Setting up your College Student for Financial Success
There's no greater joy for a parent than being able to send a child to college. Helping your children earn a higher degree sets them up for a more positive future, with greater chances of landing jobs and advancing in career fields. A 2014 study cited by US News & World Report found that millennials, aged 25 to 32, experienced a difference of $17,500 in median annual earnings for a full-time job between those with a college diploma and those with only a high school diploma, with the boost favoring college degree holders.
When your children leave college though, it is imperative they understand the value of money. No matter how good their first job is, a poor relationship with money can undo all of the positivity that comes with a new job and a regular paycheck. Here are the steps you can take to set them up for success financially in the future.
Help Them Create a Budget
A budget does not seem sexy or fun, but it can help young college grads stay on top of their money. It is easy to forget how much you are spending and how much you actually earn. A budget will help your college student maintain focus on their income and expenses.
Teach Them Want vs Need
Another major step is teaching students the difference between items they want and those they need. Clothes, food, toiletries, and a roof over their head are really the only items that your student needs. Going to the movies with friends, ordering the latest smartphone, and purchasing the fancy, name-brand clothes are all wants. Yes, everyone deserves a little fun and should have new clothes, but they do not need to be out every night of the week or wearing the latest brand lighting up social media.
Checking & Savings
Set your children up with a checking and savings account while they are in college. Make sure paychecks, or money from you goes directly into the checking account. It might also be a good idea to establish automatic transfers each month from checking to savings to help them save money without thinking about it too much.
Help Them Understand Credit Card Abuse
Using credit cards is a great way to build a solid credit score, but overuse can quickly lead to financial ruin. While stories about rampant credit card debt might feel like something that happens to others, the reality is that credit card debt, often the result of abuse and overuse, is a serious problem in the US. The average American has a credit card balance of $6,375 and total credit card debt surpassed $1 trillion in the US last year.
Loans & Financial Aid
Loans and financial aid are a great way to pay for college, and if you cannot afford to pay for your child’s education in full, these outlets can help bridge the gap. However, make sure they are aware of who is responsible for those bills when they come due after college is completed. Paying off loans, in particular, is critical to avoiding debt after school.
Smart with Money in College
Show your child how to stretch their money while they are in school. There are cheaper textbooks available in the form of used textbooks, used furniture to decorate dorms or apartments. Whenever possible, buy used to help cut costs.
Stay Involved and Help Them Learn
Do not allow yourself as a parent to become removed from their life financially while they are in college. You can help your child better understand finances by remaining active in their life, and all it takes is check-ins from time to time.
Explore Jobs in College
Encourage your child to find a way to balance work and study in college with a part-time job. Not only will it provide them with a good life lesson for use down the road, but it can also help offset some of the costs for college by bringing in a small income while spending money on tuition, room, and board.
Start Investing, but Again, Remain Involved
Finally, you can start your child young with lessons in investments. This encourages them to save money and look toward the future, but do not simply allow them to make their own decisions when it comes to how and where money is invested. Stay involved to help drive home any lessons that can be learned.
Hughes Warren’s financial advisors can also help you put your student on the right track to financial success.