You want your child to get off on the best possible financial footing when they hit college — experts weigh in on how to make it happen.
Note: This story is sponsored by College Ave Student Loans
As your child enters their senior year, it’s an exciting time for the whole family. There are so many last “firsts” to document, along with prom, sporting events, fall break, spring break, and yes — the all-important college decision. In many ways, senior year is the bridge between childhood and adulthood, and with all the aforementioned activities jammed into the last 12 months of living under mom and dad’s roof, it’s easy for some conversations to be put on the backburner. Namely, important financial conversations that involve the next four years of money decisions. These conversations should be moved to the top of every family’s to-do list.
Why? Now is the time to tackle important money-related topics and action items with your high school senior, so he or she can fully embrace financial independence and get the most out of the investment being made for their college experience. We checked in with experts for a rundown on the top five actionable financial steps to help your child get off to a great start in college.
1) Discuss the financial investment of their college experience.
A college education is likely to be one of the most significant investments you and your child will ever make. “Take the time to talk over what they can do to make the best of their college experience and the magnitude of the funds being spent. Sure, this is about getting good grades and showing up to classes, but it’s so much more,” says Marsha McClary, founder of ROI of Life, a boutique financial life planning firm specializing in women’s needs.
Specifically, your child needs to understand that every tuition dollar you (and they) are spending is an investment in their future. They need to understand the need to live within the budget they’ve been given, which will mean doing things like cooking at home whenever possible, purchasing used textbooks, and not skipping class — once those tuition dollars are paid, every skipped class can technically be considered a loss.
2) Talk about financial life skills in a way your child will understand.
Consider setting up a few lunch or dinner meetings with your teen to discuss their financial lives, McClary suggests. Look to cover topics including minimizing debt, having an emergency fund, saving and budgeting, and maintaining their security and confidentiality when sharing personal information online, she suggests.
You can start these dialogues with your child in a way that will be exciting to them. For example, have they chosen a dorm or apartment that will fit their lifestyle and budget? Where do they want to live after they graduate? “When you ask financial questions in a way that opens the door for your child to see the bigger life implications that are associated with money decisions, it makes it easier for them to get into the dialogue, and have a vested interest in having — and sticking with — a plan,” says Joe DePaulo, co-founder and CEO of College Ave Student Loans.
3) Show your child the value of saving.
Start by helping your child to think about every expense in their life as an investment, and to determine if that investment satisfies a need or a want, says Arielle L. Jacobs-Bittoni, CFA, Chief Wealth Strategist at Refresh Investments in Santa Monica, CA.
“For example, if they spend money eating out with friends, that’s a want, versus buying textbooks, which is a need. Once their expenses for their needs are met, then they have a choice and they should think wisely how they spend the rest of their money,” Jacobs-Bittoni says. “A portion can be for those wants to enjoy life, but they should also carve out a portion to save for their future.” Parents should discuss with their child what amount they believe should be saved for the future. Certainly, it can start small, but it’s important to create that habit now and ask them to make that commitment to themselves. Let them know they’re not alone — share with your child how saving has impacted your family’s life, and use examples like a new car, a new home, vacations, or other meaningful purchases, she suggests.
4) Minimize student debt.
“Recent graduates are often overwhelmed by the debt they accumulated in college — debt that can be overwhelming and reduce the joy of a new career,” McClary says. For example, a $50,000 loan paid back monthly over 10 years at 6% interest is a $555 monthly payment — that’s huge when you’re living on a starting salary, and it can influence every life decision you make, including where you live, who you live with, what job you accept, and so much more.
If your child is planning to take out private student loans, but they’re not sure what interest rate to expect, they can use a pre-qualification tool, like the one at College Ave Student Loans. These tools can tell you if your credit pre-qualifies you for a loan, and what interest rates you can expect, all before you apply. “If you’re looking to keep borrowing costs as low as possible, shop for a lender that offers you a good rate, as well as multiple repayment options to help you find a monthly payment that fits your family’s budget.,” DePaulo says.
Also, make sure your child fills out the FASFA (Free Application for Student Financial Aid) carefully to ensure exposure to all grants and aid that might be available, McClary says. And if your expectation is that your child will work their way through college to minimize debt, make sure you’re both on the same page about that, including the number of hours they’ll work, the kind of job they’ll have, and what their earned dollars should cover.
5) Take advantage of online tools and apps for easy access and automation.
If your child doesn’t have a bank account, getting them started is easy these days. Look for an online bank that offers a debit card your child can use on campus with no fees. Most bank accounts enable parents to set up spending limits, alerts, and monitoring, McClary says, so you’ll be able to track their spending as well.
Also, if it’s been a while since you scoped out the money management app landscape, you might be surprised. Apps such as Venmo, Zelle, and Splitwise have truly changed the way people manage their money, and handle the joint expense of things like parties and nights out. Also, free (or cheap) budgeting apps abound, including HerMoney fan favorite YouNeedABudget (YNAB), which can enable your child to see exactly where their money is going, and help them separate those needs and wants we mentioned earlier!
No matter what bank account or apps you choose, or how you broach these conversations, the most important thing for your child is that they’re more confident with their overall financial picture and that they have a grasp on basic money management skills before they leave the nest. They’ll rest easier — and so will mom and dad.
MORE ON HERMONEY:
- Despite The Rising Cost, College Is Still Worth It
- The Best Ways To Spend Your College Savings
- How Do You Know How Much Is Okay To Borrow For College
- How To Manage Having Two Kids In College At The Same Time
- How Do You Choose A Student Loan
- Everything You Need To Know About Borrowing Money For College
SUBSCRIBE: Looking for more financial insights delivered right to your inbox? Subscribe to HerMoney today!
Editor’s note: We maintain a strict editorial policy and a judgment-free zone for our community, and we also strive to remain transparent in everything we do. Posts may contain references and links to products from our partners. Learn more about how we make money.
