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Financial Tips To Prepare Your Teen For College

College Financial Tips To Prepare Your Teen For College
Your teen has graduated high school and is off to college in the fall! You're probably thinking about the packing list, roommate assignments and registering for courses.  But don't forget to prepare your teen for managing their money when they leave the nest.  We're in your corner with tips to get started with this summer to set your teen up for financial success in the fall! 
 
Confidentiality
When talking about personal finances, make sure your teen knows that’s exactly what finances are… personal. Discourage them from sharing private information with their friends or roommates, such as PINs, online banking passwords and debit cards. This will help protect them from falling victim to predators and keep their private information safe. Be sure they know how to regularly review their accounts and to contact their credit union if they suspect anything doesn’t add up.
 
Being Financially Fit
By emphasizing the importance of financial health now, big topics won’t seem as daunting to your teen as an adult (like retirement) and opens the door for life long planning.  Start with the basics now and they will be ready to build on them later. Great questions to answer together are… 
  • Do you feel confident you can stick to a budget?
  • How does a credit card work? 
  • How is a credit card different from a debit card?
  • Do you know how to set up direct deposit and schedule bill payments?
Looking for more important questions to ask? Check out our Financial Health Quiz and see what financial goals are important to your teen! 
 
Set Goals
After asking your teen some of these questions, begin to identify some goals. Have them take the lead here and get to know where their financial interests are. Maybe they want to learn more about how the Annual Percentage Yield (APY) works in a savings account. Or if they want to start working towards a big purchase like a first car. Being on the same page can help you help them achieve their goals. By clearly outlining something to work toward, your teen can start to see the benefits of saving and planning for expenses. Habits like this will serve them well for the rest of their life!
 
Emergency Funds
We've all heard, “It’s better to have it and not need it than need it and not have it." That’s the point of an emergency fund. This type of fund will ensure that when unexpected costs arrive, your teen will be prepared to handle them without derailing the rest of their finances.  Brainstorm what emergencies could arise (unexpected class expenses, car repairs, weekend trips with friends) and how to budget for them.  As an adult, It is recommended to have 2-6 months of expenses set aside. You and your teen can decide what that might look like for them. 
 
Budget, Budget, Budget
There's a lot to plan for when it comes to college. This summer, help your teen prepare for the transition from high school to college with a money plan - start budgeting! Your teen is getting ready for a big change, and budgets can be a great tool to help them live within their means. Start by considering living expenses. Are they living off campus? Splitting Wifi bills? What about utilities? Groceries? Write down what you think they will be spending versus how much they will be earning (you may want to consider scholarships, financial aid or a part-time job for this). Work together to ensure their financial goals are in alignment with their income. It’s unrealistic to put away $1,000/month in a savings account when they only make $500/month at their part-time job. Likewise, they can’t expect to spend $500/month on food if they have other expenses to consider.  Have your teen practice using this budget over summer. That way, before they head off to school, they are familiar with how a budget works and how it benefits them.  By setting reasonable and attainable goals, your teen will build a positive relationship with finances and budgets!
 
Explain the Difference Between Wants and Needs
Ok, at this point you have carefully set goals and a budget. Now, the challenging part, sticking to it. Talk to your teen about the difference between wants and needs. Sometimes it can be difficult to accept that ordering pizza every night is not an actual need, especially as a young adult. But by setting expectations on what is and isn’t acceptable for “splurges”, your teen can learn to be financially responsible— learning when it is OK to say “yes” to something extra, and when it might not be very beneficial. Everyone should have some money set aside to spend on hobbies and activities! The important lesson here is balancing wants and needs to live within their means.
 
First Credit Card
Starting college is often when young adults get their very first credit card.  Typically for emergencies. Now is a great time to get your teen familiar with the pros and cons of credit cards and understanding features (like cash back or other rewards) and rates that work for their life.  Go over the basics of credit scores and how making regular, on-time payments on their credit card effects those scores and keeps them financially fit. If you teen is ready for a credit card, Global offers a variety to help them protect and enhance their money. Learn more here.
 
Keep the Conversation Going
You’ve made it this far and are that much closer to helping your teen find financial success as a young adult - keep the conversation going. Goals and finances are always changing and growing as your teen does, so stay in touch to be sure they are still making progress. 
 
Global is here for you and your teen through every step of your financial journey! 
Written By
Global Credit Union
Member Financial Education and Engagement


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