The phrase “college prep” usually refers to academics, but it’s just as important to make sure your college-age child is financially prepared, too. Here’s a quick quiz to help you figure out where your child could still use some schooling:
For many students, the problem begins with a lack of understanding about how credit hours relate to the cost of college.
1. Does your child know how much college life will truly cost?
Helping cover your child’s expenses while at college doesn’t have to mean keeping the true cost to yourself. In fact, sheltering children from the cost of tuition, fees, textbooks and more can prevent them from growing into financially savvy adults.
Before freshman year begins, take the time to walk your child through all the expenses they’ll be accruing, from monthly cell phone bills to auto insurance premiums. Discuss which expenses will be the student’s responsibility and which will be “subsidized” by the family. This will help the student treat money more seriously and leave him or her better prepared for adult life.
2. Does your child know how to create and follow a daily budget?
The student who follows a daily budget will leave college in the best possible financial position. A budget built around the student’s income – whether the money comes from part-time work or parental help – helps the student understand the need to prioritize spending and balance fun with a little frugality.
Learn more in our article on how to create a daily budget for college life.
3. Does your child understand the consequences of credit card debt and overdraft fees?
For many young people, college can be a rude awakening to the fact that credit and debit cards are not endless sources of easy money. Their ease of use and the abundance of expenses at college can make it easy to rack up too much unpaid debt and perhaps incur overdraft fees.
Sit down with your child before college and go over the credit or debit cards they’ll have available. When should the cards be used? How and when will credit cards need to be paid off? What are the penalties if a payment is missed or an account is overdrawn?
Remember, the Credit Card Act of 2009 requires a co-signer for a credit card issued to anyone under age 21 who does not have the independent ability to repay the credit card charges. If your student has the use of a credit card in your name or one that you’ve co-signed, make sure to set, monitor and enforce restrictions on the use of the card.
4. Does your child know the costs associated with off-campus housing?
Apartment leases can be complicated documents, and many students might be tempted to simply sign on the dotted line and be done with it. Offer to walk through a lease with your child before signing. Help them understand the late fees, security deposits and utility costs they’ll be responsible for. Also, encourage your child to shop around for the best lease terms and not necessarily the best monthly rate.
If your child has a roommate, it’s also important to have a defined agreement in place for sharing and payment of utilities and rent.
5. Does your child know the consequences of skipping, failing or dropping a class?
Anything that delays graduation can add thousands of dollars to the cost of college. For much more on this issue, check out our article on the costs associated with missing, dropping or failing a class.
6. Does your student know how to avoid identity theft?
Students should know to keep wallets and purses locked away safely, to use strong passwords, and to sign out of all computers after accessing email, social and financial accounts – especially in shared computer labs. Their smartphones, laptops and tablets should also have remote-wiping enabled in case of theft.
Beyond technology, though, spend time educating your child on the basics of financial security, including shredding personal finance documents, signing credit or debit cards and monitoring all financial accounts for suspicious activity.
