Prep your college freshman for financial success
Even if you’ve been teaching your teen good money habits since day one, the financial independence he’ll encounter when he starts college can feel like a big, new responsibility. Set him up for success by going through these practical tips on managing money.
Create a budget
Understanding the connection between income and expenses can help young adults know what they can and can’t afford so they can make better spending decisions. For instance, just because she has the money for a new smartphone doesn’t mean she can comfortably pay for the monthly data plan. Help your child set up a budget, but keep it simple. Have her map out all sources of income, such as financial aid, pay from a part-time job or a monthly stipend from you. Then have her list all necessary expenses, such as tuition, books, housing and a meal plan. What’s left over can be spent on the fun stuff.
Open a checking account
If your child doesn’t have a checking account yet, help him open one. The account can give him a sense of financial independence and help him manage his money: Many banks have online resources that let you track balances and spending. And he will likely be able to set up text alerts for when his balance is low.
If possible, select a financial institution with a presence on campus or one that offers no-fee ATM withdrawals so your child doesn’t get hit with lots of ATM fees. Or, for convenience, he can use a debit card to access the money in the account.
Download a banking app
Most major banks offer apps that let customers manage accounts, monitor balances, transfer money, pay bills and more. For tech-savvy teens, downloading and learning how to use the app to bank smartly is just as important as the account itself. The Bank of America Mobile Banking app allows users to track spending and even deposit checks remotely.
Apply for a credit card
College is a great time to begin building a credit history, and the easiest way to do that is with a credit card. By law, those under 21 will need either proof of income or a cosigner in order to get their own card. If you decide to help your child get her first credit card by cosigning, you can guide her from the start. For instance, suggest she use it for one small monthly expense that she can easily pay, like a Netflix subscription. Then have her set up automatic payments to ensure the bill is paid on time and in full each month. It’s a good way to build a credit history without going into debt.
Sign up for alerts and reminders
From text alerts to email updates, most banks and credit card companies offer online and mobile tools that help students stay on top of their account activity. Now that you and your child have talked about checking accounts and credit cards and set up a mobile app, go through the alerts. Setting up notifications can help prevent slipups like overdrawing a checking account or making late payments on a credit card.
Discuss fraud prevention
Shared living spaces and lack of financial preparation may make college students more vulnerable to identity theft. On top of that, 18- to 24-year-olds are slower than any other age group to recognize they’ve been victims of fraudulent activity, according to a study of identity fraud by Javelin Strategy & Research. Your child can help keep his personal information safe by using unique passwords, keeping them secret, regularly changing them and only sharing his Social Security number with trusted sources. When it comes to the internet, remind him not to open attachments from people or organizations he doesn’t know, and not to click random links. Installing anti-malware software on both computer and mobile devices can also help. Beyond technology, make sure your student knows how to protect his identity if he loses his wallet.
Plan to save
As your child gets older, saving becomes more and more important. Urge her to start putting money away for unexpected needs and future goals. Since setting a specific goal can help, encourage her to pick something to save for—perhaps a spring break ski trip or a new car. Contributing even a few dollars a month to a savings account early on can pay off down the road.
With guidance and encouragement from you, college can be a great time for young adults to gain real financial independence and develop responsible money management habits that will serve them well long after they’ve graduated.