The suitcases are packed, the dorm room decorations bought, and now it’s time to send your adult kid off to college. It’s both exciting and scary. Exciting to see the young adult your child has grown into, scary to know she is going to be living on her own without you by her side anymore.
If you haven’t already, one of the best send-off gifts you can give your college-bound kid is some sound advice about money. But how do you have that all-important talk and have it stick?
Read on for a few tips about making sense of college spending.
- Ask questions and listen. Start by asking your student what he thinks he will be spending money for each week or month of college. Listen carefully to what he says. If he doesn’t know, help him think through the possibilities and make a list. But listen. What he says will tell you how much he understands about budgeting and where the money will come from and go to.
- Once the list is done, go through and prioritize – what are the essentials and what are the discretionary items. Label which items you will pay for and what your child will need to pay for. Are some items, like room and board, being paid for automatically through electronic fund transfers? Be sure your student understands exactly what you can afford to pay for and what you cannot afford to pay for.
- Who decides? Decide if you are going to allow your student to spend the money as she sees fit or if you will have a say about how it gets spent. If your child has to work for her spending money, then she should decide how to spend (or save) it. If you are providing it all, then you should have some say. Having her earn some and you provide some is the best of both worlds – it helps her learn to earn, but you still provide a safety net. Talk about what you each want. Perhaps you provide the money during freshman year and after that, she works part-time.
- Getting the money. Decide together how and when spending money will get sent to your child. Will you write him a check each month or will money be transferred into his bank account from yours? Will he need to get a job to help make ends meet?
- Talk about credit and debit cards. Will she have one or not? Will you provide a card for your student or will she apply for one of her own? Either way, discuss credit card/debit card safety – keeping that PIN and card private and in a safe place. Talk about how the card should be used – only for emergencies? What constitutes an emergency? Should she call you before using it? This is a chance to let your child make some decisions for herself. But if you co-sign on her card, keep tabs on her spending. Her credit card debt can affect your credit rating.
- Talk about discretionary spending. What will be his spending limits – total budget? Will he have the choice as to how that total budget is spent or will some money have to go for certain items?
- Open a local checking account. This is a good time to help your child choose a bank or credit union and set up a checking account in the town where she will go to school. Talk about minimum balances and fees and interest rates. Be sure she understands the consequences of going below minimum balances and fees for withdrawing cash from non-bank ATMs.
- Student ID/debit cards. If your child’s college ID card also serves as a pre-paid debit card on campus, talk about the temptations that poses. Going by the student union and swiping that card ten times a day for snacks adds up quickly.
- Teach your kid to cook. Cooking at home will save a lot of money in the long run. Teach your kid how to make a few easy meals at home. Those skills could end up getting them work later as well.
- Be supportive, but give him some rein. Your kid is growing up. Budgeting and learning about money is part of that. He’ll make some mistakes, to be sure, but that’s okay. Use those mistakes as learning opportunities. If he overdraws on account, have a conversation about it, but let him figure out how to prevent it from happening again. It’s not the end of the world.
Talking with your college student shouldn’t be a one-time thing, either. Have conversations regularly (just don’t make it the only thing you talk or text about each time you communicate with him) throughout the year. Every time you help him spend and save wisely you’re teaching him not only how to deal with college, but how to deal with life.