Those of us who are parents know how nerve wracking sending your child off to college can be. Between worrying about what they’re eating and how late they’ll be staying out, watching your baby bird leave the nest means you’ve got a lot on your mind.
One way you can easily relieve some of that stress is by properly arming your child with some basic, but sound financial information that will build good habits for the future. Here are three simple practices to help ensure that their first solo flight will be a smooth one.
Teach your child to put together and follow a budget
This is an essential life skill that your student will need to help them succeed today and tomorrow. To get started,Debt.org suggests that you start by having your student compile a list of all their sources of income.
Include money from a part-time job, financial aid, or money they get from you. Next, have them record all of their fixed costs and due dates, such as rent, Internet, and tuition. Finally, they will subtract their fixed costs from their total income, leaving them with their disposable income.
This effort will give your student a good estimate of how much money they reasonably have to spend every month. Once they have a good grasp on this, help them set aside a certain percentage of their income every month to put into a savings account for the future.
Make sure they don’t apply for other credit cards
Scholarships.com suggests that students stick to one credit card while in college. Have your student do this until they can prove they have good money management skills and can avoid racking up enormous amounts of credit card debt.
One way to help guard against further debt accumulation is reduce the card’s spending limit. If it is too high for your student’s basic daily needs based on the budget your student prepared, call the credit card company and ask to have it lowered. Remember, credit cards are for convenience and shouldn’t be used for large unnecessary purchases. Also, make sure they pay the card on time every month, even if it isn’t paid in full. The main thing you want them to avoid are those pesky late fees and damaged credit.
Have online access to their checking account
By being able to view their spending habits and transfer funds in a pinch, you can help make sure they avoid overdraft fees. According to Laura Bruce of Bankrate.com, the national median for overdraft fees in the U.S. is about $27.
These penalties will begin to add up fast if you aren’t careful. The best way to deal with them is to avoid them altogether. Explain to your student how the overdraft system works and the danger of writing bad checks. Remember, a bounced check can get them in a lot of trouble!
With these pieces of advice and careful planning, your student can enjoy a prosperous, debt-free college career, while building good credit for the future.