Now that we've reached the latter part of August, countless parents are gearing up for the teary goodbyes that come with sending their children off to college. Living away from home during college is a great way for a student to gain a sense of independence. But to help ensure that your child starts off on the right foot, here are three important money skills to review before the semester kicks off.
Budgeting as a college student is quite different from budgeting as a working adult. In the latter scenario, you're generally grappling with a host of expenses, from rent to utilities to groceries. Many students who don't live at home during college reside in dorms, so they don't need to budget to the same extent, since utilities, food, and other such expenses are often built into the prepaid cost of room and board.
Still, chances are, your child will have some money management decisions to make, whether they apply to buying books and supplies, paying for leisure activities, or purchasing necessities like clothing and toiletries. And that's why it pays to teach your student how to align those expenses with the available cash.
For example, if you plan to give your collegian $1,000 per semester for expenses that aren't prepaid, teach the child how to ensure that it doesn't run out. You can do the same if your child's discretionary income will be coming from a part-time job. The point is to show how to manage money so it isn't wasted.
2. Putting money into savings
It's hard to save money as a college student, but if your child plans to get a job, you might impart one important lesson before it's time to head off for school: Pay yourself first. A child who gets into the habit of putting money into a savings account before spending it will be in a great position to build an emergency fund or meet other financial goals.
You can have this same talk even if your child isn't planning to work, but will be getting an allowance of sorts from you. Either way, the lesson is the same: You should always aim to save a portion of whatever money you come into, especially since you never know when you'll need it for a rainy day.
3. Avoiding the debt trap
It's difficult to get through college without racking up some amount of student debt. But that doesn't mean your child shouldn't strive to avoid other types of debt -- namely, the credit card variety.
Of course, it's easy to succumb to the debt trap when you're mostly without an income and there's the temptation to spend money everywhere you turn. But a child who isn't careful might wind up in a very deep, expensive black hole of debt, with a damaged credit history to boot.
If your child plans to get a credit card upon starting college, stress the importance of never charging more than your collegian can afford to repay by the time each bill comes due. And if you're going to add your child to one of your accounts, impose a spending limit and rescind that privilege if you find that it's being abused. This way, your child will learn early on that overcharging on a credit card comes with consequences.
It's never easy to send children off to college, but if you take the time to review the above lessons, you can at least rest easy knowing that they are well positioned to avoid financial mistakes. And that's a degree of peace of mind worth having.