As a parent, watching your child graduate high school can be bittersweet. You’re filled with pride as you reminisce about all they have achieved and overcome to reach this point. Yet, you know they are about to embark on the next chapter of their life. For many, that’s heading off to college in the fall.
Before your child leaves the nest, it’s vital they understand how to manage their money responsibly. That includes knowing basic money concepts, such as budgeting, and utilizing financial tools like debit cards and mobile banking.
Use the summer as an opportunity to educate your child on the following financial topics.
Learning to Budget
Managing a budget is a crucial skill that everyone should master. It’s even more important for college students because money is typically tight, and student loans provide much of their income.
It often helps to create a mock budget with your child. Create a simple budget they can utilize throughout the summer. First, list their incomes like allowances, graduation gifts, or pay from a summer job. Then, have them track all their expenses and balance the budget weekly.
The more comfortable your child becomes with budgeting, the less likely they will be to make financial mistakes.
Managing a Checking Account
Most people access their checking accounts daily. Whether it’s paying bills, buying groceries, or dining out at a restaurant, the majority of transactions stem from this account. That’s why it’s essential to understand how these accounts work.
If your child doesn’t already have a checking account, stop by to open their account. Then, review the basics of a checking account – including payment times. For example, not all payments are deducted from your account immediately. If you pay a bill in the morning, that transaction might not show up in your account for 12 to 24 hours - several days if paying by check.
Teaching your child to track their expenses and update their budget regularly will prevent them from overdrawing their account.
Accessing Cash with an ATM or Debit Card
While digital payments are quickly becoming the norm, you never know when you’ll need quick access to cash – especially as a college student. If your child has a checking account, inquire about opening a debit card. Otherwise, they can use an ATM card linked to their savings account.
When your child arrives at school, locate surcharge-free ATMs on or near campus. You can also teach them the cash-back trick: To avoid ATM fees, they can use their debit card to make a purchase at most major retailers and grocery stores. Then, they can request cash back without incurring any ATM fees.
Balancing with Digital Banking
Keeping tabs on your money is essential in the world of digital payments. And, yes, there’s an app for that! Between online banking and our mobile banking app, your child can access their accounts anytime, anywhere.
First, make sure they can log into both platforms. Then, walk your child through all the features, such as monitoring their account activity and transferring money between their savings and checking accounts.
Teach your child to perform a “daily money minute” where they sign into their account, review transactions, and log any expenses on their budget.
Using a Credit Card
Not everyone is ready for a credit card when heading to college. That’s perfectly fine. But you want to ensure your child has access to money in emergencies. An easy way to accomplish this feat is to list your child as an “authorized user” on your credit card.
Authorized users will receive their own credit card that is linked to your account. Any purchases they make will be your financial responsibility. You’ll want to set rules on when they can use the card, and some creditors will allow you to set spending limits. But it provides peace of mind to parents knowing their children have emergency funds.
A perk of being an authorized credit card user is that your child will start building their credit history and score.
Building Good Credit
Building a good credit history is one of the most important financial lessons you can teach your child before they head to college. Peer pressure surrounds young adults, and this includes financial peer pressure. College is when most young people get their first credit cards (it’s a quick and easy way to join their friends on spring break!).
However, with proper guidance, they can learn ahead of time that financial decisions can have a long-lasting impact. For example, a good credit score can make it easier to lease an apartment if they plan to live off campus eventually.
We’re Here to Help!
Your child likely has a to-do list a mile long of things they want to accomplish before leaving for college. Make financial education a key part of that preparation. The lessons you teach today could have a significant and lasting impact on your child’s future.
If you’re interested in opening an account for your child or have questions about helping them manage their finances, we’re ready to help. Please give us a call today.