Financial Education for your College-Bound Children
September brings with it a flurry of back to school activity. For those of you sending your children off to college, an opportunity presents itself to teach them life lessons beyond the classroom. The college years are a time for young adults to learn about living on their own and making decisions independent of mom and dad; this includes financial decisions. This month, in celebration of the back to school period, we thought we would provide a few tips and warnings to discuss with your college-bound children so they start their college experiences on the right financial footing.
Living within your means is a key success factor in any financial plan. Meal plans and pre-paid cards are a great way to teach this to a college student. As there are limits incorporated into these methods, it’s an easy segue into discussions around budgeting and living within the “means” they are allotted.
Simply teaching them to balance a checkbook can also go a long way. Once they have a basic understanding of how cash comes in and out of their account, the lessons of budgeting can be put into practice. The first time they realize that they can’t afford to buy pizza for a Thursday night cram session, they’ll quickly understand the importance of managing their cash flow.
Using Credit Wisely
Credit card companies salivate at the sight of a campus full of unsuspecting students. It presents a prime opportunity to build a customer base with no knowledge of compound interest, cash advance fees or the importance of a solid credit score. They lure them in with free t-shirts and Frisbees – all for just filling out a few simple applications. The typical college student has no idea how filling out these credit card applications can impact their financial future for years to come. Luckily, some universities are banning these companies from soliciting business on their campuses, but the risk is still widely spread across the country. It’s important to explain to your children that credit cards are not free money. Talk to them and make sure they understand the pitfalls of credit and the implications if they misuse it. If credit cards are used wisely, the college years can be a wonderful time for your children to begin building sound credit histories.
College students are also often targets of identity thieves. Public access computers, mail stations and easily accessible communal living spaces are all opportunities for an identity thief to access the information of a student pre-occupied with mid-terms and papers. Therefore, it is important for you and your students to keep an eye on bank and credit card activity. In addition, this is also a great opportunity to get your children into the habit of checking their credit reports annually. We are all entitled to one free credit report every 12 months from each of the major nationwide credit reporting companies. These reports can be accessed online at www.annualcreditreport.com.
Take Advantage of the Opportunities Provided
In reality, most colleges provide the tools necessary for students to start their independent lives on the right financial path; the challenge is getting students to utilize these tools. Many colleges offer a personal finance class elective, teaching students the basics of mortgages and debt, budgeting, taxes, insurance and the basic fundamentals of investing. Whether a business student or not, these are topics that all students must understand to ensure their future financial well-being.
For those students that might have learned their financial lessons the hard way, many college campuses also offer counseling services to those in need of assistance. These services can be offered by financial aid offices or even student-to-student counseling provided by upper-class students in the university’s finance program. If your child has hit a patch of financial hardship, it’s a worthwhile venture to seek out these programs for assistance.
While charitable intentions are often motivated by more than finances, college provides a great opportunity to get your children involved and begin to develop the philanthropic mindset that you value. Many universities affiliate themselves with various non-profit organizations to provide volunteer opportunities for their students. By starting these habits with your children as young adults, you increase the chance they will carry these values throughout their lives.
College is a time to engage in experiences and learn the lessons that can last a lifetime. This can be a tough transition for both you and your children. As your advisors, the Truepoint team would like do all that we can to make this process a little easier. We are more than willing to meet with you and your child to discuss any questions you may have as your child embarks upon this very important journey.