If you have a high school senior in your home, you may feel relief that she is on the cusp of graduating. Perhaps you are waiting on college acceptance letters, or perhaps he has heard he was accepted to the school of his dreams. Chances are, your child will be heading off to college in the fall. However, besides sending them off with creature comforts to help them navigate the new world of college, you should also prepare them financially for living on their own.
Many high schools no longer offer classes on how to manage personal finances. As a parent, it is your job to educate your children on important personal finance lessons:
Choose a credit card carefully. If your child is going to apply for a credit card in college, she shouldn’t apply for the one that visits campus and offers a free t-shirt. Rather, you and your child should make the decision about what credit card to apply for together. The best credit cards for college students often offer cash back in areas where college students typically spend such as gasoline purchases and entertainment. In addition, the card should offer a relatively low credit limit.
Don’t spend more than you need to. Many college students experience freedom for the first time when they go away to college, and as such, they often overspend and make other poor choices. While it is important that college students enjoy all college life has to offer, it is also important that they don’t live above their means and create a debt load that can be difficult to pay off once they graduate.
Be wary of student loans. Taking out student loans is often necessary to afford college. However, many students spend more than they should on living expenses and are saddled with tens of thousands of dollars worth of student loan debt. Sit down with your child and show him how much he will pay per month on student loan debt once he graduates, how many years he will be paying, and how much interest he will pay over the life of the loan.
Going away to college is an important step to adulthood for many teenagers. However, to succeed and get on the right financial path for the future, you as the parent need to teach them a few financial lessons before they go. Ideally, you will have been teaching them about personal finance during their childhood and high school, but if not, it is never too late to sit down with them and help guide them in their financial future.