How students manage money, make choices and spend time now makes a big difference in wealth after graduation.
Sending someone off to college soon? Make sure they’re ready to handle finances. You should be proud if your student can shave costs by buying used books, watching daily expenses and spending wisely.
While money savvy students are indeed frugal, they also learn to master debt (student loans and credit cards) and manage their time and goals so they graduate in short order. The sooner they develop good financial habits, the better.
Help your student amp up his/her financial prowess with these must-have skills
- Learn to delay gratification, not graduation. FOMO is real. College offers sooooo many options – travel abroad, spring breaks, artsy classes, must-see concerts, fun clubs, friend groups to enjoy, adding a second major, changing career paths. Fear of Missing Out – FOMO – drives many a student to convince a parent that those “once-in-a-lifetime” opportunities must be funded – now. Yes, students are in the mode of experiences and exploring to find their purpose in life. Experiences and exploration cost money. They also add time, precious time that delays graduation, job offers and earning an income. Learning to focus on the end goal of graduating on time means saving money now and earning income sooner. It does not mean a student gives up experiences and exploration! Plenty of students do fun things after they graduate! Sometimes job opportunities take them on the very experiences they sought in a few weeks during college.
- Learn to track spending. Most of us neglect to track all our small, seemingly insignificant, expenses. But they add up so quickly, and we wonder, “where did my money go?” When you write down what you spent it’s easier to estimate future expenses and have money left. It can be a simple process – use paper and pencil or an app like Remember the Milk. The important thing is, track every swipe of that debit or credit card and ATM withdrawals. Yes, every coffee, pizza, movie, returned shipping charge and downloaded tune. By the way, stash those pesky receipts in a bag or box. This habit will come in handy when you’re on the job and file expense reports or tax receipts. (And, add ‘em up to make your budget.)
- Learn to make a budget. Tracking expenses is not the same as budgeting. A budget is a document that estimates what you are planning to spend – BEFORE you spend it. So basically, learning to make a budget helps prioritize spending into wants and needs, allowing you to think through spending decisions when not under pressure to buy. Life is full of choices – no one can have everything, though it may seem like some friends do. It’s okay to allocate spending to “wants,” like concert tickets or a spring break trip, but not before the “needs,” like tuition and food. Having a budget gives you power to manage the money you have. Find a good budget template here.
- Learn to manage debt. Student loans. Car loans. Credit cards. Debt can be like a hangover. The sooner a high school grad learns how to borrow and repay wisely, the better. As a parent, you may be thinking, “We’ll fix that temptation – we just won’t get a credit card or a student loan.” Wrong idea. Eventually, most everyone borrows money for something. You don’t want the first time experience to be for an emergency payday loan or huge home mortgage, right? Now is the time for a student to understand the cost of borrowing – and the alternatives. (Who knows, your money savvy kid could also be in the position of lending money to someone else someday and you don’t want them to be ignorant or naïve about it.)