For many young adults, moving into their college dorm is their first experience living away from home. While this kind of freedom can be exciting for a new college student, managing money in college can be tricky, and your son or daughter could overextend themselves financially without some guidance. Teaching your teen about money management may help them avoid overspending while living away from home. And it could set them up for financial success in the future. Here’s a quick guide to money management for college students to help you get started.
6 money management tips for college students
1. Have an honest conversation about money
Before your teen heads to college, have an honest conversation about money with them. Use that time to talk about good financial habits and share some money lessons you’ve learned. Consider offering a few real-world examples of situations where money management might get tricky. Use these examples to create a dialog with your teen about how they’d handle challenging money scenarios. If you’re planning to offer them financial support when they head to school, explain what that will look like. Also, discuss your expectations for them. Do you expect them to get a part-time job? Will they be managing their own bills? It could be helpful for one or both of you to take notes as you talk. That way, you can refer back to your conversation, and you’ll both be on the same page.
2. Help them set a budget
If your teen has no experience with budgeting and they’ll be managing their money mostly on their own, it could be helpful if you set a budget with them. You might even use your own budget as a starting point. Once you figure out a realistic budget based on their income and expenses, it’s time to find a budgeting tool that works for your teen. After all, budgeting isn’t a one-time thing. Several budgeting tools exist, so encourage your son or daughter to test out a couple of free options and find one that works well for them. For instance, Mint and Goodbudget are both decent apps to try.
3. Encourage them to save
As you work with your teen to develop their budget, encourage them to set aside some money regularly in case an unexpected cost arises. For instance, nobody can predict when their car will need repairs, which are often costly. Regularly saving will help them be financially prepared for these types of expenses. It’s also a good habit to get in early, and it could help them both in college and when they graduate and enter the workforce. If your teen is working while in school, consider asking if it’s an option to automatically direct a portion of their earnings to a savings account. This could make saving money even easier.
4. Consider on-campus jobs
Maybe your teen worked part-time in high school, but they’ll be attending college in another state. Obviously, it wouldn’t make sense for them to travel hundreds of miles to continue with their part-time position. On-campus employment is a convenient alternative for young jobseekers looking to earn some income while in school. And if their college doesn’t let freshmen have cars on campus, they’ll be able to walk to work pretty easily.
5. Take advantage of student discounts
Your college student is probably going to want to go out with their friends on the weekends. Whether they’re heading to an on-campus sporting event or grabbing sushi at a nearby restaurant, chances are they might be able to get a student discount. As you’re talking to them about money, mention that many places offer these types of discounts. Getting into the habit of asking about them could end up saving your son or daughter a bunch of money on entertainment and dining out.
6. Consider an authorized user credit card
Once your college student has a solid financial foundation, you may want to consider making them an authorized user on your credit card. As an authorized user, they will get their own credit card that’s linked to your account. Consider setting some ground rules for spending and coming up with a payment agreement before handing them their own card. Becoming an authorized user will allow them to benefit from your positive payment history, which could help them build good credit. Having good credit will make it easier for them to rent an apartment and get loans in the future. It will also make it less expensive for them to borrow money down the line, as the interest rates they get will likely be lower.
Bottom Line
If your teen is wondering how to manage finances in college, this guide can serve as a helpful road map. And fortunately, there are also several tools and resources out there that can help, including free budgeting tools and student discounts. But perhaps the most impactful way to guide your teen is to be open and honest with them about money. Understanding the benefits of good money management and the potential consequences of overspending can serve as a valuable starting point for building solid financial habits.
