Anyone who has a child getting ready to start college for the first time probably has a list of concerns a mile long. Among the worries is the handling of money. Whether your child is going away or staying home, there is a real opportunity to start your son or daughter on his or her first journey into financial responsibility. While it might be hard to look at your “baby” as an adult handling money, there’s no time like the present to learn these important lessons. These tips will help your child get off to a strong start.
1. Consider what income sources are available. Will your child save money over the summer or have a job while at school? Will you be supplying extra money?
2. Decide on who is paying for what. Sit down and be clear about what you are paying for, and what you are not paying for. This will allow your child to ballpark what his/her expenses might be. Go shopping together so your child can get a real sense of what things cost; then put together a rough budget.
3. Look at ways to shave the expenses. For example: Does your child really need a car? Is public transportation an option? Can used books and supplies be bought on line or at the book store? Can a roommate share the costs of a refrigerator or rug?
4. Make a final weekly budget. Based on the figures from the three previously mentioned points, put together what can realistically be spent each week and allow for 5% savings as a cushion. I recommend a weekly budget, because it is a big task to stay balanced for a whole month; breaking the task into a series of smaller ones may be more manageable.
5. Use cards with caution. Explain how debit cards work. There may be fees associated with them and, if lost, they can pose a danger to the account if not reported promptly. Using ATMs at another bank can get expensive, as well. Credit cards also require caution. Show your child why finance charges are not an option because they make the cost of purchasing goods much greater. If credit cards are used, have him/her keep the minimum low, and keep spending below the minimum.
6. Record keep. Encourage your child to always balance the checkbook. All transactions should be entered in the checking account ledger (cash/debit card transactions, checks written/deposited, and credit card purchases). This recordkeeping should be done immediately, and not when it hits the bank/credit card statement, so that your child always knows what actual funds are available.
These steps will lay the foundation for good money habits for years to come.