When your child goes off to college it is often the first time they are financially independent. Even if you are giving them money to help out and support them, they are still making all their financial decisions on their own. This means that it is more important than ever to teach them financial management skills they can take with them throughout their college career and beyond. Budgeting will be the key to those management skills and here is some advice in teaching your college student how to budget.
Demonstrate to your child how to create and maintain a detailed budget. If you will be funding them, give them a set amount each week. Discuss with them real and perceived expenses. Consider if they are going to be working part time as added income and plan out a detailed budget so they are able to meet all of their financial needs.
Take advantage of today’s technology and your child’s tech skills. Encourage them to use an online system to regularly monitor their budget from their computer or smartphone. There are many useful budgeting tools out there on the internet.
Explain to your child that since they have very little income coming in, they need to be aware of where their money is going so they can meet all the necessary financial obligations. Have them understand there is a finite amount of funds and therefore a limit they need to be aware of on weekly and monthly spending. Explain the consequences of falling into debt and how easily debt can rack up if they don’t monitor their spending.
Getting them in the habit of budgeting now will lay the groundwork for future financial responsibility when they are truly on their own financially. So even if your child isn’t in college yet, start talking to them about budgeting and getting them on the right page before financial problems happen.
You want to give them independence, but as they are starting to become financially independent you need to be around to give them guidance. Consider a joint bank account, which will make it easier for you to give them money in times of emergency, and monitor their monthly spending. Having access to their online budgeting tool will help ensure that not only is it being used, but that it is being used properly.
If you don’t control how your child is spending, the independence will go to their head and they may develop bad financial habits that will lead to bigger problems in the future. Keep an eye on their spending and note when they are continuously asking for money out of budget. It’s ok to put your foot down and say no once in awhile.
You may be paying for your child’s education or you may be relying on loans, but showing them how much their education is costing per semester may help them take their classes more seriously. This will also help your child understand how much they should expect to pay back if they are taking out loans for their educational expenses.
If there is an extreme circumstance or emergency need for school you can give them extra money. But other than that, if you keep giving them money out of their budget, they are never going to learn the importance of the budget. If you have to give them extra money, consider it a loan from the next month’s budget allowance.
If they are frequently using cards, they are going to have a very hard time paying them off without a steady income coming in. This can lead them into financial problems in the future. Credit cards are great for building credit early on in life, but they can turn into larger problems if used too frequently. Consider only letting them use a credit card that caps out at $300 or $500 so they can be easily paid off if something goes wrong.
Every semester have a sitdown with your college student and discuss expenses, budgeting, and expectations of future expenses and income. Asses their spending habits and give them suggestions on how to improve them in the future.
Teaching your child financial responsibility while in college is one of the most important lessons you can teach them. Going over these financial tips with your college student can not only help them learn good financial habits, but it may even help you fine-tune your own.
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