As a mom of a teen and an award-winning financial advisor, I understand the nerve-wracking blend of excitement and concern that comes with sending your kid off to college. It’s an important time where financial lessons can have a long-lasting impact on our kids’ lives today and beyond their degrees.
“The more you learn, the more you earn.” — Warren Buffett
The time before your kid leaves the nest and heads to college is your window of opportunity to share your most important nuggets of financial wisdom. If you feel like you’re not equipped to give your kid enough financial tools, consider enlisting help. An experienced financial advisor or a money-savvy friend or family member may be able to lend a hand. It’s so important to start with a solid foundation in financial literacy — a gift that keeps on giving.
Here are some tips to empower you and your child to tackle college expenses together, turning what can be a stressful process into an empowering and straightforward learning experience.
Embrace Financial Know-How Early
Let’s face it, we all need to know the basics of finances. Financial literacy isn’t just about balancing budgets; it’s about laying the groundwork for making wise financial decisions when things don’t work out.
Some important questions to discuss with your kids:
- What are the best ways to spend your money and then keep track of what you’ve spent?
- What to do if you buy something you soon regret? What are the steps?
- If you go out to eat with friends and they need help paying, what do you do? What do you say? How do you get paid back?
- How do you ensure you have enough to pay for things?
- How do you build and check your credit?
- What do you do if you’re stuck and don’t have enough money? What if you’ve lost your phone or your credit cards?
By involving your child in financial discussions and decisions, you’re not just preparing them to manage their money in college–you’re helping them build the skills necessary for a successful financial future.
Get Comfortable Talking to Your Kids About Money
When I work with clients, one familiar theme presents itself: people don’t like to talk about their money with their loved ones, their partners, and their family members. However, to maintain a healthy and open relationship with your teen and soon-to-be college student, this is essential. Here’s where to start:
Begin by sitting down with your kids to talk about your own financial experiences during college or your early career. They might not enjoy the discussion (but hey, they are probably still listening!), but it is an opportunity to build that communication bridge between you.
Set Up a College Budget
Identify Income Sources: College and extracurricular activities cost money, so it’s best to gameplan all potential income, including part-time jobs on campus, freelance or side gigs, internships, and scholarships that your student has as opportunities to make money in college.
Don’t tell them how to keep a budget, show them and start one together. Here is an expense planning spreadsheet that you can DOWNLOAD.
List Your Fixed and Variable Expenses: From tuition to Uber rides, to midnight Taco Tuesday runs, dorm events, groceries, understanding these is key to formulating a realistic budget.
Include the Cost of Attendance: Factor in tuition, laptop, headphones, books, travel, and other essentials. For students attending distant colleges, travel costs for visits home should also be considered.
Explore and Utilize Tools: Apps like Mint or YNAB, or even a simple spreadsheet can help keep track of finances.
Start with the 50/30/20 Rule: A simple recipe to allocate income — 50% on needs, 30% on wants, and 20% on savings or debt repayment. As your earnings increase, you will want to personalize these figures with a financial advisor.
Allocating Your Money Wisely
Emergency Fund: Encourage your teen to save (and keep!) at least $500-$1,000 for unexpected expenses.
Encourage your teen to attend online financial literacy workshops (many college campuses offer these now), read personal finance news, and tap into resources such as books and online content. Discuss the importance of having a ‘money buddy’–someone who is also smart about their finances. Your kid could become this role model for their new college friends. Having a grounded support system at college is crucial not only for friendship and academics but also for managing financial social pressures.
Involving your child in creating and maintaining a budget not only teaches smart and prudent financial skills but also promotes a sense of responsibility and independence. As we guide our kids and help navigate this significant rite of passage to college, by investing time in teaching your them about finances (even if it seems like they’re not listening, they really are–at least some of it–trust me), you’re setting them up not just for college, but for life.
Let’s empower our kids to embrace their financial independence with confidence and savvy.
The financial advisors at Sun Group Wealth Partners are registered representatives with and securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through Sun Group Wealth Partners, a registered investment advisor and a separate entity from LPL Financial.
