- How to get your kids ready to face their own financial futures.
- Lead by example and show your kids how to use the bank to their advantage.
- Teach principles of credit, since a good credit history can influence a Millennial’s ability to get a job, buy insurance, or rent an apartment later on.
As kids get into the school routine each fall, all of you parents with children in the house are probably thinking a lot about getting them financially ready for life, college, and having a family of their own own day.
Realizing that you forgot to teach your kid anything about money? Whoops. Just like saving for college, a financial education is best started early. Very early. Ideally when your little one first learns to recognize the musical sound of the ice cream truck.
But if that time has long past, don’t fret! Here’s a cheat sheet for what your college-bound student needs to know. And whether your child is still in braces or shopping for college dorm supplies, the best time to get started is now.
1. Help them get their first real job.
A good step towards raising a financially savvy teen is encouraging them to seek out their first job. While a job provides your child with a little extra spending money, it’s about much more than that. On top of the money, the responsibility that comes with a real job will teach your kid:
• How to put their best foot forward in an interview
• How to interact with adults other than teachers and parents
• How to manage his or her time
• How to fill out employment paperwork
• And what the heck is FICA?
In other words: having a job teaches life skills.
But the money is important too. Be clear with your student about what he or she is responsible for paying for, whether that’s saving up for a new car or buying their own lunch at school. Having this conversation will help eliminate potential sources of conflict down the road.
2. Show them how to establish banking habits.
Having that first job of course leads to a paycheck, which then leads to the need for a bank. First know this: the way your kid banks may look much different than the way you banked as a teen. For starters, the check register is nearly obsolete, as is check writing and reconciling down to the penny (unless you’re raising a future accountant). Kids today are citizens of the mobile banking generation.
Banking style differences aside, your child still needs to learn two important banking skills: how to make sure they have enough money in the bank to cover spending, and how to set money aside for savings. They will likely use apps for both, but it’s your job to show them why they’re important.
You can also encourage your child to take advantage of this electronic banking perk: automation. Paychecks can be directly deposited, and money automatically transferred into savings. This is also a good time to explain the difference between a routing number and account number to your student, something that you take for granted but is likely foreign to him or her.
As far as where your child banks, it makes sense to help them open an account at the same place you bank. That will allow you to easily transfer money to their accounts any time you need to, which becomes increasingly important when he or she goes off to college. If your child is close to leaving for college, another option to consider is the campus. They won’t be bound by whether or not they have a car, or how busy their schedules get.
3. Have the credit conversation. Often.
As a parent, you probably remember the crazy pizza and t-shirt offers that competing credit card companies promoted around your campus back in the day. Today, banking legislation has restricted this type of practice, but college students can still easily get into trouble with credit.
A good credit history is more important than ever, as it affects a young adult’s ability to rent an apartment, buy insurance, and even get a job.
Set some time aside to discuss the responsible use of credit before your child goes to college. And continue to have those discussions as the credit card offers roll in. (Note: This may require that you brush up on these topics yourself, which is not a bad thing!)
4. Make a FAFSA plan.
The Free Application for Federal Student Aid (FAFSA) will help determine how much financial aid your child is entitled to. This form is not fun. It’s a beast for parents, let alone students. But it’s important that you take the time to figure it out. Luckily, there is an easy-to-use FAFSA calculator that can help you figure out how much aid your student can get.
The FAFSA application form is available at FAFSA.gov on January 1 every year, and there are different federal, state, and school deadlines for filing. Some forms of financial aid are on a first come, first serve basis, so it’s important to file early, even if it’s with estimated numbers. If you do end up waiting until February 1, you can have your IRS information retrieved and transferred to the FAFSA for you, which might simplify things a bit.
5. Try out a budgeting tool.
There are tons of handy apps that your child can download to help them set a monthly budget and view where their money is going. Show your student how to use a free tool like Personal Capital, which will not only help them set max spending goals, but will also use easy graphs to show them if they’re spending half their budget on drinks and takeout, when it should be going to books for class.
Having money conversations with your kids is a bit like flossing: your intentions are often better than your follow-through. Let this list serve as your inspiration to get going, whatever state you find yourself at. I promise it will pay dividends down the road!