important to keep checking in to see how they’re doing. Keeping the lines of communication open is important because they’ll know that can come to you with questions as new challenges arise. Help them figure out a solution when you can. If you can’t, teach them when to ask for additional help and where to go to get it.
Any opinions are those of Thomas Fleishel and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.