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Teaching Your College-Age Child About Money

Now that your child is older and about to leave for college, it's time for you to make sure that they have enough financial knowledge to manage money while they are away.

Lesson 1: Budgeting 101

Your child may already understand the basics of budgeting from having an allowance or a job. Now as they are about to leave for college, a "real world" budget is needed. Here are some ways you can help them plan and stick to a budget:

  • Help your child figure out what income will come in and the schedule for when to expect that income.
  • Make sure your child understands the difference between needs and wants.
  • Determine together how you and your child will split responsibility for expenses.
  • Warn your child not to spend too much too soon.
  • Include entertainment expenses in the budget, and encourage your child to stick to the agreed upon limit.
  • Show your child how to track expenses by saving receipts and keeping an expense log.
  • Encourage your child to plan ahead for big expenses.
  • Caution your child to monitor spending patterns to avoid excessive spending, and ask them to come to you for advice at the first sign of financial trouble.

Help your child understand that a budget should remain flexible; as financial goals change, a budget must change to accommodate them.

Lesson 2: Maintaining a Bank Account

It's essential to keep accurate records, especially of ATM or debit card usage. Show your child how to balance a checkbook on a regular (monthly) basis. Most checking account statements provide instructions on how to do this.

Encourage your child to open a savings account too, especially if they have a part-time job during the school year or summer. Your child should save any income that doesn't have to be put towards college expenses.

Lesson 3: Building Credit

A credit card can provide security in a financial emergency and, if used properly, can help your child build a good credit history. Building a good credit history takes time and the sooner your child can work on that the better. A good credit history can help make it easier for your child to rent an apartment, get a car loan, or even find a job.

Here are some tips to help your child learn to use credit responsibly:

  • Advise your child to get a credit card with a low credit limit to keep credit card balances down.
  • Teach your child to review each credit card bill and make the payment by the due date.
  • If your child can't pay the bill in full each month, encourage them to pay as much as possible.
  • If your child continually has trouble meeting expenses, they should review and revise the budget instead of using a credit card.

Finally, remind your child that life after college often involves student loan payments and maybe even car or mortgage payments. The less debt your child graduates with, the better off they will be.

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