Teaching your college-bound teens about money can help them avoid a serious financial rut.
College-bound teens should arm themselves with more than just advanced skills on academics. They should land on campus with some essential life skills and infallible money smarts to help them successfully navigate what life after high school has to offer.
Unfortunately, most teens are absolutely clueless about managing their finances. According to the data collected by Higher One, a company that markets financial services to colleges and universities, 58% of first year college students feel ill-equipped with managing their own money. In addition, a survey conducted by the National Endowment for Financial Education revealed that 73% of college students engaged in risky financial behaviour in the past six months.
Considering the many pitfalls that await college-bound teens, you need to teach your teens about money ? and this summer is the best way to do it. How can you prepare your kids to become more responsible young adults? Here are some essential tips that may help you accomplish your goal.
Make sure they have their own bank account. Before you teach your kid how to manage his or her money online, it is imperative that he or she learns how to use the bank in person. For best results, choose a checking account that requires no minimum balance, allows for unlimited checking, and has a simple fee structure. In addition, choose one that offers ATM, debit card or online access and ample overdraft protection.
Teach them how to budget. Allocate a quarterly clothing budget and let your teen pay for what he or she needs. You can also give your teen a special project and let him or her work out the details while sticking to a predetermined budget. Encourage the use of an online or mobile budgeting tool to make the task more manageable, and emphasize the importance of sticking to a budget.
Differentiate between needs and wants. Teach the difference between needs and wants, and make them understand the reason why the needs should be given more priority.
Teach the importance of tracking expenses. Show your child how to track expenses, and how doing so can help him or her stay within budget. Reallocation of expenses may be necessary at times but it may also mean that there will be less money to spend on other items. Avoid giving extra money when your teen spends over budget.
Explain the value of saving. Let them understand why they need to set aside some money on a regular basis. Tell them to be on the lookout for student discounts and great deals to save money during college.?
Advice them against amassing huge student loan debts. To minimize student debt, teach your teen to spend on the right things, adopt a ?pay now? policy for non-essential things such as entertainment, and put a cap on their borrowing.
Give your teens the financial training they need and you can significantly reduce the risk that they will run into some serious financial rut that can ruin their future.