College can be a financially dangerous time for kids. It’s often the first time they are on their own, and the first time they may have to really handle money. Whether your son or daughter is still deciding where to attend college or whether he or she is already living in the dorms, when it comes to money, there is always more to learn.
Talk about money. Money is one of the few constants we have throughout our life, yet it is one of the least discussed subjects. And, the more that you talk about something, the less embarrassing or shameful it becomes and the more natural dealing with it becomes. Discuss issues like how you are going to pay for college or what you are going to do if you lose your job, as a family. Let your child understand that facing money problems is natural.
Don’t always bail them out. Kids need to learn from their mistakes. If you are always rescuing them whenever they get into trouble the only thing they will learn is that “mommy and daddy will help me when I need it.” You need to let them make their own mistakes and learn from them, no matter how painful it may be for them, and for you.
Stop and think. Kids need to be taught to use impulse control when it comes to their finances. You need to teach your children to stop and think before spending money. The sooner he or she learns this, the fewer problems they will face.
Budgeting. While kids are in college they aren’t really given an allowance but you will probably be giving them money to buy books, food and clothing. Sit down with your child and make a list of things he or she needs and things he or she wants and then help him or her to make a budget. This should help to keep spending in check. And, if they come back to you and ask for money, you can pull out the budget and ask what happened.
Contracts. Teach them to read contracts and to never sign anything without carefully reading it and having experts read it too. Your child may want to live off campus; this is a great opportunity to go over rental contracts. If your child wants a credit card, you can take this opportunity to turn a real life situation into a chance to learn about contracts.
Establish goals. Work with your children to establish goals. This will give them something to save and strive for—a purpose. It’s easier to know where you are going if you have a destination in mind. While it may be hard to think about goals while they are in school, teach them about investing and the magic of compound interest and get them excited about saving for the future.
Credit Cards. Credit cards get college students in more financial trouble than anything else. The new Credit Card Act should help but you still need your kids to understand how credit cards work and how quickly interest can grow. Sit down and write it out, show them on paper how much money they could end up wasting if they don’t pay their bills on time. Make sure you stress the importance of how this can affect them in the future. You might want to co-sign a card with a very low limit until you are sure he or she can handle the responsibility of a credit card.
Debt/Credit Reports. You need to demonstrate how debt and interest works and how quickly getting buried under a mountain of debt can be, a good way to do this is by using a credit card calculator. If someone sees that a $100 purchase can end up costing more than double and taking months to pay off he or she may thing more seriously before spending money. You also need to demonstrate the importance of the credit score and how it can affect purchases for years to come.
The importance of sharing and giving. If you give to charities get your children involved. Have them choose which charities to give to, and help them to understand the importance of doing good things for others. You don’t want your child to grow up to be stingy or greedy.
There are many tools that parents can use to help teach their college-aged kids about money, such as sharing a joint bank account, or loading up pre-paid debit cards that allow students to get familiar with using different forms of money without the potential of falling into debt.