On college campuses across the country, a whole new crop of coeds are setting out (almost) on their own. If this is the first time your kids have been responsible for more than a weekly allowance, now is the time to actively engage them in the process of managing their finances.
Here are 15 tips and guidance to ensure your student's gains are financial:
- Help them understand the difference between debit and credit cards. Discuss the type of card they will have, what account it is tied to, and who will be making the payments or deposits.
- Emphasize the importance of tracking financial transactions, starting with managing their checking account.
- Encourage your student to start a routine of reviewing account balances daily to know when deposits, checks, and purchases have cleared.
- Remind them that transactions often clear instantaneously, so they should avoid writing checks or using debit cards unless they know their balance will cover the transactions.
- Choose a bank or credit union like Navy Federal with limited to no ATM fees to help them avoid racking up significant service charges.
- Download your bank's mobile app and take advantage of online banking services to stay on top of account activity anytime, anywhere.
- Consider getting your child a prepaid card. Then, ease them into using a credit card, making sure they understand that they function as a loan and must be paid back.
- Start your student with only one credit card until they can manage it properly. Set a goal together to never owe more than 30 percent of the credit limit on that card.
- Impart to your student that the accumulated interest on a credit card will add significantly to the repayment amount, so they should strive to pay off the full balance each month.
- Teach that cash advances on credit cards should be avoided. These can incur upfront fees in addition to the burden of having interest accrue immediately.
- Warn your student against tempting free giveaways or low introductory rates that often rise dramatically. Instead, help them choose a card with no annual fee and a lengthy grace period.
- Utilize your card's fraud-monitoring service, and together with your student, regularly check their account for any unauthorized activity.
- Choose cards and accounts with zero liability to ensure they are not responsible for unauthorized or fraudulent purchases.
- Involve them in any student loan discussions and decisions, including the application process and terms and responsibility of repayment.
- Know that these steps pave the way for a solid financial future for your student. Missteps now could lower their credit score, making it difficult to secure housing, a car, or even a job down the road.
Your kids are about to enter the most exciting period of their lives. Make sure they do so with their eyes wide open about the importance of sound personal financial management skills. Send us back to school with your student.