For most, college is the first foray into the world of money management. But sadly, the majority of students aren’t that well-prepared. A study by EverFi found college kids can’t answer a third of basic financial questions.
That’s a scary thought, considering parents send their kids off to school in charge of debit and credit cards, meal plan money, book purchasing, tuition and scholarship funds. Not to mention, this phase of life when young adults should be building credit and practicing good money habits for their future.
Since students often get zero real-life financial education in high school, it’s up to parents to begin the training. Before you send Jacob or Emily (the most popular names in 1999, 18 years ago) off to college, make sure they have a hefty amount of real-world money know-how. And if you have to send them money in a hurry, an app like Venmo gets cash to your kid in a jiff.
Hold an honest conversation about how much money they’ll have monthly, where it’s coming from — you, their job or a scholarship — and the need to set a budget and remain within those boundaries. This will help them avoid racking up credit card debt or overdrawing their debit account. Go over how tempting it can be to continuously splurge on extras like coffee and pizza when they’re on their own, and share tips about how you stick to your own budget when temptation calls. An app like Mint can make the whole thing friendly and (sorta) fun.
Kids are clueless about credit — and hey, so are many adults. Don’t pass go until your student understands interest rates, credit scores, late payments, the ins and outs of having a credit card and what it should be used for. Then, fork over some money management guidelines so they know $800 in late-night fast-food runs is not what the card is for.
Shop smart for books. Textbooks are a huge financial expense, with new editions costing hundreds of dollars. Bypass the campus bookstore, and opt for renting or buying online. Check out Chegg. And always (always!) resell used books.
Co-signing, even on an apartment rental, can have a negative impact to your kid’s credit score if their roommate splits and you can’t make the payment. A co-signed lease amounts to joint ownership on a debt, and it can derail their credit history. College students should carefully vet any apartment leases or rental agreements and sign only for themselves — not friends. The app Rent Share is a great way for roommates to split the rent.
If students are working while in school — or even just during breaks — it’s never too soon to learn to put some money aside. Getting into the savings habit early will only help them with money management in the future. Small amounts add up. The Digit app makes saving easy: It links with their checking account, finds a few bucks to spare every week and automatically saves it. Out of sight, out of mind.
With just a few money management lessons and some financial apps, you’ve got a college student who can not only recite poetry and discuss philosophy but also effectively handle their cash flow while away at school.