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Financial Facts of LIfe

Financial Facts of LIfe

When your children leave home for college, they will face a host of new experiences, responsibilities, environments, and new freedoms. To help your student in this transition, he/she should know the “financial facts of life” such as, opening the first checking account or making that first purchase on credit. They will have to be ready to enter the world of independent financial management. Young people view managing money as a symbol of maturity and independence.

To make sure your children know how to start their financial future on the right foot, you need to make sure they understand the fundamentals of personal finance. Do not assume they are learning this information elsewhere. Graduating high school seniors averaged a failing grade of 52% in basic personal finance knowledge according to a recent study. As a parent, you are the most important source of financial education for your children. It is not always easy to talk with your kids about money. Discussing personal finance with them shows that you see them as responsible young adults.

Conversation tips

To aid in a successful conversation, keep these tips in mind.

  • Approach the discussion with a positive attitude.
  • Set a tone of confidence, openness and trust.
  • Laughter helps, lighten the mood with a joke.
  • Make it an equal exchange, not a lecture.
  • Ask plenty of questions, and listen carefully to the answers.
  • Do not talk down.
  • Do not bring up old financial disagreements. Think of college as a clean slate.
  • Make sure your kids know they can always turn to you for financial advice, information or help.
  • An excellent way to teach your children the fundamental principles of finance is to establish a budget for college.

College Budget

College students’ budgets should not be complicated.  Simply follow these steps.

  • Itemize your student’s regular monthly expenses.
  • List total income, which may include work study funds or part-time job, allowance, and financial aid refunds.
  • Subtract expenses from income to see if the budget is reasonable.
  • If the expenses are more than the income, works together to trim expenses until the numbers agree.
  • If at all possible, include a savings strategy.

Be sure you children understand the importance of maintaining this budget to avoid overspending and debt trouble. By properly educating them about the importance of financial responsibility, you protect them not only while they are in school, but for years to come.

Information for parents of college students.