What\'s in Your Kid\'s Wallet? Prepare Students to Live on Their Own

 Geoff Williams
  3rd-Sep-2018

If you're the parent of a college student, you've likely spent years concerned about saving enough for your kid's education. But now that your child is officially heading off to college, you're probably worrying about whether he or she can comfortably afford the day-to-day expenses of student living. You may also be wondering if your child has an understanding of basic money-management principles. After all, even if tuition and room and board are paid for, there are extra late-night pizzas, Uber rides and textbooks to account for.

If you're concerned that your child is unprepared to experience a new level of financial freedom in college, get your son or daughter's finances on track with these expert-backed steps.

Teach your kids basic money-management tips before they leave for college. Ideally, parents will discuss finances with their kids well before they head to college, says Frank Resnick, a retired college administrator based in Hartford, Connecticut, who is a college financing consultant. But if you haven't taught your children budgeting strategies and other fundamental money principles, then you'd better start now.

"Understanding basic banking – saving, checking and credit – is a must. There are plenty of available online tools or courses," Resnick says. He recalls the financial patterns of students when he was the chief financial officer at Central Connecticut State University from 1977 to 2004. "Too often, I would see a student take $10 from an ATM without thinking about the $1 or $1.50 fee," he says. "To them, it really didn't seem like much." But Resnick points out that those students were paying a 10 or 15 percent fee to access their own money.

And given that ATM costs are steep, it's even more foolish not to pay attention to ATM fees. To avoid such fees, advise your child to only use an ATM that's within his or her bank's ATM network.

Give your children a budget to follow. "They should be doing weekly and monthly budgeting – figuring out what expenses they will be responsible for, like their cellphone bill, car insurance and food," says Dave Geibel, senior vice president and managing director at Univest Wealth Management in King of Prussia, Pennsylvania. "There's an amount of money they need to attribute to that. They also need to be aware of large one-time cost items that could disrupt the budget, like an annual car insurance payment or a necessary purchase."

There could be a long list of items to account for in your child's budget. Even if you assume that room and board are accounted for, other costs to consider might include transportation expenses, clothing, school supplies and miscellaneous costs like entertainment.

Still, your child likely won't know how much the day-to-day college costs will be until he or she starts school. That's why he or she should use a spreadsheet or Mint.com to track spending, advises Mark Kantrowitz, the publisher and vice president of research at the website SavingforCollege.com. Other free budgeting apps your child may want to consider include PocketGuard, Wally and Expense Keep. Eventually, your child will have a good sense of how much daily college life costs – and will start to develop some good budgeting habits to maintain after college.

Weigh the benefits and drawbacks of a part-time job. While collecting extra income from a part-time gig may seem like a smart financial decision to your child, keep in mind that a demanding job can take a toll on his or her long-term financial health.

"Students who work full time while enrolled are half as likely to graduate within six years as students who work 12 hours or less a week," Kantrowitz says. "Every additional hour beyond 12 takes too much time away from academics."

If your child does have to work, it's a wise idea to encourage him or her to find a job on or near campus, so time isn't wasted commuting to the job. And if your child is a rising junior or sophomore, he or she might consider becoming a residential adviser for a dorm, which generally offers room and board in exchange for supervising and mentoring the students on the floor.

Consider getting your child a credit card. Opening a new credit card account can be advantageous to establish healthy credit habits. However, keep in mind, those under age 21 can't apply for a credit card without proof of independent income or a co-signer.

As an authorized user, your child may be able to build credit history, though this depends on whether or not the credit card purchases end up being reported on his or her credit report. That said, if you sometimes miss payments and your kid is an authorized user, you could hurt your child's credit.

On balance, opening up a credit card account can be a good strategy for managing expenses, says Paul Pittman, a financial advisor and certified financial planner with the Preferred Client Group in Raleigh, North Carolina. But before giving your child a credit card, make sure you select a card "with a national bank with branches in both the college and hometown, with a preset spending max."

And remember, "The credit card needs to be paid off every month," Pittman stresses. If your kid is the one doing the spending, you're probably the one paying it off every month, which is why the preset limits and proper budgeting is critical. You may also want to discuss any exceptions, such as only using the card in the event of an emergency.

Remind your child that doing well in school translates to a greater value after college. It's common sense that your son or daughter should apply him or herself in school. But your child may not realize that if he or she drifts through college and has lackluster study habits, college can be more expensive, says Adrian Ridner, CEO and co-founder of Study.com, a website for students researching schools or careers or for those who are interested in online education.

"Earning a degree is already expensive enough, so students need to make decisions that won't increase the cost of college," Ridner says, pointing out that changing majors after two or three years of college can potentially translate to an increase in tuition costs if it extends the graduation date.

If your child gets bad grades, tuition costs can also pile up. "Your child needs to understand that falling behind in their courses and failing them can result in spending more on a degree," Ridner says.

With that said, college can be a pressure cooker without putting even more pressure on your son or daughter. But if your children spend their money and time wisely, it will be better for them in the long run, Kantrowitz says.

Views: 1549
Domain: Afterhours
Category: Parenting
Geoff Williams
17 October, 2018

How to Start a Profitable Business on Amazon

If you're launching your own company, you've likely considered leveraging Amazon, thanks to its robust infrastructure and far-reaching distribution network. And you wouldn't be al

Geoff Williams
23 August, 2018

Is a Life Coach Worth the Money?

You've probably heard of "life coaches" and "wellness coaches" – individuals who inspire people to shift their behaviors and habits, realize their potential and propel their

Geoff Williams
17 June, 2018