If your child is heading off to college this fall, there’s a lot to do to prepare for the big move and get her ready to tackle the personal finance challenges she’ll soon face. Take the time to teach your freshman the tools she needs to start college on the right financial foot. Here are 5 tips to impart:
Cover Unexpected Costs
Tuition and housing are expenses you and your new college student should know in advance, but there are a variety of other college costs to consider. Books and supplies can run a couple thousand dollars. Some student organizations and clubs cost money to join. There are travel expenses to think about, as well as the costs for a meal-plan, eating out and entertainment on and around campus. Make sure your child is aware of these potential costs and help her explore ways to keep them low, such as:
- Utilizing Student Discounts – Many local businesses and services near your new freshman’s college campus will offer student discounts that can help her save during the first year. You can also find many online retailers that offer discounts, including Apple, Amazon and Microsoft.
- Finding Part-Time Work – Your new college students may scoff at taking a job in college. But a quick explanation about how much money she could earn might change her mind quickly. For example, working a job for just 10 hours per week at $10/hour, over 9 months of school, would earn her $4,000 per year. In four years that’s $16,000 in gross income.
Create a Budget
A budget is an essential component to managing finances, so definitely spend some time with your child and help her map out any college income and expenses. For income, include money you’ll provide, income from a job, and any student loans, grants and other types of financial aid money that will be available. For expenses jot down rent, utilities, groceries, entertainment, dining, books and miscellaneous items. Teach your college freshman how to categorize these expenses so she has a good understanding of what her money is being spent on, and what can be afforded given her income. Organizing finances on a budgeting apps are helpful tools for showing your child how to handle money. And she can keep using the app while she’s away.
As an experienced budgeter and parent, it’s also a good idea to impart some smart money choices based on your child’s preferences and habits. If your kid loves going to concerts and other big social events, mention how she can have those experiences at college for less, like attending free outdoor concerts, watching a free film night at the school union, and going to city-sponsored and student run events, instead of buying tickets for Lady Gaga.
Chances are your child will overspend now and again thanks to her newfound freedom. Your freshman has been used to living off the money you’ve provided for 18 years, after all. But by offering some lessons and establishing some ground rules, she may think a little harder about where her money goes and why it’s important to stay on budget.
Apply for Scholarships and Grants
Encourage your child to apply for grants and scholarships. Make sure she fills out the Free Application for Federal Student Aid (FAFSA) each year she’s in school. The federal government will use the information on the form to determine whether or not she needs financial aid. Certain sites allow your child to be matched with thousands of scholarship opportunities. The more applications your freshman submits, the better the chance she has to get one. You should also emphasize that getting good grades in college may lead to academic scholarships from the school she attends. Some schools offer grants to students in certain majors, too.
Minimize Student Debt
If your child needs to take out student loans, make sure to talk to her about how to spend the amount borrowed. The money received isn’t free and should be for school items ONLY – tuition, housing, books and food plans. It should not be used to fund a party lifestyle on campus. Teaching kids to use their student loans for books instead of kegs will help curb temptation and prevent her from paying interest on purchases that aren’t necessary. Although student loans aren’t really due until after graduation, let your child know she can start paying them down while in school. Taking a part-time job is a great way to reduce debt and minimize long-term interest payments.
A new college student will likely be immersed in studies and social activities at school, but it’s a good idea to remind your kid to keep an eye on her personal and financial information, and take precautions to prevent fraud. If someone steals your child’s credit card or other sensitive information, it can create months of financial problems. To help prevent this, have her sign up for a free credit monitoring service to keep track of the information on her credit reports. If something looks off, it should be reported immediately. Your student should also get in the habit of checking her online banking accounts regularly to look for any unauthorized transactions. The sooner she takes action after seeing one, the less she may be responsible for, especially on a checking account. Finally, remind your child not to give out information easily. Your student must be careful when sharing sensitive information like a credit card number or Social Security number to pay for things online or setting up an account. Tell her to always use secure sites and never to make purchases on public wifi.