It’s natural to be worried about your child as they prepare to leave for college. After all, you want them to have everything they need to succeed as they face the expected and unexpected challenges to come. That’s why this season can be a great time to refresh your student’s understanding of financial literacy, including the basics of budgeting, borrowing, and banking.
Gen Zs are highly aware of financial stressors and want to learn how to make financial health a pillar of their self care strategies. Fortunately, more students than ever are taking personal finance classes during their K-12 education; in fact, Tennessee is one of 27 states that sets financial literacy course requirements for high school graduation. This experience can offer a foundation that you can build on when helping to guide your student into financial adulthood, since financial literacy is a set of skills and understanding that will need to evolve with them as they get older and face new milestones.
Here are some tips to guide your conversations as a family before you send your high school grad off to college, to help minimize their stress and keep them focused on their courses.
Creating a Budget That Works
The concept of a budget is likely familiar to your student, but now is the time to begin exercising their money management muscles by learning to live by one. Sit down with your child and help them create a budget for the upcoming semester. You can use a simple pad and paper to list what money is available and what expenses they’ll expect to have; but for many students, a budgeting app they can access on-the-go may be more valuable.
Another important consideration when talking about budgeting is not only what they plan to spend but also what they hope to save. As your student’s year goes by, they’re sure to have their eye on specific goals such as a better laptop, a nice couch for their dorm apartment, or a school break trip. Help them plan for the pricier purchases ahead by demonstrating how savings goals can factor into their budgeting strategy.
Talk through scenarios with your student. What will they do if they go over their budget? What if there’s a nearby concert they want to go to last minute? How can they update their budget if they notice a new area of spending they need to take into account, such as transportation, meals, or subscriptions? Helping them think through these common hurdles will teach them to use their budget proactively so that it can be a tool to support them rather than hold them back.
Learn More: How to Set Your College Student’s Allowance
Living on Borrowed Money
College is a great time for your student to begin building their credit history. They can do so in a number of ways, including getting a student-friendly credit card for emergencies or making rent payments once they’re ready to move off-campus. One of the more common ways that rising college students begin to learn about borrowing money, however, is through student loans.
In addition to scholarships, grants, and federal aid, student loans are a common way that families help cover the cost of a college education. This kind of loan can be a significant financial commitment, so it’s important to teach your child about student loans work, how interest accrues, and their repayment options so that that they can be prepared to make an informed decision with you. To minimize the impact of student loan debt, encourage them to be conscientious about their college expenses and how much they may need to borrow for school.
Managing a Bank Account
An integral tool in helping your student succeed financially is a bank account, where they can deposit their paycheck from part-time jobs or internships, make withdrawals, and pay for living expenses. If your student doesn’t yet have their own bank account, consider helping them open one before they go to school. You could also set up a second account for them that’s linked to you or other family members so that you can easily transfer funds to them as needed.
Many bank accounts offer easy-to-use mobile features that can help your student practice their budgeting, saving, and more, making money management something they can do from anywhere, at any time. The more familiar your student is with banking, the more confident you both can feel as they continue their education, begin their professional journey, and make decisions about saving for retirement, investing their money, or seeking personal loans or mortgages. It all starts with knowing how to work with a banking partner.
Preparing Your Child for College
If your child is attending college this fall, they’re about to dive into a world of new things to learn and experience, including how to make independent decisions about their personal finances. Set them up for success by refreshing their understanding of the basics, like budgeting, saving, credit and lending, and banking. Doing so might not prevent all of the frantic calls and questions you’ll receive when a problem arises, but it may cut down on just how many you might get! After all, financial literacy isn’t something you learn overnight; it’s an ongoing process for you and for them.
