Your College Student’s Future Financial Success Starts With These 5 Steps
If you’re the parent of a high school senior or college freshman, money and spending have likely been hot topics of discussion this year. The stark reality is that college has never been more expensive. In the past four decades, college tuition has more than doubled, and students are borrowing more money than ever to earn their degrees. Equally sobering is the number of college students who don’t feel prepared to manage their money.
While your young adult might understand the basics of earning and spending, chances are they haven’t fully grasped the long-term implications of saving, borrowing and building credit.
But they can learn! This first year of college — which can be incredibly expensive as students set up dorm rooms, buy books and supplies, join clubs and pay tuition — is the perfect time to start. These first months on their own can be an opportunity to equip your student with the tools and knowledge to become financially literate and responsible.
To save you some time, we consulted the experts and came up with these five tips:
- Talk it Out. Communication is key. Talk with your child about the money they have available for college. Be honest and make sure they know the numbers — what you will pay and what they might be expected to pay. Agree to have regular check-ins to discuss upcoming or unexpected expenses.
- Create a Budget. It’s not really anyone’s idea of fun, but creating a budget is a must. Think of it as a map that is critical to reaching your destination. A monthly or weekly budget also helps your student understand the concept of living within their means.
- Track Your Spending. Guess what? There’s an app or two for this. In general, they are easy to use, can cover a wide array of accounts, and some allow you to set budgeting goals. Just make sure your student understands that these apps represent real and actual dollars before getting started. You could also go old-school and use an envelope system, using cash for food, gas, entertainment and other things.
- Build Credit — Carefully! Working toward having a good credit score is incredibly important and will benefit your student in many different ways after they graduate from college. Credit scores have an impact on everything from renting apartments and buying cellphones to being approved for other credit cards. Student cards can be especially helpful and often come with student discounts and perks. Whatever card you start with, make sure your student is aware of its interest rate and the monthly due date and plans to pay it off each month.
- Consider an On-Campus Job. If your student wants or needs to earn extra money while in college, a position on campus is typically more flexible and easier to fit into a busy class schedule. The extra money they earn would also be good seed money for a savings account.
And remember — if you have younger children still at home, the Florida 529 Prepaid Plan and Florida 529 Savings Plan are great ways to set aside money for their college expenses. Let them in on your long-term savings goals with those plans, and let them help you track the growth as an age-appropriate early money management lesson.