Heading off to college. Along with getting a driver’s license and graduating high school, this is the biggest milestone in your child’s life, not to mention quite an event for any parent. You and your child have managed to maneuver through the scholarship and student loan process, make contact with his new dorm mate and load up on all the items to make a tiny dorm room feel like home away from home. Mission accomplished, right? Wrong.
“Many times parents are so focused on making sure their child has all the comforts of home that they forget to have a talk about managing their finances,” says Heath Tudor, consumer liaison with RESQDEBT. “By now, parents have a wealth of knowledge and experience to pass along to their children and this is the perfect time to do it.”
Tudor offers the following useful tips for parents to consider as their children prepare to head to college:
Have “the talk”: By now, most young adults are familiar with the terms debit card and credit card but, surprisingly, many aren’t aware of the term charge card. It is important to educate your child on the difference between the three and their advantages as well as disadvantages. In a nutshell, explain that credit cards are borrowed money for which they will be charged interest for the luxury of use; debit cards are tied directly to a savings or checking which limits the amount you can spend based on balances; and charge cards usually require you to pay the full balance on a monthly basis … and most have membership fees. There is great information at www.thesimpledollar.com that can help guide your conversation.
Create an online budget: Most likely, this is your child’s first time living independently, which means all purchasing decisions will be solely at their discretion. Take advantage of one of the many free online budgeting tools available such as www.mint.com or www.budgettracker.com to set up a monthly budget before your child leaves. Online budgeting tools provide a comprehensive snapshot of spending habits which can easily help your child identify when and where any adjustments are needed. Consider sharing a password with your child so you can track spending, too.
Give the gift of gift cards: It’s an age-old problem: you give your child money for a specific expense and somehow it gets spent on something other than for what it was intended. To alleviate this problem, consider sending your child gift cards for specific retailers or uses such as a prepaid long distance card.
Lead by example: The best advice a parent can give is often that of personal experience. Share your horror stories as well as those of financial frugalness to make sure your child doesn’t make the same mistake. Additionally, practice what you’re preaching to your child. Recent studies show that parents are the most influential role models for children … you may not think they’re listening to you, but chances are what you say and do does sink in.
Plan(e) Ahead: The current economy has forced many airlines to engage in price wars to lure travelers. Consider purchasing any flights for your child now as opposed to waiting until closer to the holidays. If an unexpected trip does arise, remind your child that many airlines offer special standby rates for college students. Additionally, there are several sites that cater to college students, including www.statravel.com and www.smartertravel.com.
By following these simple tips and having an open, honest conversation about money management with your child, the journey through college can be a little easier on the pocketbook for both parents and students.
