Are you sending a son or daughter off to school this fall? In addition to a goodbye hug and a care package, you might also want to think about arming your children with some information about how to manage their money effectively. Many of the financial decisions they make over the course of the next four years are going to have a huge impact on their post-graduation finances. Here’s how to get your children off on the right foot:
1. Look for Deals on Textbooks
Advise your soon-to-be students to avoid the campus bookstore. College textbooks can be purchased used or new at a significant discount on both eBay and Amazon. They can also be rented at the websites BookRenter and Chegg. To further the savings, students should check out Flat World Knowledge, an open source college textbook website that provides some texts for free. And remember: The hard copy textbooks that your child ends up purchasing can eventually be sold on eBay or Amazon to recoup some of those out-of-pocket expenses.
2. Create a Budget and Stick to It
Think a budget isn’t important for college kids? If your children have money coming in from a scholarship or part-time job, they’re going to want to spend it. While some of it is going to be put toward entertainment and clothing, your children should invest at least a portion of those funds toward their future. The only way they can do that is to get on a budget and stick to it. If they participate in a college meal plan, encourage them to establish a weekly budget so their funds don’t run out before the end of the semester.
3. Avoid Unnecessary Services
Laundry pickup or any other errand-running services should always be avoided. It’s easy for college students to get roped into such services because of the convenience factor, but they’re expensive. Instead, encourage your children to manage their time better so they can devote themselves to their studies in addition to their other chores. Also, tell them to skip the university debit card, as the fees and other charges are significant. Avoid campus health insurance as well by keeping your children on your health plan – thanks to the Affordable Care Act, they can remain on your plan until age 26.
4. Wear Out That College ID
Your children may view college ID cards as nothing more than another form of identification, but it’s actually a gold mine in terms of saving money. They can use it to attend on-campus sporting events, speaking engagements, and a whole host of other entertainment activities for free. But the savings don’t stop there – college students can also enjoy a variety of discounts at local businesses and retailers. Make sure your kids ask before making a purchase, as many of the discounts aren’t publicly advertised.
5. Work a Part-Time Job
Consider this example: A child works a part-time job for ten hours per week at a pay rate of $10 per hour. Over the course of a four-year education, minus taxes, that translates to $12,800. That’s a huge savings for many families, and ten hours each week isn’t a big commitment. It’s truly a win-win situation.
6. Build an Emergency Fund
Having some extra cash on-hand, even if it’s only several hundred dollars, can help your children better manage their finances during school. It can really come in handy if they have to upgrade balding tires, pay for other car repairs, finance unexpected trips home or even survive a computer crash. If the money is on-hand, your children won’t be tempted to pay for these things with plastic and run up credit card debt on top of their student loan balance. Encourage them to have a small amount transferred from their checking account to a separate savings account and their emergency fund can increase automatically.
If your children don’t seem to take much of an interest in what you have to say, hit them with some hard numbers. For example, the average college grad finishes school with an astonishing $27,000 in student loan debt. That makes it a lot more difficult to buy a first home, get a new car or even manage monthly finances. It’s essential that you take the time to educate your kids now so that in four years, they aren’t saddled with debt. If you do a good job of imparting the above advice, you’ve done your part in setting them on the road to financial freedom.
What are you doing to educate your kids about money management while in school?
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