You survived the “senior send-offs,” graduation ceremonies, and the last summer at home. As your high school graduate prepares to leave the nest and begin their new life as a college student, the idea of discussing finances may be the last thing you want to think about. However, empowering your child with the knowledge and skills to successfully manage their money is a crucial part of preparing them for college and living on their own. Check out these four talking points to help make the financial conversation a little less daunting.
Creating a BudgetWork with your child to assess their income and expenses and create a budget. As new college students learn to navigate the challenges of living on their own, having some guidelines in place can keep overspending at bay. First, decide who is responsible for which payments. Discuss where your child will find the money to pay for their portion of the bills. Also, estimate the amount that your child needs each week for variable living expenses. Help them think about making smart choices with their money to cover food, gas, and entertainment costs along with any bills.
With a budget in place, your child has clear expectations of how they will receive their income and how you anticipate them spending the money. Setting these expectations early can prevent uncomfortable conversations later if their spending habits go awry.
Building Good CreditDiscuss ways to build credit with your student so that they can build a positive credit history while in college. When talking with your child about credit, stress the importance of establishing and maintaining good credit by making payments on time and in full, not charging large amounts on credit cards, and by regularly monitoring their credit reports. Make quarterly credit health check-ups an activity you complete with your child in order to start building good habits early on. For more tips, check out our guide to conducting a Credit Health Check-Up.
- Example 1: If your son has a savings account, he might consider taking out a share secured loan which typically offers lower interest rates. He can use the money from the loan to pay back the monthly installments, building good credit in the process.
- Example 2: Your daughter may ask to use your credit card to purchase gas and groceries. To help her build credit, encourage her to open a low limit credit card and co-sign to help her receive a lower interest rate.
Finding Student EmploymentEncourage your student to seek out a part-time job while in school. This will allow them to earn a small income while developing transferable skills that employers love such as communication, problem solving, and teamwork skills. Many campus offices hire students to help with answering phones and clerical tasks, and they are very flexible with students’ class schedules. In addition to earning money and building skills, students who work roughly 15 hours per week report earning higher GPAs than their classmates who do not work at all.
To help with finding part-time positions, encourage your child to visit their campus’ career center or financial services offices. Many colleges and universities host online job databases and career fairs in the fall to help students locate part-time jobs.
Paying for CollegeWith the cost of college tuition on the rise, seek out additional avenues of funding for your child. If your child changes their major, encourage them to inquire about departmental scholarships and application timeframes for the next academic year. Many scholarships are specifically marked for students from certain locations or those who are pursuing particular degrees.
Make sure your child completes the FAFSA each spring to capitalize on opportunities such as federal grants, loans, and work-study programs. In 2017, new college students left nearly $2.3 billion in free federal aid for college according to NerdWallet. In Alabama alone, 41% of high school graduates did not complete and submit the FAFSA in 2017, leaving over $45 million in Pell Grant money alone on the table.
If your child is returning to school to pursue a graduate degree, keep in mind that nearly all graduate students are able to complete the FAFSA as an independent student which does not require parental financial information.
While having a serious financial conversation with your child may not be the most fun and exciting item on your college prep to-do list, it is an important topic to cover before they are left on their own. Ensure that your college student is prepared to make smart decisions with their money by explaining the basics, setting expectations, and following up periodically to check-in. They may roll their eyes at you now, but will thank you later when they graduate college with experience in successfully managing their finances.