Financial Literacy for College-Bound Teens
As parents, we want to set our children up for success in all areas of life, and one crucial aspect is financial literacy. As teenagers prepare to embark on college, they will face numerous decisions that can significantly impact their economic well-being.
For young adults, navigating the financial challenges of college life isn’t easy. Equipping your kids with the necessary knowledge and skills can empower them to tackle those challenges head-on.
Help them start off with the right financial products
Out on their own, young adults need the right tools to help them live their day-to-day lives.
Checking accounts are like a hub for managing day-to-day expenses and learning responsible money management, but all accounts are different. Research different options together, considering fees, online banking features and accessibility to find the right account. And don’t forget to set up features like overdraft protection to help safeguard against unforeseen events.
Setting up a savings account is a great opportunity to impart the importance of building an emergency fund. If your child has regular income from a part-time job, this is also a prime time to take advantage of automatic transfers into their savings account to help build a habit of regularly saving money.
College spending accounts
Soe universities offer spending accounts or prepaid cards for students to manage their expenses on campus. It's crucial to have an open conversation about these options. Consider the restrictions associated with these cards. While they’re usually linked to meal plans, they can also work as a debit card at approved nearby businesses. But the radius may be smaller than anticipated and impractical depending on where your child plans to live.
If you plan to help your child financially while they’re in college, things will go smoother if you set up a reliable way to transfer funds. While many financial institutions offer wire transfer services for a fee, you could also consider a joint checking account. With a joint account, transfers are usually free and you’ll be able to provide some parental oversight to help keep things on track.
Another option: Use a transfer service like Zelle. With Zelle, you can send your kids money directly to their checking account in minutes, free of charge. Many banks—like First Tech—already have this feature baked into your online banking.
Build a budget
Creating a budget is critical to making informed spending decisions, but most high school students aren’t taught how to budget in school. This is a great opportunity for parents to sit down with their kids and share some money wisdom.
Discuss these steps:
Remember, building a budget is a learning process, and it may take some time to find the right balance.
Start on the path to good credit
Having a credit card is a pivotal step towards building a strong financial foundation, but young adults under 21-years-old may struggle to qualify for a card on their own.
But parents can help set their kids up for credit success:
Create a plan for sharing expenses
College life often comes with hefty living expenses. Before heading out into the world, teens should work with their parents to come up with a fair division of costs that will work for everyone, while helping them develop a sense of financial independence.
Discuss the cost of housing, utilities, groceries and other expenses. Make a plan for how those expenses will be paid. Even if you plan to cover most of your child’s expenses in the first few years, keeping them in the loop will help them learn financial responsibility over time.
Help create success in the workplace
College students have a range of job opportunities available to them, both on and off-campus. When considering a job, there are several factors that students should take into account to ensure it aligns with their goals, schedule and overall well-being.
Before taking on any job, college students should carefully consider their priorities, including academic workload, extracurricular activities and personal well-being. It's crucial to find a balance that allows for academic success while gaining valuable experiences and financial stability.
Teach good financial communication
Effective financial communication is often challenging for adults, let alone teenagers. But young adults can only benefit and learn from discussing money with their parents. Try these steps:
Start early and lead by example
Encourage open and regular conversations about money. Be transparent about financial decisions, budgeting and saving. By demonstrating healthy financial habits, you set a positive example and create an environment that fosters open communication.
Foster a positive mindset
Emphasize the idea that there are opportunities for financial growth, multiple avenues to achieve goals and the ability to create more resources through wise financial choices. Encourage your college student to see money as a tool for personal and financial growth, rather than something to hoard or fear.
Create a safe space for your student to discuss their financial concerns and aspirations. Encourage them to share their financial goals, challenges and questions. Listen actively, without interrupting or criticizing, and provide guidance and support when needed.
Teach effective decision-making
Help your college student develop critical thinking skills when it comes to financial decisions. Encourage them to consider the short-term and long-term consequences of their choices, evaluate different options and weigh the pros and cons. Teach them to make informed decisions based on their values, priorities and financial goals.
Discuss financial values and goals
Discuss the importance of aligning their financial choices with their values, such as saving for a specific purpose, supporting causes they care about or achieving financial independence. When they have a clear understanding of their values and goals, they can communicate their financial priorities effectively.
Set up regular check-ins
Schedule regular check-ins to discuss their financial progress, challenges and adjustments. Use these conversations as opportunities to provide guidance, address any concerns and celebrate their successes. Regular check-ins also foster accountability and reinforce the importance of ongoing financial communication.
Here at First Tech, we’re here to help you set up your kids for financial success. Schedule an appointment with us anytime to discuss personal finances for your whole family.