Your final financial prep
Knowing your child has her finances in order before she leaves for school will help to ease some anxiety — both yours and hers.
Once your teen has made the decision about where to go to school, you two can sit down together and make a plan. The school may be able to give you an idea of the overall costs of campus life, including tuition, books, housing and entertainment costs. You can also speak to friends or relatives who have children already in college to get information about budgeting and expenses that may not be on your radar.
Credit cards: Proceed with caution
Take this opportunity to teach your teen about the essentials: interest rates, cash advances and finance charges on late payments. And make sure she understands the dangers of charging up a card with dinners out or a shopping spree.
Once your teen understands how to use (and not use) a credit card, you can explain the importance of building a good credit score and how a bad one could affect everything from getting an apartment to landing a job.
To help protect her credit score, your teen can set up automatic payments to make sure her bills are paid on time. If she keeps her credit limit low, she can build up her credit score and learn some personal discipline.
Continue the 529 education savings plan
Many freshmen start their college experience with an open mind when it comes to careers. However, if your future student already knows what she wants to do, she’s in a great position to go for it. If that career involves continuing education, make sure you keep contributing to that 529 savings plan, which can be used for many kinds of education. It’s also a great opportunity for your teen to contribute to her own future and learn about the advantages of investing as she watches her money grow. As you probably know by now, starting small and starting early will make a big difference.
Know the student loan basics
Explain the types of loans, the interest rates and when she’ll be expected to start making payments. Stress the importance of avoiding heavy debt, just when she’ll be setting up her independence.
Got leftover cash? Leave it alone.
Her student loan amount may be more than enough to cover essential educational costs, like tuition and fees. If there's extra spending money, she should spend it carefully. It could go toward transportation for home visits, for example, rather than a shopping spree.
One way to keep your teen on track is to set up automated monthly transfers of set amounts from the student loan money to a separate account. If there’s less money available, she’s less likely to overspend.
If she’s picking up a paycheck from a part-time job, it’s a good idea to designate a percentage of that for savings. Building a reserve of cash can be empowering. Think how good she’ll feel when an unexpected expense comes up and she’s got it covered.
Be a trusted resource
Even though your teen will be on her own when she gets to college, let her know that you’re there if she needs you. Keeping the lines of communication open will help your child feel comfortable discussing her finances with you. That way you can help her catch any financial missteps when they’re small, and she can rest assured that you’ve got her back as she starts the next phase of her life.