Congratulations! Your child has successfully navigated their high school years and is preparing to embark on the exciting journey into college life. As CERTIFIED FINANCIAL PLANNER TM Professionals, we understand the importance of setting a strong financial foundation early on.
Help your teen get started on the right foot financially by ensuring that they have these five financial must-haves before stepping foot on campus:
- Budgeting Skills: Learning to budget is a crucial life skill that will serve your kids throughout college and their career. Help your child create a budget by sitting down to itemize their expected income (whether that is from a part-time job, an allowance, or student loans) and then allocating their money towards essential expenses and personal items. Help them brainstorm when they might have a need for additional funds – such as presents for Christmas, Spring Break travel, or Greek rush. Being mindful of their spending habits and tracking expenses will help them make informed financial decisions and avoid unnecessary debt.
- Establish a Emergency Fund: Life is unpredictable, and emergencies can strike when you least expect them. Teach your teen that having an emergency fund is like having a safety net to fall back on during tough times. Help them establish and maintain an emergency fund in a separate savings account. This fund will provide them with financial security and peace of mind, helping them avoid accumulating high-interest debt during unexpected situations.
- Bank Account & Debit Cards: Help your teen open a checking account with a reputable bank or credit union. Make sure to choose an account without unnecessary fees especially for students. A debit card linked to their checking account may likely be their primary payment method for daily expenses. Explain the importance of being responsible with their card and avoiding overdrafts by keeping a close eye on their account balance. As Venmo, PayPal, and other money apps have become commonplace, help your teen learn how to use these apps safely and responsibly.
- Understanding Credit and Credit Scores: While credit card companies can no longer stake a tent at Quad Day, they can still bombard your teen with credit card offers in many other ways. While credit cards can be useful for building credit, they should be used responsibly. Teach your teen how credit works, including interest rates, repayment terms, and the impact on their credit score. Explain to your teen how their credit score works and that it will influence your ability to secure loans, rent apartments, and even to get certain jobs. Aim to use credit sparingly and pay off the balances in full each month to build a positive credit history.
- Health and Insurance: Discuss the significance of health insurance and ensure your teens are covered under a suitable plan during their college years. Additionally, consider renter’s insurance if they will be living off-campus.
- Make sure your teen has the necessary legal documents in place: Before your teen heads off to college, it’s essential to ensure that they have certain legal documents in place to protect themselves and make important decisions. From Healthcare Power of Attorney to HIPAA Authorizations and a list of Emergency Contacts, read more about what your teen may need here.
Taking control of their finances is a pivotal step towards your teens successful future. Help your new college student establish a solid foundation of financial knowledge and key behaviors which will pave the way for a more financially secure future and rewarding college experience. Good luck on your college journey!