Your final financial prep
Knowing your child has their finances in order before they leave for school will help to ease some anxiety.
Be prepared
Once your teen has made the decision about where to go to school, you two can sit down together and make a plan. The school may be able to give you an idea of the overall costs of campus life, including tuition, books, housing and entertainment costs. You can also speak to friends or relatives who have children already in college to get information about budgeting and expenses that may not be on your radar.
Credit cards: Proceed with caution
Take this opportunity to teach your teen about the essentials: interest rates, cash advances and finance charges on late payments. And make sure they understand the dangers of charging up a card with dinners out or a shopping spree.
Once your teen understands how to use (and not use) a credit card, you can explain the importance of building a good credit score and how a bad one could affect everything from getting an apartment to landing a job.
To help protect their credit score, your teen can set up automatic payments to make sure bills are paid on time. If they keep their credit limit low, they can build up their credit score and learn some personal discipline.
Continue the 529 education savings plan
Many freshmen start their college experience with an open mind when it comes to careers. However, if your future student already knows what they want to do, they are in a great position to go for it. If that career involves continuing education, make sure to consider continuing to contribute to that 529 savings plan, which can be used for many kinds of education. It’s also a great opportunity for your teen to contribute to their own future and learn about the advantages of investing. As you probably know by now, starting small and starting early can make a big difference.
Know the student loan basics
Many students will be responsible for paying back a student loan. If this is the case for your child, they should have a clear understanding of what that entails.
Explain the types of loans, the interest rates and when they will be expected to start making payments. Stress the importance of avoiding heavy debt just when they are getting started.
Got leftover cash? Leave it alone
Your child’s student loan amount may be more than enough to cover essential educational costs, like tuition and fees. If there’s extra spending money, they should spend it carefully. It could go toward transportation for home visits, for example, rather than a shopping spree.
One way to keep your teen on track is to set up automated monthly transfers of set amounts from the student loan money to a separate account. If there’s less money available, they will be less likely to overspend.
If your child is picking up a paycheck from a part-time job, it’s a good idea to designate a percentage of that for savings. Building a reserve of cash can be empowering. Think how good they will feel when an unexpected expense comes up and they’ve got it covered.
Be a trusted resource
Even though your teen will be on their own when they get to college, let them know that you’re there whenever you are needed. Keeping the lines of communication open will help your child feel comfortable discussing finances with you. That way you can help them catch any financial missteps when they’re small, and they can rest assured that you’ve got their back as they start an exciting new phase in their life.
