When your teen leaves the nest and heads to college, they are embarking on an exciting, independent next chapter in life. But are they ready to face a new financial reality after unpacking the dorm room and exploring campus?
As your child prepares for college, consider the financial lessons you want to impart before they strike out on their own. By stating important conversations about money now, you can be confident your child is equipped to make sound financial decisions that lead to a lifetime of success and prosperity.
Consider talking through these topics with your teen before they head to campus:
- Budgeting basics. Hopefully, your teen has watched as you’ve modeled good financial behaviors over the years, including keeping a budget to track expenses. A basic spreadsheet can go a long way in helping teens keep track of fixed costs, like rent, and variable costs, like food and shopping.
- Saving for a rainy day and other big-ticket expenses. If your teen is working while in school, it may be tempting to pocket extra cash for a dinner out or a shopping trip. While there’s nothing wrong with the occasional treat, remind your child about the importance of establishing an emergency savings fund for big-ticket items like a new laptop or a spring break trip that won’t be paid for by mom and dad.
- What credit can (and can’t) do. Encourage your child to start building good credit early. Talk about the dos and don’ts of credit cards, including the importance of always paying bills on time and avoiding carrying a balance. For teenagers who can’t get approved for their own credit card, NerdWallet offers a few tips on other ways to start building credit early.
- The long-term impact of student loans. Sit down with your teen and walk through the different options available for financing their education. Include them in the FAFSA process; fill out the forms together, and calculate what their loan payments could be after graduation. A school that requires a six-figure loan to cover tuition could translate into mortgage-size monthly loan repayments after your child graduates. Help your teen decide on a school that fits both their educational and financial goals.