If you have a son or daughter who is about to head off to college, you’re likely worried about those first few months apart. Will your child be able to live independently, and will he or she be a wise spender and saver? Here are some ways that you can help ensure that your child makes smart financial decisions after he or she goes off to college.
Teach Them to Track Income
The first step you should take with your son or daughter is to take an inventory of the available financial resources. What is going to finance your child’s tuition and spending money? Go over with him or her all of the sources of income that will be coming together to make the college experience a reality. This might include a college fund, loans, personal life savings, money from home, and a part-time job. Be sure to go into specifics with this as well. Which sources of income will come in once per semester, and which will come more on a weekly or monthly basis?
Teach Them to Track Expenses
It’s highly important that your son or daughter learn how to track where the money is going as it is being spent. Show your child how to save receipts and track expenses in an expense log. This will help to make expenses more concrete and might make your son or daughter think twice before making a large, unnecessary expense. Your child will also gain a better understanding of creating balance in a budget, scrimping in one area to make up for a splurge in a different area.
Split Responsibility of Their Expenses
Every family approaches a child’s college years with a different financial plan in mind. For some families, it is the child’s responsibility to earn the money needed to pay for tuition and necessary expenses; in other families, the parents might cover tuition costs and basic expenses, while the child is responsible for everything else. Don’t forget to consider things like travel expenses for trips home, the cell phone bill, and car insurance as well. Set some firm groundwork that establishes who is responsible for what, so your son or daughter can plan accordingly.
Help Them Recognize Wants and Needs
If this isn’t yet a concept that your son or daughter has fully grasped, now is the time to teach this important lesson. In any budget, there are basic needs such as housing accommodations, electricity, groceries, and transportation costs. Then, there are expenses that are better classified as “wants,” such as eating out, going to a movie with friends, and the occasional splurge on clothing. Help your son or daughter determine the difference between needs and wants, and teach him or her the importance of covering basic needs before wants.
Set Goals Together
Is your son or daughter considering investing in a new laptop in the near future, or planning a vacation with friends for next spring break? Teach him or her how to set financial goals, setting aside small amounts of money at a time to save up for something big, rather than looking for the resources necessary to cover costs when the time comes to make a big purchase.