As your college freshman begins his or her educational journey, there is a very important life lesson that often slips under the radar: Preparing them to manage their financial life.
Here are five tips your child can use as they take their first pivotal steps toward financial independent.
- Change Spending Habits into Saving Habits
Whatever money your child has, much of it will undoubtedly go towards books, and other college essentials, but that doesn’t mean it isn’t a good time to instill a strong habit of saving money. Whether they are involved in a work study, or receive an allowance, suggest that they start an automatic saving program and put 105 of their earnings straight into a savings account.
In order to explain the importance behind this type of savings program, schedule a meeting with your financial advisor and have them show how money can grow at a compounded rate.
- Understand the Important Difference Between Credit and Debit
Credit or debit? While debit cards can be helpful in the budgeting process, they don’t impact your financial future, and if your identity or card is stolen, or there is a financial breach, a debit card can be more difficult to deal with. Credit cards help to build credit, and create a credit history, but generally, you need to be over 21 with a proof of income or a co-signer in order to get one.
There are, however, numerous credit card options for college students. They have a small limit, like $250 or $500, and can be opened by someone 17 or 18, but often also require a co-signer. Take that opportunity to explain to your freshman how credit history works. If they pay their bill late, they’ll hurt both theirs and your credit and could hurt their chances of renting their first apartment or even getting a job in the future.
- Find a Good Bank with Mobile Capabilities
Your college freshman will need a bank account and it shouldn’t be your hometown bank. Find a bank that works will college students and that is close to, if not on campus. A bank that has free checking and savings accounts, reimburses ATM fees, or has a low daily balance requirement.
It is also very important that millennials be smart with their money during this time of new-found freedom. Budgeting, saving money, and general financial monitoring are easier than ever now, so they need to be banking online. There are some great apps that help with budget tracking, but there are also investment apps, and most banks allow you to monitor every aspect of your money from an app. There’s no excuse for your child to miss a payment or not be aware of what’s going on with their money.
- It’s Never Too Early to Think About Retirement
If your frosh does happen to have a job, then they would also have the opportunity to open a Roth IRA account and kick start their retirement savings. This is a great way to teach them about financial independence, and start them planning for their future. Plus, you can incentivize them by offering to match whatever they are able to contribute.
