These tips will help your student learn to stand on their own two feet.
As your high school teenager prepares to leave the nest for college, you're probably doing all you can to get them academically and socially prepared. But what about financial preparation?
In a recent Junior Achievement USA survey, only half of teenagers said that becoming financially independent from their parents is one of their financial goals. If you want to help your child learn to stand on their own feet, and gain crucial money management skills, here are the top eight things you should do before they head off to college:
1. Make them get a job
Debbie Schwartz, a mother of three and the founder of Road2College.com, a platform designed to help parents make smarter college decisions, points out there's a bunch of benefits to encouraging your teen to get a job. Jobs provide structure and responsibility, can help teach your child to manage time, and give her a deeper understanding of the value of money.
"They also start to learn about taxes, and how that impacts the money that they're ultimately going to take home," Debbie adds. "These are the skills and the foundation of knowledge that will go into making them stronger financial citizens."
2. Have them research starting salaries for their intended career
Teenagers have a tendency to overestimate how much money they'll make when they graduate, and underestimate what their lifestyle will cost. It's a good idea to inject some financial reality into their thinking by having them research starting salaries in their field of interest.
Debbie says this exercise can help a teen prepare for some of the key decisions facing them. "Two of the biggest decisions that will have the biggest financial impact in your lifetime are the major you choose and the college you choose," she says, citing research by Temple University professor Doug Webber, whose work focuses on the economic impact of one's college major.
3. Show them how to digitize their finances
It's key to help your child make the connection between tech and finances, and how that cell phone they're so connected to can empower them to better manage their money.
Your child can set up banking text alerts that notify them of when their checking or savings account balance is low, when withdrawals are made, or when their spending in a category reaches a certain level. These reminders are especially helpful for busy or forgetful students, and can help them avoid potential overdraft fees. If they don't know how to do it, you can help them open a high school or college checking account, and walk them through the process of setting up banking alerts.
4. Require them to take over two important bills
Another way to help your teenagers become financially fit is to require them to pay for products or services they're using. For instance, you might be currently footing the bill for a laundry list of items, including your child's iTunes or Spotify account, a Netflix or Hulu subscription, their cell phone, or maybe the transportation they get from ride-sharing services.
Begin transitioning your child to financial adulthood by turning over a couple of those bills to them. Paying for their own music, entertainment or discretionary purchases will likely aid their financial maturity—students tend to be much smarter about their spending when it's their own money, Debbie says.
5. Teach them to create a budget—and stick to it
This is the perfect time to help your son or daughter create a budget—listing all of their income and expenses on a single sheet of paper. (You can even download a budget here.) Make clear what expenses you will or won't cover, and what he or she will be responsible for. Be sure to list due dates for key bills on the list. And have regular, honest conversations about where things stand with their budget.
6. Help them build credit
Helping your child establish a healthy credit rating is one way to get them on the road to financial fitness. You can start by adding them as an authorized user on one of your credit accounts. Alternately, you can help them fill out a secured card or a student credit card application once they turn 18. They'll likely need you as a co-signer for approval. Either way, be sure to talk to them about the importance of good credit and managing credit wisely.
7. Discuss student loans
Since 70 percent of students borrow money for college, chances are that you'll need to talk to your child about student loans. This is a good opportunity to communicate your financial limits and how much you can pay for college. It also gives your student an opportunity to learn about how many years they may be in debt if they choose to take out federal or private student loans.
8. Warn your child about financial scams
Financial predators target students with all kinds of scams. If your teenager becomes aware of such frauds now, chances are when they are in college later, they won't become victimized if they get a bogus call, email or text demanding payment for a questionable bill.
Reaching financial adulthood is a long process. But the skills and habits that you teach your student will lay the groundwork for their continued development. And, by starting their education before they leave the nest, you're preparing them to face the most difficult lessons while the stakes are still fairly low.