Dropping your child or grandchild off at college is a bittersweet experience. (I’m going through it right now). It’s a time filled with excitement, nostalgia, and a tinge of worry as they step into the world of independence. If you’re wondering how to help guide your college-bound child to get on the right track with their finances early, we’ve got a few tips for you.
1 Creating a Budget They Can Stick To
We believe budgeting is more than just a financial plan—it’s a life skill. Sit down with your child before they leave for college to devise a budget that helps them align their needs, their wants, and their long-term goals. This collaborative process can help them understand where their money is currently going vs where it should be going and teach them to foster a sense of responsibility.
Setting the Stage for Possible Financial Success
Start by discussing the various expenses your child might incur during their college years. Break these down into categories such as tuition, textbooks, living expenses, and leisure activities. By doing this, you provide them with a clear picture of what to expect. Encourage your child to track their expenses regularly, as this practice will allow adjustments to the budget as needed.
Side note: It helps to be a good example for them. You can even share your own budgeting process and then give them a simpler version of that process to follow. (Their cashflows will likely be much simpler than yours).
The Importance of Flexibility
Life happens. It’s important for your loved ones to know that a budget doesn’t have to be set in stone (Especially at their current stage of life). It can be a guideline that can be adapted as unforeseen expenses arise. You can help them review their spending habits periodically and share your observations with them. (You may find together some areas to adjust a few habits). This practice helps keep the budget realistic and can also promote mindfulness in overall decision-making.
The Power of Accountability
Encourage your child to explore tools or apps that can assist in tracking their expenditures. Many digital solutions make it easy to categorize spending, giving your child an overview of their financial habits. They may get insights from this new process more-so than pen and paper. Kids in this age range like to go their own way to an extent, and bringing technology into the equation may help them buy-in a bit more.
2 Understanding Needs Versus Wants
One very valuable lesson your child could learn during their college years is differentiating between needs and wants. This distinction will help their awareness of how much of their money is going towards non-necessities, which is a skill that will help them for decades to come.
Making the Lists
Encourage your child to create two separate lists—one for needs and one for wants. ‘Needs’ should include essentials such as rent, food, and textbooks, while ‘wants may encompass things like dining out or entertainment. This distinction helps in building discipline – a skill that will help them for decades to come. You can use the list below as an example to help you write your list.
The 24-Hour Rule
Impulse buying can be tempting, especially in a college setting where peer pressure and lifestyle trends abound. Of course they will occasionally spend money on a whim, and that’s fine, but we will consider it a win if they just make a few small positive adjustments to their impulse control.
Introduce the 24-hour rule to your child, encouraging them to wait a day before making non-essential purchases. This pause gives them time to assess whether the item is truly necessary. For larger expenses, they can extend that time to a week or a month. Many times, they will find that the desire passes with time. Plus it is a good practice in self-control.
3 Leveraging Student Deals and Discounts
By teaching your child to leverage these potential opportunities, you could help stretch their budget further while still allowing them to enjoy their college experience.
Exploring Campus Offers
Some schools offer a variety of deals exclusively for students. From discounted transportation to software to affordable dining options. Each school is unique, so your loved one will have to do some digging about what deals are available to them. Also don’t just stop at looking at the university deals but some business around university also offer deals to college students.
4 Pitfalls to Watch Out For
Teach your children the dangers of credit card debt and online gambling.
- First, credit card companies know students are susceptible to impulse purchases. There are many stories of kids signing up, running up debt, and having parents bail them out.
- Second, it is too easy to do online gambling. Notice the commercials on TV now. Gambling is promoted on sports broadcasts. What may start out as an innocent wager could lead to distraction or even worse: addiction.
5 The Journey Ahead
Teaching your college-bound loved one about saving isn’t just about dollars and cents—we believe it’s about equipping them with life skills that extend far beyond their college years.
These early lessons in money management could lay the foundation for skills that can bear fruit throughout their adult life as well.
Kids will be kids. They will make a few mistakes along the way, and that’s okay. In fact, those mistakes are great learning opportunities. While saving and budgeting is incredibly responsible, there is always room for them to simply be kids and enjoy life as well. After all, they’ll only be young once.
On the lighter side, we moved Elliott into his new house near school on Sunday. He is so excited, and so are his roommates. He starts classes next week. He is double majoring in Finance and Risk Management.
This week I interviewed a great investor and psychologist, Dr. Daniel Crosby. He has a new book coming out in October called the Soul of Wealth. I highly recommend it. The podcast and video will be posted later. Keep your eye out on our YouTube channel in the next few weeks to listen to our conversation. And I will share how you can get the book for free. Stay tuned.
Hope all is well with your family,
Jeremy
Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information. My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.
Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor. Stratos Wealth Advisors, LLC and Riverview Wealth Management are separate entities.
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