Many of us look back at our college years and revel in that expensive—but exciting—bosom of self-discovery that left us with the best memories of our lives. Whether we learned how to stretch a case of Ramen noodles over a month, or balance our social lives with academic obligations, we learned valuable life lessons.
While we want our kids to enjoy their college years, it’s critical they also learn some basic lessons about financial responsibility and managing their money. To help them along (and make your life easier), here are some guidelines to get started.
1. Openly communicate your expectations.
You must have a conversation about the expectations you have for your student’s finances before school begins, or you’ll regret it later either when you get that first credit card statement in the mail, or a desperate call from your new freshman pleading for financial help. Be upfront, blunt and honest about what expectations are in this area. Discuss limits around spending on big-ticket items, and offer some leeway if they don’t get it right the first time. The best lessons arise from trial and error.
2. Create a realistic budget.
Now is a great opportunity to teach your child budgeting basics such as the envelope method—in which they are given spending categories and an allotment for each—or zero-based budgeting, the method that makes them account for all their spending during a certain period. Both methods teach financial responsibility and discipline, which are key to managing money responsibly.
While we want our kids to enjoy their college years, it’s critical that they also learn some basic lessons about financial responsibility, and managing their money.
3. Track spending.
Set up monthly meetings to review his or her spending habits. Discuss what went well throughout the month (paying bills on time, saving), and what didn’t. If things did not go as desired, then create a plan for your child to do things differently during the following month. Think of this as teaching your child how to ride a financial two-wheeler; you’re right behind them holding the seat until they can ride solo.
4. Go online.
There are many tools that can help you build a budget and track spending to head off any issues that might arise, such as veering off budget unexpectedly and getting charged overdraft fees. By taking charge and helping your child manage his or her account online, you can help avoid any issues before they become a problem by monitoring their activity and raising any red flags that you might see.
5. Impart discipline.
Before they leave for college, work with your child around establishing and maintaining financial discipline. This means that even if the money is in the account for that pretty party dress, paying the rent and buying course materials comes first. Remind them that proper preparation prevents poor performance!
6. Automate it and forget it.
If you’re looking for a way to connect with your kid online around their finances, Citi® Financial Tools is a free service that will allow you to track checking, savings, and credit card account balances (including those not held with Citi), in addition to your expenses, so you can create personalized monthly budgets to better balance your college finances.
Moving on to this new stage life can be daunting at first for you and your child—not to mention expensive. However, helping them learn to manage their money will give you peace of mind, and will be a lesson for them that will live on—far beyond graduation.