Going to college is a complicated time in your child’s life. The freshman year may also be the first time your college student is managing their own money and expenses. As a mom or dad, there are some essential financial decisions to help your college kid with before your teen leaves for school.
How to Use a Credit Card
Help your child understand that credit cards are high-interest loans and that the student must make payments on time. Students should use credit cards for routine expenses like gas and groceries, and not to finance expensive spring break trips. Missed payments lead to super-high interest rates and late fees, making it harder to pay off credit card balances.
Teach students the consequences of graduating with too much credit card debt and ruining his credit score before he even graduates. Note that if your child is under 21, you’ll have to co-sign for the card — so you’ll be on the hook for the bills. Consider making your teen an authorized user on your account instead and have the bank set a spending limit.
Find the Right Student Loan
Paying for college can be a substantial financial burden. Student loans make financing an education more accessible. However, it’s essential to choose the right loan for your child’s needs. Review the different types of loans with your college-bound teen. To make the decision easier, look for websites that compare private student loan options side-by-side on the same page.
Choose an affordable student loan that your child can pay off once she graduates based on her anticipated career path. Compare rates and payments. Make sure to apply with multiple lenders and base your budget on actual rates, not estimates.
Take a Car to School
If the school allows, allowing your student to bring a car to college is convenient. Maintaining the vehicle can also drain your college kid’s budget quickly. Review all expenses including gas, insurance, and routine maintenance. Make sure your teen knows when to change the oil and check the brakes.
Don’t forget to mention budgeting for emergency repairs such as flat tires and unexpected breakdowns. Also, the college may charge an annual fee to park a car on campus.
Set a Monthly Budget
Car expenses are just some of the costs college students have to finance. Whether your teen plans to work part-time or will live on savings, show your kid how to create a monthly budget. Talk about using a meal plan and buying snacks at a grocery store (instead of eating out) to save money.
Include the cost of books and supplies for any classes your child is planning to take each semester. Use a budget spreadsheet to teach your child how to make his money last the entire school year.
As teens move on to college, make sure they have the information needed to make sound financial choices. The decisions your college students make now will follow them long after they graduate. Talk about setting a budget, finding a college loan, and the pitfalls of using credit cards.
Which tips have you found helpful for preparing your child to make adult decisions?
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