For a lot of kids, college is the first time they feel truly on their own. They find themselves solely responsible for getting to classes on time (no more snoozing that alarm!), figuring out meals, and dividing their schedule into work and play.
Money and finances can play a key role in students’ success in college and beyond, and many students find themselves less than prepared to juggle their new financial responsibilities. Perhaps they’re saving too little (if anything), so they’re not prepared for unexpected expenses. Or maybe they’re spending way too much without realizing it, which can create huge barriers to financial security.
By financially preparing your kids for college, you can teach them the value of money and how they can manage it so they are set up for success in the whirlwind of academics and life lessons that is college.
Good Money Habits for Students: It Starts at Home
Teaching your child good money habits starts with you. Kids learn by observation, so the best way we can teach them about money is to lead by example and illustrate what good money habits actually look like.
A huge part of financial education is being transparent and honest. Allow your student to be a part of your own financial process in small yet teachable ways. When they are exposed to good money habits, they can begin building those habits themselves so finances are not so intimidating when they go out on their own.
Allowing your child a peek into your own financial situation will help them begin to learn how money actually works and set a solid foundation for financial success in college. Shielding our children from financial responsibility because we think they are “too young” is not doing them any favors.
Encourage Your Student to Work a Job in High School
By helping your kids understand that money is earned and not just handed to them, you are not only teaching them a lifelong skill but you are also allowing them to make their own choices while still under your watchful eye.
There’s nothing like a first job to teach valuable lessons about money and help them start developing good money habits. When kids start to earn their own money, they learn both the value of a dollar and the value of their own time. When they do the work to earn their paycheck, they learn very quickly that it is much harder to spend your own money than someone else’s.
Emphasize the Importance of Saving
Encouraging your son or daughter to earn their own money is a great start, but that’s only one piece of the money equation. Having a conversation about different simple saving strategies—such as paying yourself first or setting up automatic transfers into a savings account—will give them a framework for how to build their savings and rainy-day funds.
Emphasizing the importance of saving is also a great opportunity to help them set goals for larger purchases that may come up (spring break travel plans, anyone?).
Saving is a necessary part of any financial plan, but it means delaying gratification and planning for the future—neither of which college freshmen are famous for. To help them exercise their savings muscle, give them opportunities at home to practice saving for things they really want or need before they go out on their own.
Teach Your Child to Budget
The summer or year before your child leaves for college is a prime time to teach them how to budget and show them how much things actually cost. Budgeting is a lifelong skill that will continually serve them throughout adulthood.
Budget by Example
Your child is quickly growing in independence and will soon be making their own decisions. They are closer to being an adult than a child (does that make you as weepy as it makes me?) and they’ll likely appreciate your openness and honesty more than ever.
Take the time to sit with them and show them what your budget looks like and how you divvy up your household’s expenses and savings goals. Discuss in detail how long it takes your family to save for different upcoming expenses and future goals and talk through some of your financial decision-making processes with them.
This is also a great opportunity to help them create their own budget. Budgets create financial freedom while teaching responsibility, and your soon-to-be college student may need help learning how to manage a budget so that it works in their favor. Being smart and responsible with your money is a hard lesson to learn especially when you realize you can’t do every single thing you might want to do.
Working together to create their budget helps create a visual of the inputs and outputs of their finances. They can see how much money they need to pay for necessities like rent, food, and school supplies and how much they have left to spend on things they enjoy. (From my personal experience with my son, Grubhub should absolutely be a budgetary line item…)
Be Transparent About the Costs of Going to College
Having the talk (nope, not that one!) about what exactly finances will look like for your teenager once they actually get to college is so important and the sooner you have it with them, the better. Sit down and discuss which areas you will be helping them with and which areas they are going to be solely responsible for.
Being transparent about where the money is coming from to pay for everything will only serve them and increase their confidence when it comes to their finances. Discuss how each semester is being paid for, when, and where the funds are coming from.
Be clear about what exactly their financial responsibilities will be. Are they responsible for any meals they might want outside of the dining hall? What about extracurricular activities like going to the movies or even sorority/fraternity fees?
Having an honest financial discussion with your child will ensure there aren’t many surprises once they are out on their own. Teaching them about student loans and how they work will make the sticker shock of paying them back much less dramatic.
Discourage Impulse Buys
I imagine everyone needs a little help with this one no matter your age group! Impulse buys can be the quickest way to trash your well-planned budget (looking at you, random Target runs!). Eliminating impulse shopping is not only helpful to your own wallet and personal finances, but it is a great example to set for your children.
Making impulse purchases is easier today than when any of us were in college. With Amazon, Instacart, and all the other delivery services our world has to offer, not only can these services be costly because they are so easily available to use, but they can oftentimes feel like the norm.
If your child hasn’t had easy access to these types of ordering services before, it could be a bombardment of temptations. They’ll need to be prepared and have a plan for if and how much they’ll use them.
When we teach our children to have restraint with their money, they will quickly learn that they have more funds for activities and things that are truly important to them.
Financially Preparing Your Kids for College: Let Them Fly
Maybe you’re a parent who’s been counting down the days until you have one less person in the house, or perhaps you would keep your child at home with you forever if that was an option. Either way, remember that you’ve been doing a great job all these years preparing your child for this moment.
As a supportive parent, you know how crucial it is for children to learn at their own pace while still knowing that you are there to answer their call and give them advice when they ask for it. There’s a lot to know when it comes to finances and the world of money. It can feel very overwhelming to a teen who is just stepping out for the first time, but teaching them the basics of good money habits is what’s most important.
Emphasize the importance of not spending more than they make and model those behaviors so they can see a good example of how to manage what they earn. If you are willing and able to have these conversations with your child, then you are well on your way to setting them up for financial success as they embark on an exciting new chapter of their life!
Build Your Family’s Money Habits with a Financial Partner
The moral of the story here is to let your children be a part of your own financial process. When we leave our kids to figure out money and finances by themselves, we are doing them a great disservice.
We want our children to go out into the world, make a difference, and be successful in whichever path they choose. Money is an inescapable part of this world and the more we can prepare and educate them, the better off they will be. We are setting our kids up for success in more areas than one by teaching them to be confident in their finances by understanding saving, budgeting, and financial responsibility.
College is a confusing, whirlwind of change. Good, bad, and everything in between. Let’s send our kids out into the world knowing they are prepared and can handle everything—especially their finances.
Need more tips on talking with your children about finances? I would love to speak with you. As a financial advisor with more than 25 years of experience in the industry, I believe that good financial planning is a generational endeavor, and our kids deserve to be included and educated when it comes to important financial decisions. To learn more, schedule a meeting with me today!
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.