One reason many people go to college is to get a better job and to be more financially secure after they graduate. Unfortunately, many teenagers go off to college without knowing how to balance a checkbook. Basic financial skills are a must when one is living on their own. According to Sallie Mae, over 50 percent of college students have more than four credit cards, and 80 percent of students fail to pay these cards off. This leaves them with more debt when they graduate and the potential of losing a job due to bad credit.
It’s important to talk to high school and college students about their finances. Even if they’ve had a class that taught them money management, it’s just theory until they’ve had to do it themselves. What do you do when you get to end of the month with just $10 or $15 until you get paid? Most people call mom and dad, which works once or twice, but it will get old after a while. Better to give your student the information they need to manage their money while they are in college and away from home.
Practice Makes Perfect
You don’t want to wait until your student is leaving for college to open a checking account. Give them the opportunity to use a debit card and checkbook to manage their finances before they ever leave. Set up limits on how much they can spend, which helps them learn boundaries. Don’t bail them out on Sunday after they spent all their money at the mall on Saturday.
Make them balance the account each month to make sure there are no errors.
Use an app that helps them see how much they are spending and where. When linked to the debit card and an email, it sends an email and shows where each dollar was spent. When they see how much they’re spending at McDonald’s or the video store, it helps them learn to budget their money more effectively.
Get Your Student Involved in Taxes
If the student works, they may be required to fill out tax forms. Although it’s easy for parents just to want to take care of this, you should get your child involved. By starting out when their tax returns are simple and uncomplicated, they aren’t as scared when the documents start getting longer and more complex. Even if you take their taxes to your accountant, make them part of the process. Teach them how important it is to get these forms filed on time each year. They don’t need a tax lien on their back when they graduate.
When your child turns 18, show them how to check their credit report. Although students may not have anything on their report, it doesn’t hurt to check it for errors. By learning the importance of their credit score before anything goes on the report, students can keep it high. Many corporations and the government look at the credit report before hiring. Checking the report annually maintains the accuracy and helps the student get into a routine of paying attention to their number.
Scholarships, Loans, and FAFSA
You may not be anticipating any student grants, but it pays to fill out the Free Application for Federal Student Aid, or the FAFSA. Work-study positions are awarded based on the information you and your child provide, and you may find better rates on student loans by going through FAFSA. Even if you don’t think your child qualifies, you may be surprised at and how much free money you can get from a federal grant program. Every small bit helps.
Encourage your child to apply for scholarships. Don’t wait until the senior year, start as early as possible. Look for essay applications and local businesses that offer scholarships. Teenagers should proactively look for opportunities, and enhance their resume, so to speak, by performing community service. Check with the student’s employer and see if they offer tuition reimbursement. Look for all avenues to get "free" money to help your child manage the growing cost of a college education.
Depending on the age of the student, they may or may not need you as a co-signer on a loan. Even if you aren’t needed, you should use the opportunity to make sure your child understands the ramifications of a loan and how they will repay it. Discuss the interest rates and different options. If you are putting your signature on the loan, you have to be ready to pay it back if the student defaults. Yes, it is your child. However, if they don’t seem to have the financial responsibility to do this, you will be on the hook. Don’t jeopardize your future trying to help your child.
Turn to Your Credit Union
Your local credit union can work with you to teach your high school and college student money management skills. Often, you can obtain your college loans through your credit union and save many of the expensive fees that you might have when working with a bank. You will also get great customer service. Many times, credit cards through a credit union have lower rates. It just makes sense to use their resources to get through college and come out financially secure.