Your oldest is finishing up their senior year of high school. Before you know it, you'll be dropping them off at the dorms, hoping they've soaked up all the life lessons you tried to pass on.
Or maybe it's one of your younger kids heading off and you're about to become an empty-nester. Either way, you’ve talked with them about safety, getting to class on time and being responsible at parties. But, how much have you talked with them about being responsible with their money?
Money responsibility conversations typically come up after a child overspends, forgets to pay a bill or needs to ask for more money. Don’t let it get this far! Have an honest money conversation before they leave the house. Here’s what they need to know:
1. How to budget
How much money will your child have to spend each week or each month while away at college? Work with them to create a budget and outline common expenses they may have. Set expectations for what expenses are their responsibility versus what you will still be paying for. Open a checking account and have them practice balancing their account with their statement each month. Make sure they know how to access the account online to monitor their balance, deposit money and withdraw money.
2. How to pay bills
Show your child how you pay bills each month. Do you have a standard process you follow, and do you keep track of the bills you have paid? Discuss with them what to do if they find an error on a bill and the importance of paying their bills on time and how it can impact their credit score if they do not.
3. Good credit practices
Many kids get their first credit card around the time they leave for college. As parents, you’ll most likely have to co-sign for the card, unless your child has income on their own. Set clear boundaries with your child on how the card should be used and how it should be paid off each month. Teach your child about interest that can be charged on balances and the importance of not buying things you can’t afford to pay off.
As a college-aged student, savings will likely be the last thing on their mind, however, it is still a very important practice. Just because there is a budget to spend, doesn’t mean they can’t also save money at the end of each month. Maybe they want to save for something special or are working to pay off school loans. No matter what the purpose, saving is an important good money habit.
After these four discussions, your child will be set up for success. Remember to keep the lines of communication open regarding finances while they are away at college. Be sure to check in on how they are doing with their budget and see if they’ve managed to save a little, too.