The financially savvy student
Before your student goes out the door and starts his/her academic career, one thing is very clear….they need to know finances. Where do I go if I need cash, buy books, supplies, food, etc. and you are 300 miles away? The time for a reality discussion about money is mandatory. Most children think money grows on trees or the ATM machine has an unlimited supply of cash.
You say that your child has no problem spending? I bet they don’t! But do they know how to actually handle their finances, make deposits, write checks and most importantly, use a credit card responsibly, or, for that matter, keep within a budget?
The right time to start is when they are young, but seriously, it’s a different thing when you set up their savings account and then bring them to the bank to deposit their holiday gifts. Once they become 18, they suddenly become adults in the world around them. You’ll find that out when you need their medical or financial information and you are left outside the door (this applies even if you are paying for them)!
My advice is to sit down with your child and discuss openly how they will financially get through the year – what expenses do they expect? First off, they will need books – costly, yes, and can run approximately $500 per semester. And, how about spending for extra supplies, socializing, and emergency funds (more if they can bring their car), etc.
Your plan could be to open a checking account and, if your bank/credit union provides credit cards, open a credit card in their name with a starting limit of $500 to be used for emergencies only. If $500 appears to be too high, go for a lower limit until your child understands using it responsibly. At the same time see if your bank/credit union will allow you to be a “custodian” of the account so that you can keep tabs on it to check on balances. It took a while before my daughter understood that every time she used her ATM card and her account was overdrawn she would be charged $25.
Another important step is to sit down with your child and make sure they understand how to write a check and post it in the ledger before they start school. Take them for their first deposit and withdrawal. I made the mistake of always depositing and cashing checks for my daughter as our credit union is very close to where I work. It just seemed easier if I took care of it. However, she needed to know how to do it herself so I took her to the credit union, and we filled out a deposit slip together and made the deposit. Because she is now working part time and a branch of our credit union is in the same building where she works, she can now do it herself.
Another suggestion, in case your bank/credit union is not represented on campus or close by, you may want to check out those banks/credit unions during your visits to the university/college. Many times during open houses, banks will be on hand to answer questions, or to open accounts…choose wisely.
Just make sure you have a plan and can share in the plan to oversee the budget if you child is not used to curbing their spending habits. Believe me, it can get out of hand rather quickly…