Nonprofit Take Charge America is encouraging parents to talk with their college-bound teenagers about how to build a strong financial foundation. College may present situations where teens need to make financial decisions on their own, possibly for the first time.
“Many teens don’t intuitively know how to manage money. That’s why it’s critical for parents to sit down with their kids and have an open and honest discussion about financial basics,” said Michael Sullivan, personal financial consultant with Take Charge America.
“Providing that foundation will give kids the confidence to better understand the financial choices they make and properly manage money long after they finish college.”
Four key areas Sullivan identifies are budgeting, credit card caution, identity theft and student loans.
Regardless of income level, having a budget is the foundation of good money management skills throughout life and will help teens track income and expenses while providing a plan of action toward achieving financial goals and curb overspending.
Sullivan says parents should explain the concept of needs versus wants and help teenagers get started budgeting with a spreadsheet or apps like Mint or EveryDollar.
Many college students get into trouble with credit cards so it’s important for parents to discuss the potential repercussions of opening multiple credit cards and the important of making payments on time, every time.
To help them build credit, parents can consider helping them open a secured credit card or add them as an authorized user on one of their credit cards with spending limits.
Identity theft can negatively impact a teenager’s financial life for years. Parents need to explain the importance of protecting financial details, including bank accounts, credit cards, Social Security numbers and other personal information from scammers and identity thieves.
Teens should be reminded never to share such information with anyone they don’t trust, especially if they are contacted through an unsolicited phone call, email or text.
Student loans are a necessity for many but students may not readily recognize that those loans are not free money and should not be spent on trips or non-school-related shopping.
Parents should talk to them about what expenses the loans are intended to cover (tuition, books, housing) and explain that, unlike scholarships or financial aid, they will be responsible for repaying the loans, with interest, when they leave school.
Visit Take Charge America, takechargeamerica.org, or call 888.822.9193 for resources to help individuals and families with a variety of financial challenges.