Before your teenager leaves for college, it’s important to teach them valuable money skills so that they learn not only how to take care of themselves, but also how to stay out of debt. If you teach your teen how to make smart money choices now, it can have a lasting impression on their financial future.
If your teenager does not already have a savings and checking account, you will want to make sure that they get one ASAP. A checking account will begin their money responsibilities and can help them learn the importance of a budget. It’s also valuable for your teen to open a savings account as well. Teenagers need to know the importance of saving so that they are able to make big purchases in the future and not have to rely on credit.
Heading to college is a major step for teens, and it marks a transition to adulthood. While parents will want to impart as much knowledge as they can to their children before they depart, parents sometimes fail to properly teach their teens about the importance of saving money and proper money management.
Here are a few tips that parents should instill in their teens before they head off to college:
Paying the Bills –
College often marks a time when people start managing their own bills and although parents often help, college students begin taking on some of this responsibility. The transition can be difficult, but parents can help by drawing up a budget or a sample budget and teach their children how to deal with recurring costs. Parents might also want to show their children how they manage their own budgets because teens often fail to realize just how many bills they’ll be paying, especially once they graduate.
The Power of Interest –
Teens often have some experience with bank accounts, and many see how money in the bank leads to interest payments. However, college-bound teens often fail to recognize how much interest, especially in accounts other than checking accounts, can build significantly over time. College students rarely think much about retirement savings, but a few examples of how relatively small but regular savings contributions can lead to more money over time can make a lasting impression.
Preparing for an Emergency –
Young adults will usually understand the concept of having an emergency savings fund, but they might not know how likely they are to have to pay emergency bills. Parents can help prepare their teens by explaining cases where they’ve needed an emergency fund in the past and emphasizing that emergency expenses are far more common than children realize. While it takes some time to build up an emergency fund, parents can help their children realize that beginning to save early is important.
Keeping it Simple –
Thinking about savings, investments, and other factors can be a bit overwhelming for college-bound teenagers, who are probably feeling a bit overwhelmed by the transition in general. However, parents can teach children that saving money doesn’t have to be especially complicated. By working through a budget and showing that saving money can be as simple as setting aside a certain percentage of all money earned, parents can encourage their children to make saving money a regular part of managing their finances. Again, explaining how valuable interest can become can help make a difference.
Life After College –
For many, leaving college is an even bigger transition than entering college, and teenagers often fail to grasp just how quickly college comes to an end. By beginning to budget money and save it while in college, students can make the transition to moving on after college a bit simpler and easier to handle. Small lessons can go a long way; teenagers who learn just how often college graduates move back home with their parents might be motivated to save some money to maintain independence upon graduating.
Show Teens Where Your Money Goes –
Once your teen has bank accounts, sit down and show them examples of your financial statements. Show them your bank statements so that they get an idea of how many bills that you pay monthly. Also show them documents such as your credit card statements. You want to point out things like the annual percentage rate, and the amount of interest. Many teens do not realize how much extra money using a credit card costs. If you show your teen this, they will be more likely not to use a credit card while at college. Recommend that they only use a credit card for an emergency situation. Stress the importance of saving money so that they are able to make a purchase, such as a new phone, when they want one. By doing this, your teen will likely enjoy their new phone better than if they had charged it on a credit card.
Start Good Money Habits Early –
You should also explain to your teenager how important it is to start saving early in life. If you explain the value of saving early, chances are your teen will continue to save throughout their life. Teach your teens that it is important to always save for things such as emergencies and retirement. As your teen becomes more knowledgeable about money, they will begin taking steps to create a smart financial future.
Managing money is an essential skill, but teenagers often receive little or no help while in high school. By teaching college-bound teens some of these lessons, parents can ensure that their children get off to a great start. Teach your teen the importance of budgeting, saving money for emergencies, and good money management techniques. This will ensure that they make smart financial decisions as they continue to grow up.
If your college student gets into trouble or finds themselves on the verge of debt troubles, Advantage CCS can help set them up on a budget and work out a debt management plan. Our free non-profit consumer credit counseling services are available online, in person, or over the telephone. The call is free, confidential, and there are no obligations.