As you send your baby off to college, this may be his first opportunity to manage his own money and make financial decisions. Give him a real financial education by sending him to school with a budget and some solid financial rules. You’ll see that this will create a bedrock of money savvy that will serve him his entire life.
A college budget that accounts for textbooks, housing and other expenses can reduce stress and overspending. Start by working with your child over the summer to make some legitimate estimates of how much books and supplies will cost. Have a serious discussion about what else you will help to finance (eating out, even though they have a meal plan? Transportation? Clothing? Spin classes?), and what you will expect her to pay for out of her own stash.
Then, make it real. Put the amount you agree to into her spending account and see how the first few months of school go. Of course, you’ll want to review this together to be sure that your original estimates were reasonable. That’s just like real life, isn’t it? The goal here is to help your child learn to live within her means and still enjoy her college years.
Choosing a bank for your child doesn’t need to be difficult – choosing the right one means low fees and ease of access. You’ll want to choose a bank that has lots of ATMs on campus, and has no fees for its checking accounts. I found it especially easy to get the kids’ accounts at my own bank so that I could move money between our accounts very easily, but, my kids went to school relatively local. You’ll want to check out the banks in the area where your child’s school is. Money magazine has done some of the leg-work for you in its Best Banks for College Students article.
Kids don’t use actual cash much anymore, so a debit card is a necessity. But, that doesn’t mean it shouldn’t come with some strings attached. Your child should know, at all times, exactly how much money is in her checking account and how much she can spend. This is easy these days with phone apps that can tell you your balance at any time. You may even want to turn off that overdraft protection so that she can’t make purchases that she doesn’t have the cash for (and avoid those high overdraft fees).
It is generally difficult for someone under the age of 21 to get a credit card, but, you can allow your child to be an authorized user on your account. Does your kid need a credit card? Probably not, but, it can go a long way for peace of mind when you know he is far from home. We found it useful when our son’s computer died and he needed to get a new one, pronto. Work with your child now, before you send him to school with your card, regarding exactly what the credit card is used for and when – i.e. what constitutes an emergency. And, it goes without saying, review your credit card charges monthly to be sure you are all on the same page. Most cards will even allow you to have alerts sent to your phone when the card is used.
College will bring a lot of changes for both of you – do some homework now to make this next move as smooth as possible.
If it’s time to get your portfolio on-track for financial success, schedule a call with me to start the discussion.