Soon thousands of young adults will head to college, many for the first time. As parents, what is it that you hope they’ll learn from the college experience? Looking back on my own experience, I realize that I was shipped off with very little guidance and received virtually no guidance along the way. I guess my parents assumed that college professors would teach me everything I needed to know to graduate, find a great job and become a successful and independent citizen upon graduation. Fortunately, I did learn a lot but as you can imagine, success came with a lot of trial and error. Would it be possible to reduce this “learning curve “? One of the most important life lessons is money management and you can use college time to teach your children money strategies that can serve as a strong foundation for financial success. Here are 5 tips for providing your child a personal finance education:
- Co-build a budget. Sit down with your child and together work through a budget for the school year. You’ll want to plan out the entire year including college and summer. To help you get started download our Budget for College Students under ‘Links’ in the Resource Center of www.WelchGroup.com.
- Give them the money. Set up a joint account with your child so that you can monitor their spending but fund it either monthly or quarterly based on the budget you’ve established. They’ll now be responsible for paying all the bills, including tuition, room, board, books and discretionary spending. If you want them to have a credit card, start with a debit card and make sure they track all debit card purchases in the checkbook register along with checks written while keeping a running total of their checking account balance. An excellent free electronic resource is www.Mint.com.
- Be a good coach. Think of what you admire most about your favorite coach (in any field). Their number one characteristic is probably not criticism. It’s more likely to be encouragement and support. You’ll want to monitor your child’s progress closely in the beginning. In my experience, it takes two years to become a master budgeter so give your child a break and help them up when they stumble.
- Let them help. In my experience working with families for over thirty years, children who helped pay for college have a much greater appreciation for their education than those who got a free ride. Consider having them work part time or summers to save money for part of college costs. This may be as simple as empowering them to earn their ‘spending’ money while you fund the basic costs of college. I worked as a grader during the school year plus summer jobs. These experiences better prepared me for ‘the real world’ after college. One way to ‘earn’ money is to get a scholarship. There are thousands available, some just for the asking. Visit the Resource Center at www.WelchGroup.com; click on ‘Links’; then click on ‘College Scholarship Search Engine’. Maybe you could ‘match’ a portion of this scholarship money with a Roth IRA in their name?
- Help them set goals. In a decades-long Harvard study, the 4% of graduates who consistently set goals later created ten times the wealth than the remaining graduates combined! College goals might include building an emergency reserve, finishing college debt free, building a savings account or saving for a college abroad program.
Don’t be surprised if this turns out to be the most important part of their college education or that you learn something useful too!