Make saving second-nature
Africa Studio/ShutterstockHaving the self-discipline not to spend every cent of every paycheck can be tough. To make it easy, have teens set up their accounts so part of their paychecks automatically go into a separate savings account, recommends financial consultant Robin Taub, CPA, CA, author of A Parent’s Guide to Raising Money-Smart Kids. “Money is set aside for a specific goal, and you don’t touch that money,” she says. “You let it sit there and accumulate for university costs.”
You won’t always save as much as you want
fendyrodzi/ShutterstockBudgets are incredibly helpful for making sure you maximize your savings, but life happens. Let your kids know that if they’re spending carefully and keep going over the limits they set, they might just not be able to save as much (yet). “If you need to readjust your budget at any point in time, that’s OK,” says Ruth Kaneko, financial educator with credit union BECU. “It’s better to be realistic about your budget and how much you actually spend on items.”
Credit cards don’t mean endless money
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Owning a credit card helps build a good credit history—if it’s used wisely. If your incoming college student has a credit card for the first time, make sure the bill is paid off in full every month. Leaving a balance will just create interest and debt, and blow a good credit score. “Try to stick with one credit card and use it as a tool to build good credit and not as a way to finance a lifestyle,” says Peter Raffalski, CPWA, senior vice president and market executive with Gibraltar Private Bank & Trust. If your teens have trouble paying the bills off, have them save the plastic for a specific purpose—like paying a cell phone bill—and use cash for everything else, suggests Kaneko. Especially tell your teen (and yourself) to never use a credit card for these reasons.
Little things add up
College students might want to tag along every time their roommates run out for ice cream or coffee, but those little purchases add up. If kids are swiping with plastic card every time, they might not realize how much of their budget is going to small buys. “I’ve heard stories about college kids calling home thinking their debit card has been hacked,” says Beth Kobliner, author of Make Your Kid a Money Genius (Even if You’re Not), “but once they (and their patient parents) take a look at the statements, they’ve realized that all their casual card-swiping was the real culprit.” Teach your teens how to be thrifty instead of giving in to every temptation.
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Independence is expensive
If you’ve been paying for your kids’ food, gas, and utilities their whole lives, they might not realize just how those costs add up. Help them break down just how much they should expect to pay for groceries, household supplies, electric bills, and more. “It’s important to go over that stuff before they go to make sure they understand what it’s going to cost every month and where that money is coming from,” says Taub. No one is saying you need to cut your kids out the moment they leave for school, but let them know how much you’ll cover and what they’ll be responsible for. If they overspend, don’t be afraid to stay firm in how much you’re giving so they can get better at saving money in the future, says Taub.
Career choices shouldn’t be all about money
Sure, no one would argue with a great salary. But if your kids talk about pursuing careers they don’t seem crazy about just for the big paycheck, make sure they’re truly following their passion. “You will be spending more time at work than anywhere else, so if you are unhappy at work, you will be unhappy in life,” says Steve Repak, CFP, author of 6 Week Money Challenge: For Your Personal Finances. Wondering if you're in the wrong industry, too? It's not too late to change—find out how to find a new career you love.
Working has its benefits beyond money
Even a part-time job—which probably won’t be a dream gig—has benefits beyond the paycheck. For instance, one study found students with part-time jobs (10 to 19 hours a week) got better grades than their peers, including those who didn’t work at all. “This is likely because kids feel more engaged in campus life, and therefore more invested in their education,” says Kobliner.
Finding a job isn’t always easy
Seems like a part-time job should be easy enough to land, right? Not really, says Taub. Just like a full-time job, your kid might need to write a resume and cover letter, plus go through a lengthy interview process. Your teen might need to deal with a few rejections before getting hired, but it will be a major learning process. “The earlier you have experience the better, because the stakes get higher as you get older,” she says. Teaching your teen how to write a standout cover letter and prepare for an interview—plus learn from mistakes—will help your child during a full-time career hunt.
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Give a little back
Being smart with money doesn’t mean keeping it all to yourself. Your kids might feel better giving some away to a cause they’re passionate about. Just make sure they account for it, says. “Consider building some charitable giving into your budget,” says Raffalski. “Otherwise there might not be anything left over in the end.” But Taub stresses that money isn’t the only way to give back, especially for broke college students. In that case, encourage them to get involved with volunteering, whether tutoring underprivileged kids or asking for sponsors for a fundraising race.
Investments pay off
If your college-bound kids feel overwhelmed by loans and expensive schools, remind them why it’s worth it. Have them compare their potential career salaries to what they’d make without. “It’s making that connection between that investment and the return on their investment in terms of what the degree will help them do,” says Taub. Of course not every job will need a four-year degree, but it will help others understand why it could be worth it.
Think before you spend
Impulse buys are hard to pass off. But in most cases, it will be available (and for the same price) the next day. Returns are a hassle—and might never happen—so train your teens to think hard before splurging. “If you look at your budget and decide you can/can’t afford it, it’ll always be there the next day,” says Kaneko.
Be smart about loans
Your kids should know how you’ll contribute to their education costs well before they leave for school, says Kobliner. “Ideally, this conversation starts in ninth grade, so you have time to plan—and to manage expectations about what your family can afford,” she says. She recommends nixing private loans and sticking with low-rate federal ones, which have lower interest rates and better repayment options. This timeline will break down exactly how much you should save.
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It’s never too early to save for retirement
Even career newbies should be setting away some money for retirement savings. “If you put a portion of your paycheck away now, you will never miss it later,” says Repak. Always take up a company’s offer on matching those savings—after all, it’s free money, he says.