Starting Off

Talking to any teenager about money management can be tough. Adolescence is an age of discovering who you are as person, which unfortunately means spending money. Since your teenager doesn’t typically pay many bills, they are likely to spend allowance and income on whatever their heart desires. Immediately.

When I was 13-15, there wasn’t a comic book or video game that didn’t have my name on it.  (comics and video games were much cheaper back then)

Reality doesn’t even hit when your child makes the decision to go to college. Because college students they think the world is their oyster and they will experience even more  new financial freedoms.  Potentially, all on your dime.

It’s your job as a parent to stop them cold. You must make sure they sign up for the class   “personal money management”.  You are the teacher and this post can be the course overview.

Side note: My son is only 1 years old, so I am not speaking from personal experience, but many of my clients have children in college. I have taken their experiences to formulate this post.  Also, my parents funded my education and gave me a strict budget to adhere too. 

Cost of College

College is easily one of the most expensive times of a persons life, and for many students it’s a rude awakening on money management.

During a school year, average college students spend between $3,700-5,100 on

• books,
• supplies
• transportation
• personal expenses

(Source:Trends in College Pricing—2012-13, The College Board)

That does not include tuition, room or board!

Parents who allow their students to “spend as they go” may find themselves refilling a seemingly bottomless well.

Sink or Swim Mentality

Many parents today have the sink or swim mentality towards their  college student. This approach is to throw their child into the financial deep end without teaching them how to swim the waters of financial management. Only a parent truly knows their child best, but for many children this strategy takes away their ability to ever learn how to manage money properly. Some young adults need guidance and advice to balance their checking account or how to use credit cards wisely. Don’t rob your child of the insight he or she so desperately needs.

Laying the Groundwork

So how should a parent best help their child transition into a successful young adult?

To help prevent overspending, parents can help their students develop basic money management skills.

Consider the following steps to help get your child off to a good start at college:

• Before your student leaves for college, have an open discussion of expectations—both your child’s and yours.

• Consider providing a lump sum each semester, setting guidelines on how long the money must last.

• Explain when checks or money transfers can be expected, the amount your student will receive, and any rules concerning use of the funds.

Thanks to modern technology moving money is easier than ever before. Parents have several options for funding their college student. They can send checks or transfer funds directly into an account through the bank or online. However, it may be difficult to cash a personal check without a local bank account. Even with the convenience of online banking, it may be a good idea for your student to open a small account on campus.

While some parents may avoid credit cards, especially for a student who has difficulty managing money, others may find a credit card to be a useful backup, especially in an emergency or for certain expenses, such as car rentals, plane fares, and train tickets. It’s also an easy way to help your child build credit. Open the card under your name and add your child as an authorized user. For some families, this might be an ideal way to reimburse college students for books and travel.

Cultivating Money Smarts

It’s important to teach young adults to manage their money. Obviously, children learn best by following the example of their parents.

Do you practice what you preach?

Also to encourage young adults to take responsibility for their finances, parents can start by teaching them to manage their own savings and checking accounts. Have them meet with a bank representative to open the accounts, and practice balancing the monthly statements. This accountability will help set the foundation for future financial independence.

Parents can also emphasize the importance of disciplined spending. Recommend that young adults allocate a set amount per week for discretionary spending, so they are not tempted to withdraw funds too quickly or carelessly. By discussing what this amount must cover, students may come to realize that too many late night pizzas or trips to friends at other schools can easily exhaust the funds. It’s often good to have your child actually withdraw his or her weekly allotment so they don’t overspend as easily. They will have the experience of seeing how far their money actually goes.

On Campus or Off Campus

Although many schools require first-year students to live in a dorm on campus, parents can use the decision about whether to live on- or off-campus as an exercise in evaluating financial trade-offs. Initially, your child may think it will be cheaper to live off-campus. However, in many college towns with a high demand for off-campus housing, accommodations within walking distance of the campus are expensive. Also, landlords frequently require a one-year lease—a period longer than the school year. On the other hand, living off-campus may allow students to save money by sharing housing expenses and preparing their own meals. You may revisit this decision as your child progresses to the sophomore or junior year, as he or she makes friends and becomes acclimated to the area.

It’s also important to have the discussion about your expectations of your child will have to pay rent when he or she decides to live at home again. Whether they decide to commute to school or move home for the summer, it’s important to set boundaries that are right for you and your family.

Reaping Rewards

Both you and your college-age child can benefit if he or she “makes the grade” in personal money management. Life can become easier for you if you can count on your child to manage out-of-pocket expenses while away at school. And, your child may be better prepared for future financial independence.

As always, you can consult with me to discuss   money management issues  with your College Student.

Look for future posts on the best ways to fund a college education and a more recent post about how college GRADUATES should manage their money.  

Thanks for stopping by and I hope you and your student achieve financial success!