GRAND RAPIDS, Mich. — In this edition of Smart Money, we take a look at some of the things high school graduates should consider before leaving home for college this fall -- including financial independence, budgeting, debt, financial implications of certain career paths and more.
ESTABLISH A GOAL OF FINANCIAL INDEPENDENCE
- This should be the final stage in the journey from financial dependence to independence!
- Students should become increasingly responsible for expenditures. Develop a shared understanding of parent and student responsibilities for financial needs.
- Your student will develop financial confidence by beginning to fly solo during these years.
- Ensure that your student knows how to balance a bank account.
- Remind your student that you will continue to be a financial mentor and will help keep him or her on track.
- Allow the freedom to make mistakes while keeping an eye on the broader picture to prevent catastrophes.
TEACH YOUR COLLEGE STUDENT TO USE A BUDGET
- The AICPA provides one resource. http://www.360financialliteracy.org/Tools/Calculators/Student-Budget
- An emergency fund of three to six month of expenses should be part of a college student’s savings plan.
- Students should anticipate and save for major purchases.
- Consider periodic check-ups that allow you to discuss financial progress and provide a venue for answering questions and mentoring students.
EDUCATE STUDENTS REGARDING DEBT
- Strongly caution your student regarding the risks associated with excessive and/or inappropriate debt.
- Illustrate the length of time required to pay a credit card balance when making only minimum payments.
- Encourage your student to save for purchases and pay cash for them.
- Ensure that your student understands the implications of student loan debt.
- Continue to emphasize the virtues of patience and restraint involving financial transactions.
- Exercise caution when deciding if your student should have a credit card.
CONTEMPLATE FINANCIAL IMPLICATIONS OF CAREER CHOICES
- Your college student should research the availability of jobs in his or her field.
- Encourage your student to understand anticipated compensation, benefits and other elements of potential jobs.
- Will your student need to travel to job interviews? Will relocation be necessary when a job is secured?
- Ask your student if he or she will incur expenses for special resources, additional education/training, certifications, tools/equipment or other items to obtain the desired job.
- How long will it take to obtain a job in the chosen career? What financial resources will be necessary during the transition period? What is the magnitude of student loan debt versus anticipated compensation?
- Your student should contemplate expenses that will arise when he or she begins employment. Has your student considered housing, transportation, insurance and other financial elements that will apply after graduation?
FIND CREATIVE WAYS TO CUT COSTS
- Utilize public transportation and carpooling opportunities.
- Determine if your student’s school offers free or reduced housing for students who serve as resident advisors.
- Limit the number of occasions you eat at restaurants.
- Living at home may be an option for some students.
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