How can you prepare and guide your children with their money management responsibilities before they leave for college and pursue their ambitions in life?
Start by having a meaningful discussion about your expectations for how your kids should identify financial priorities and handle their expenses in school. Follow these pointers to facilitate your children’s transition to college and help them grow confidence and independence in their financial decision-making abilities:
- Assemble essential documents and safeguard personal information: Most importantly, talk to your children about creating a filing system and organizing relevant financial documents (i.e. financial aid, qualified education expense receipts and medical insurance policies) to assist in paying bills and meeting deadlines in a timely fashion. Emphasize to your kids that they should pick up mail regularly and protect personal information that can be stolen off paper bank and credit card statements. Remind your children to be prudent in how they utilize the internet in public college computing spots (i.e. do not bank online when using public Wi-Fi) and when they communicate on social media sites. Further, safeguard your kids against identity theft by stressing that they should not post identifying details, such as credit card numbers and regular passwords, unless there is secure computing software.
- Reinforce budget tracking skills and ownership capabilities: Foster disciplined and savvy lifelong financial skills by encouraging your children to strategize and practice budgeting now to stay flexible for varying inflows and expenses during their college years. Refer to money management software and online resources, such as Mint.com and Quicken.Intuit.com, to help teach your kids to track their finances. In addition, you should underscore the purpose of accounting for unanticipated expenses (i.e. food outside of the meal plan and extra car costs) to your children and suggest that they set tangible monthly spending limits for themselves.
- Cultivate exemplary credit-building habits: Having a sturdy credit history over time is integral to your child’s financial future, especially when it comes to applying to a post-college job or purchasing their first house. Encourage them to build a strong credit history by defraying their credit card balance each month to avoid paying interest and late penalty charges that can adversely affect their credit scores. Consider assisting your kids in developing their own credit history and financial life responsibilities during their college years by obtaining a secure credit card and reviewing credit card statements together.
- Utilize banking accounts to adeptly manage finances: Evaluate which bank provides optimal arrangements for money management accounts by researching campus banking institutions on their websites and visiting their branches with your college children. Ascertain that they can securely monitor their accounts online and access money out of their account at an Automated Teller Machine (ATM). Viably assess overdraft protection and whether your children can link another account to cover potential overdrafts and avert bounced checks that can potentially damage credit history.
- Proactively seek alternative options to control college costs: Direct your children to the college financial aid office for counseling in the event of any unforseen financial situation (i.e. job loss, medical emergency) that can have drastic ramifications on their money management or aid eligibility. Make sure your kids are cognizant of available need and merit-based scholarships and grants every year and take the necessary steps to sustain existing aid. If your children qualify for financial aid, they can supplement this monetary support with an on-campus federal work study job to offset high college costs. Alternatively, if your children are not eligible for work study, they can begin searching for part-time employment while in school to cover higher education expenses.
Read Discussing Essential Financial Skills and Responsibilities with Children Leaving for College for additional pointers to enhance your children’s financial readiness.
Always take ample time to engage your children in family and college money conversations! Ultimately, you can provide them with a foundation for making a lifetime of informed financial decisions.
FPA member Elaine King, CFP®, CDFA™, is the founder of Family & Money Matters Institute in Miami, Fla. FPA member Philip Herzberg, CFP®, MSF, is Director of Media Relations & Public Awareness for FPA of Miami-Dade.