College is a an exciting time for our kids. Some students have never been away from home and for many this is the first time they will be truly independent. As parents, we have been saving our hard earned money since the time our kids were born to pay for the high cost of education. Many teens have worked summer jobs to help shoulder the burden. So, how can you teach your kids to be financially savvy so they do not come out of college with more debt than necessary?
1.Do Not Have Multiple Credit Cards
Credit cards are the easiest way for a college student to rack up debt. For incoming freshman, special introductory offers make it enticing to open multiple cards. When one card is maxed out, they have back up cards ready to approve the purchase. Before they know it, the debt has piled up. If a student has just one credit card, they have a spending limit which makes it much easier to manage spending.
2. Save Receipts
Give your student a receipt envelope to keep with them at all times. Every time they make a purchase, tell them to put that receipt in the envelope. At the end of the month, they can check their credit card statements to make sure they were not overcharged or the victim of identity theft. It also gives them a point of reference to see where they can cut costs. They can also download a receipt organizer app so they can keep all receipts in order.
3. Create a spending spreadsheet
It is helpful to keep track of where money is going. By entering expenses into a spreadsheet, it is easy to see how much was spent and on what. After doing this for about a month, it will be easy to see what expenses can be cut.
4. Do Not Become Your Student's Financial Parachute
For many teens, they go to their parents when they run out of money. Set a budget with your student and stick to it. If they run out of money, they will have to sacrifice, find a job, or figure it out. If you rescue them every time, they will never learn to manage their money.
5. College Students Can Do Better Than Minimum Wage
Parents of teens are always looking for reasonably priced tutors. If there is a local high school, students can offer their tutoring services and set their own prices. This is a great way for your student to make extra money and work flexible hours. If they are great in a particular sport, they can privately train middle school and high school athletes.
6. Open Up A Chequing and Savings Account
It's important students learn not to spend every penny they make. Each week, they should put 90 per cent of what they earn in a chequing account and 10 per cent into a savings account. This is an important life lesson and a good habit to start early.
7. Save Money Where You Can
Buying $7 caramel double lattes and eating out every meal is a great way to burn through money in college. Invest in a coffee maker and mini-fridge to make coffee and snacks. This could save at least $50 each week.
8. Choose a more affordable school for two years and then transfer
Many people don't realize they do not have to spend four years at one institution to get their degree. Accepting a scholarship at a school that is not your first choice or going to a school where you get a lower priced tuition is a great option for your first two years. Then, transfer to the dream school with the higher price tag. This could save thousands of dollars in tuition.
9. Student Loans Are Not A Piggy Bank
Student loans should not be used for anything other than school. Using these loans to buy those fab shoes, pay for spring break, or buy a keg for the frat is a bad decision. Talk to your student about financial peer pressure and how it may seem like a good idea at the time but graduating with huge debt is not worth it.
10. Do Not Destroy Your Credit
Missed credit card payments affect your credit score and can hurt your student later on when they want to finance a small business, buy a house, a car, or any other large investment. Teach your student to try to pay off their entire balance each month so they do not rack up interest payments and credit card debt.
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