One of the best gifts you can give your child is the skill of money management.
Start when they’re young with a regular allowance that lets them learn to plan and face the consequences of ill-advised purchases.
When your children start college, they will have an easier time managing money if they have had practice while they were at home with you as a safety net.
Before your child leaves for campus, discuss with him or her how to create a budget and common ways college students fritter away money.
Pose some “what if” situations and help with ideas on how to cope with common money problems.
Additionally, your college student should learn these six money skills before or during their college years.
How to Plan
Your child needs to know up front which college expenses you will cover, and which expenses she is expected to pay for herself.
Create a plan together about how you will disburse the funds. Many parents choose to allot a certain amount of money at the beginning of each month.
Make it clear to your child that you won’t cover shortfalls when the money runs out (except in rare emergencies like a medical emergency).
Stick to this plan, or your child won’t learn how to live within her means.
How to Create a Budget
In college, temptation to spend is everywhere. Before your child leaves for school, help him create a budget.
Have him list his monthly income sources, including savings, wages, and parental allowances, and then list estimated expenses for the month.
It isn’t easy to identify college living expenses in advance, but you should try. Consider costs like school supplies, meals outside his meal plan, personal care items, and laundry.
Remind him that budgets have flexibility and can be revised once he knows the expenses he faces.
How to Use a Checking Account
Your child should open a checking account where her school is located.
Shop around and you can often find student checking accounts with no or minimal fees and with convenient ATMs to eliminate out-of-network ATM charges.
Show her how to balance her checking account using respected online resources (like mint.com).
Remind her that when an out-of-state check arrives (say, from Grandma), it may take a few days to clear, and she should ensure the check has cleared before spending against it.
While most college students use debit cards instead of checks, it is smart for her to know how to write a check, just in case.
How to Separate Wants from Needs
This is an enormous advantage for college students and on into adulthood.
Is $30 per week for gas a “need” or a “want?” In fact, the whole issue of having a car on campus is worthy of discussion.
How much should your child budget for non-meal plan food? How much will laundry cost?
It may take a couple of months to pin down actual expenses, and at that point it’s easier to separate wants from needs.
Some students give themselves a weekly cash allowance rather than carrying a debit card, and when that week’s allowance is gone, they have to wait till next week for more “wants.”
How Loans and Financial Aid Work
Grants may be paid directly to the school, with money left over going to the student to use for books and other expenses.
Knowing how student loans are disbursed and how they’re repaid after graduation is critical even for the new freshman.
Your college student (with your help) should understand how big her student loan debt will be upon graduation, and how she will pay it back.
How to Know When They’re Ready for a Credit Card
In 2012, according to the International Journal of Business and Social Science, 70% of college students had at least one credit card.
Have a look at this infographic from Credit Sesame to learn more about college students and their credit cards.
The CARD Act of 2009 imposed restrictions designed to help prevent college students from overextending themselves with credit cards, but it is still easy for college students to amass large amounts of credit card debt while in college.
Discuss credit cards before you send your child off to school, and if you provide them with an emergency credit card, emphasize that you will be reading the balance closely and will know if they use it for non-emergencies.
Mary Hiers is a personal finance writer who helps people earn more and spend less.