For many parents, watching their kids head off to college is a bittersweet moment. On the one hand, you are proud of all they have accomplished and excited for the adventure that lies ahead. On the other hand, it can be hard to watch them leave the nest after 18 years of loving and caring for them. No matter how you feel, it is important to support your child during this transition with the same encouragement, life lessons, and advice you have always provided.
For many young adults, college is the first time they are living away from home and managing their own finances. This can be a big adjustment, and it’s important to be prepared for the additional expenses that come with college life. In addition to tuition, students will need to budget for things like food, textbooks, and other supplies. While it can be challenging to manage all of these expenses on a tight budget, there are some helpful tips that can make the process easier.
Here are four ways you can financially prepare your kids to succeed on their own.
1. Make sure you’re all on the same page
As any parent knows, sending a child off to college is a big step. Not only are they embarking on a new phase of their life, but they are also incurring a lot of new expenses. As such, it’s important to be clear about who is responsible for what before they leave. There is no one right or wrong way to split up the bill, but it is important that everyone is aware of and agrees with the plan. Additionally, we recommend having your college student chip in financially in some way; doing so will teach them financial responsibility. Once you’ve decided how expenses will be handled, your child will be able to focus on their studies and enjoy their time at college without worrying about money.
2. Teach them to budget
It’s no secret that college is expensive. From tuition and fees to room and board, the cost of a post-secondary education can add up quickly. As a result, it’s important for students to budget carefully in order to make their money last. And while there are plenty of financial aid options available, not all students will qualify. That’s why it’s so important for parents to teach their children about budgeting before they head off to college. By showing them how to track their income and expenses, as well as how to set aside money for savings and emergencies, parents can give their children the tools they need to manage their finances successfully. Teaching your child to budget is a lifelong skill, but it’s especially important when they’re getting ready to go off to college. With a little preparation, you can help them start their education on the right foot financially.
For parents who want to help their students with money, giving them a monthly or weekly allowance is one option. However, another approach is to provide a lump sum upfront and let the student budget for the entire semester or year. Consider setting up a shared checking account and depositing the funds directly into it. Your child can then use a debit card to withdraw cash or make purchases directly. By budgeting carefully, your child can learn firsthand how to stretch their funds further. According to Charles Schwab, only 38% of young Americans believe student loans are good debt.
3. Teach them about debt
Speaking of debt, as your child prepares to go to college, it’s the perfect time to teach them the ins and outs of this complex topic. Debt can be a good thing or a bad thing, depending on the circumstances. Good debt is when you borrow money to buy something that will increase in value or generate income. For example, taking out a loan to buy a house, invest in a business, or fund an education. Bad debt is when you borrow money to buy something that will decrease in value or doesn’t generate income. For example, using a credit card to finance a vacation or taking out a loan to pay for an extravagant wedding. It’s important for your child to understand the difference between good and bad debt so that they can make smart financial decisions in college and beyond. By understanding the concept of debt, your child will be better equipped to manage their finances and stay out of debt trouble down the road.
4. Schedule a time for them to speak with a financial advisor
As a bonus tip, bring them in for a meeting! At Treehouse Wealth Advisors, we are passionate about helping our clients reach their goals and invest in their adventure. In addition to creating comprehensive financial plans that take into consideration things like funding education, we also strive to create an environment that emphasizes the importance of financial learning and literacy. Speaking directly with a financial professional can have a lasting impact on a young adult.
Final Thoughts
Sending your children off to college is an exciting and emotional time, as well as a crucial opportunity for them to spread their wings and explore the world on their own. By teaching your kids important lessons about budgeting, debt, and more from an early age, you can help set them up for success for their life’s adventure.
Sources:
- https://www.bls.gov/opub/btn/volume-5/spending-patterns-of-older-americans.htm
- https://www.cnbc.com/2018/08/08/4-ways-real-estate-can-boost-your-retirement-income.html
- https://www.fidelity.com/viewpoints/retirement/managing-cash-flow
- https://www.census.gov/data/tables/2019/demo/wealth/state-wealth-asset-ownership.html
- https://fred.stlouisfed.org/series/MSPUS
- https://www.fedweek.com/retirement-financial-planning/most-retirees-never-move-to-new-home-study-finds/
