Thursday, August 9, 2012
The "Money Talk"
If you have a child getting ready to head off to college, there may be a talk you still need to have… the “money talk.” Financial planning is probably not the first thing on a college freshman’s mind, but that doesn’t lessen its importance. It is essential that incoming college freshman understand money management, credit, and budgets because financial mistakes made during college can take years to overcome.
Research shows that students that complete financial education courses in high school are more likely to save, less likely to max our their credit cards, and less likely to be a compulsive buyer. Unfortunately, only 14 states require a high school course in personal finance. This means that having conversations about money with your children at home are even more important.
Understanding how to budget is one of the most important lessons a person can learn before entering college. Susan Beacham, the CEO of Money Savvy Generation says that, “Kids leave home thinking they can live at college as they did at home, and that’s not possible, is it? The standard of living they had at home will be different from the one they have at college.”
College freshman must adapt to a different standard of living, and the first step is to create a monthly budget. To make it easier to stick to the budget, put the budget on paper or a computer spreadsheet and specify times that the family can review the budget together. Beacham also warns that credit cards are very tempting for college students, so it is important for parents to establish what the card should and shouldn’t be used for.
If you have a child heading off to college this fall, don’t miss the opportunity to have the “money talk.” Susan Beacham says, “Financial planning is a huge life lesson that needs to be worked on to ease your child’s transition to having an independent financial life.”